-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rce3BEjDnZ61QRqZ4bEnjW7gvI7eiK5h3vmi+HuT5DsZVwzMZFhpWiRQ0PEAs3Y7 GbXV7Xso9LLsrHeFxPwp2Q== /in/edgar/work/0000950123-00-009835/0000950123-00-009835.txt : 20001031 0000950123-00-009835.hdr.sgml : 20001031 ACCESSION NUMBER: 0000950123-00-009835 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 46 FILED AS OF DATE: 20001030 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NRG SOUTH CENTRAL GENERATING LLC CENTRAL INDEX KEY: 0001124468 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-48900 FILM NUMBER: 748918 BUSINESS ADDRESS: STREET 1: 901 MARQUETTE AVENUE SUITE 2300 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123735300 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOUISIANA GENERATING LLC CENTRAL INDEX KEY: 0001126955 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-48900-01 FILM NUMBER: 748919 BUSINESS ADDRESS: STREET 1: 901 MARQUETTE AVE STREET 2: SUITE 2300 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 BUSINESS PHONE: 6123735300 MAIL ADDRESS: STREET 1: 901 MARQUETTE AVE STREET 2: SUITE 2300 CITY: MINNEAPOLIS STATE: MN ZIP: 55402 S-4 1 y57012s-4.txt FORM S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 2000 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ NRG SOUTH CENTRAL GENERATING LLC (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 4911 41-1963217 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
------------------------ 901 MARQUETTE AVENUE, SUITE 2300 MINNEAPOLIS, MINNESOTA 55402-3265 (612) 373-5300 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S AND CO-REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES) ------------------------ JAMES J. BENDER, ESQ. NRG SOUTH CENTRAL GENERATING LLC 901 MARQUETTE AVENUE, SUITE 2300 MINNEAPOLIS, MINNESOTA 55402-3265 (612) 373-5300 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ WITH A COPY TO: STEVEN P. BUFFONE, ESQ. GIBSON, DUNN & CRUTCHER LLP 200 PARK AVENUE NEW YORK, NEW YORK 10166 (212) 351-4000 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering: [ ] CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED PER BOND(1) PRICE(1) REGISTRATION FEE - --------------------------------------------------------------------------------------------------------------------------------- 8.962% Series A-1 Senior Secured Bonds due 2016........... $500,000,000 100% $500,000,000 $132,000 - --------------------------------------------------------------------------------------------------------------------------------- 9.479% Series B-1 Senior Secured Bonds due 2024........... $300,000,000 100% $300,000,000 $79,200 - --------------------------------------------------------------------------------------------------------------------------------- Guarantee*....................... -- -- -- (2) - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(f) promulgated under the Securities Act of 1933, as amended. (2) No separate consideration will be received for the Guarantee, and, therefore, no additional registration fee is required. THE REGISTRANT AND THE CO-REGISTRANT HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT AND THE CO-REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. *OTHER REGISTRANTS
- -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- EXACT NAME OF REGISTRANT STATE OR OTHER JURISDICTION OF PRIMARY STANDARD INDUSTRIAL I.R.S. EMPLOYER IDENTIFICATION AS SPECIFIED IN ITS CHARTER INCORPORATION OR ORGANIZATION CLASSIFICATION CODE NUMBERS NUMBER - -------------------------------------------------------------------------------------------------------------------------------- Louisiana Generating LLC** Delaware 4911 41-1870498 - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
** Address and telephone of principal executive offices are the same as those of NRG South Central Generating LLC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED OCTOBER 30, 2000. PROSPECTUS [NRG LOGO] NRG SOUTH CENTRAL GENERATING LLC EXCHANGE OFFER FOR OUTSTANDING $500,000,000 8.962% SERIES A SENIOR SECURED BONDS DUE 2016 $300,000,000 9.479% SERIES B SENIOR SECURED BONDS DUE 2024 IN EXCHANGE FOR $500,000,000 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016 $300,000,000 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024 THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ], 2000, UNLESS EXTENDED. TERMS OF THE EXCHANGE OFFER: - We will exchange all outstanding bonds that are validly tendered and not withdrawn prior to the expiration of the exchange offer. - You may withdraw tendered outstanding bonds at any time prior to the expiration of the exchange offer. - The exchange of outstanding bonds will not be a taxable exchange for United States federal income tax purposes. - The terms of the bonds to be issued are substantially identical to the terms of the outstanding bonds, except that transfer restrictions, registration rights and liquidated damages provisions relating to the outstanding bonds do not apply. - Each broker-dealer that receives bonds for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the bonds. The letter of transmittal accompanying this prospectus states that by acknowledging this and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of bonds received in exchange for outstanding bonds where the outstanding bonds were acquired by the broker-dealer as a result of marketmaking activities or other trading activities. We have agreed that, for a period of 90 days after the expiration of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any resale. See "Plan of Distribution." - We will not receive any proceeds from the exchange offer. - There is no existing market for the bonds to be issued, and we do not intend to apply for their listing on any securities exchange. See the "Description of Bonds" section beginning on page 69 for more information about the bonds to be issued in this exchange offer. THIS INVESTMENT INVOLVES RISKS. SEE THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF THE RISKS THAT YOU SHOULD CONSIDER PRIOR TO TENDERING YOUR OUTSTANDING BONDS FOR EXCHANGE. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES AND EXCHANGE COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Prospectus dated October , 2000. 3 TABLE OF CONTENTS
PAGE ---- Prospectus Summary.......................................... 1 Risk Factors................................................ 14 Forward-Looking Statements.................................. 19 The Exchange Offer.......................................... 20 Use of Proceeds............................................. 28 Capitalization.............................................. 29 Selected Historical Financial Data.......................... 30 Pro Forma Financial Data.................................... 32 Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 35 About Us.................................................... 39 Business of NRG South Central and Louisiana Generating...... 41 Management.................................................. 53 Certain Relationships and Related Transactions.............. 55 Summary of Certain Principal Agreements..................... 57 Description of the Bonds.................................... 69 Description of Principal Financing Documents................ 76 Plan of Distribution........................................ 100 Certain U.S. Federal Income Tax Considerations.............. 101 Legal Matters............................................... 101 Experts..................................................... 101 Where You Can Find More Information......................... 102 Index to Financial Statements............................... F-1
Our principal executive offices are located at 901 Marquette Avenue, Suite 2300, Minneapolis, Minnesota 55402-3265 and our telephone number is (612) 373-5300. i 4 PROSPECTUS SUMMARY This summary contains basic information about us and this exchange offer but may not contain all the information that is important to you. For a more complete understanding of this exchange offer, we encourage you to read this entire prospectus and the documents we refer you to. Unless otherwise specified, the words "we," "our," "ours" and "us" refer to NRG South Central Generating LLC and include its subsidiary, Louisiana Generating LLC, the guarantor, on a consolidated basis, but exclude NRG Sterlington Power LLC, Big Cajun I Peaking Power LLC and NRG New Roads Holdings LLC, its subsidiaries that are not guarantors. The term "NRG South Central" refers to NRG South Central Generating LLC in its individual capacity and the term "Louisiana Generating' refers to Louisiana Generating LLC in its individual capacity. The terms "NRG Sterlington Power," "Big Cajun I Peaking Power" and "NRG New Roads Holdings" refer, respectively, to NRG Sterlington Power LLC, Big Cajun I Peaking Power LLC and NRG New Roads Holdings LLC, each in their individual capacity. The term "outstanding bonds" refers, collectively, to the 8.962% Series A Senior Secured Bonds due 2016 and the 9.479% Series B Senior Secured Bonds due 2024, issued on March 30, 2000. The term "bonds" refers, collectively, to the 8.962% Series A Senior Secured Bonds due 2016 and the 9.479% Series B Senior Secured Bonds due 2024, issued on March 30, 2000, and the 8.962% Series A-1 Senior Secured Bonds due 2016 and the 9.479% Series B-1 Senior Secured Bonds due 2024 offered in this prospectus. You should carefully consider the information set forth under "Risk Factors." In addition, certain statements are forward-looking statements which involve risks and uncertainties. See "Forward-Looking Statements." THE EXCHANGE OFFER BONDS OFFERED................. $500.0 million aggregate principal amount of new 8.962% Series A-1 Senior Secured Bonds due 2016; and $300.0 million aggregate principal amount of new 9.479% Series B-1 Senior Secured Bonds due 2024; all of which have been registered under the Securities Act. The terms of the bonds offered in the exchange offer are substantially identical to those of the outstanding bonds, except that certain transfer restrictions, registration rights and liquidated damages provisions relating to the outstanding bonds do not apply to the new registered bonds. OUTSTANDING BONDS............. $500.0 million aggregate principal amount of 8.962% Series A Senior Secured Bonds due 2016; and $300.0 million aggregate principal amount of 9.479% Series B Senior Secured Bonds due 2024; all of which were issued on March 30, 2000. THE EXCHANGE OFFER............ We are offering to issue registered bonds in exchange for a like principal amount and like denomination of our outstanding bonds. We are offering to issue these registered bonds to satisfy our obligations under a registration rights agreement that we entered into with the initial purchasers of the outstanding bonds when we sold them in a transaction that was exempt from the registration requirements of the Securities Act. You may tender your outstanding bonds for exchange by following the procedures described under the caption "The Exchange Offer". TENDERS; EXPIRATION DATE; WITHDRAWAL.................... The exchange offer will expire at 5:00 p.m., New York City time, on [ ], 2000, un- 1 5 less we extend it. If you decide to exchange your outstanding bonds for new bonds, you must acknowledge that you are not engaging in, and do not intend to engage in, a distribution of the new bonds. You may withdraw any bonds that you tender for exchange at any time prior to [ ], 2000. If we decide for any reason not to accept any bonds you have tendered for exchange, those bonds will be returned to you without cost promptly after the expiration or termination of the exchange offer. See "The Exchange Offer -- Terms of the Exchange Offer" for a more complete description of the tender and withdrawal provisions. CONDITIONS TO THE EXCHANGE OFFER......................... The exchange offer is subject to customary conditions, some of which we may waive. U.S. FEDERAL INCOME TAX CONSEQUENCES................ Your exchange of outstanding bonds for bonds to be issued in the exchange offer will not result in any gain or loss to you for U.S. federal income tax purposes. USE OF PROCEEDS............... We will not receive any cash proceeds from the exchange offer. EXCHANGE AGENT................ The Chase Manhattan Bank. CONSEQUENCES OF FAILURE TO EXCHANGE...................... Outstanding bonds that are not tendered or that are tendered but not accepted will continue to be subject to the restrictions on transfer that are described in the legend on those bonds. In general, you may offer or sell your outstanding bonds only if they are registered under, or offered or sold under an exemption from, the Securities Act and applicable state securities laws. We, however, will have no further obligation to register the outstanding bonds. If you do not participate in the exchange offer, the liquidity of your bonds could be adversely affected. CONSEQUENCES OF EXCHANGING YOUR BONDS.................... Based on interpretations of the staff of the SEC, we believe that you may offer for resale, resell or otherwise transfer the bonds that we issue in the exchange offer without complying with the registration and prospectus delivery requirements of the Securities Act if you: - acquire the bonds issued in the exchange offer in the ordinary course of your business; - are not participating, do not intend to participate, and have no arrangement or undertaking with anyone to participate, in the distribution of the bonds issued to you in the exchange offer; and - are not an "affiliate" of our company as defined in Rule 405 of the Securities Act. If any of these conditions is not satisfied and you transfer any bonds issued to you in the exchange offer without delivering a proper prospectus or without qualifying for a registration exemption, you may incur liability under the Securities Act. We will not be 2 6 responsible for or indemnify you against any liability you may incur. Any broker-dealer that acquires bonds in the exchange offer for its own account in exchange for outstanding bonds which it acquired through market-making or other trading activities, must acknowledge that it will deliver a prospectus when it resells or transfers any bonds issued in the exchange offer. See "Plan of Distribution" for a description of the prospectus delivery obligations of broker-dealers in the exchange offer. THE BONDS The terms of the bonds we are issuing in this exchange offer and the outstanding bonds are identical in all material respects, except the bonds offered in the exchange offer: - will have been registered under the Securities Act; - will not contain transfer restrictions and registration rights that relate to the outstanding bonds; and - will not contain provisions relating to the payment of liquidated damages to be made to the holders of the outstanding bonds under circumstances related to the timing of the exchange offer. A brief description of the material terms of the bonds we are issuing in this exchange offer follows: THE ISSUER.................... NRG South Central Generating LLC THE BONDS OFFERED............. $800.0 million in aggregate principal amount of (a) $500.0 million 8.962% Series A-1 Senior Secured Bonds due March 15, 2016 and (b) $300.0 million 9.479% Series B-1 Senior Secured Bonds due September 15, 2024. ISSUE PRICE................... The issue price of the bonds offered in this exchange offer will be equal to and in the denomination of the principal amount of the surrendered outstanding bonds. INTEREST PAYMENT DATES........ March 15 and September 15 of each year, commencing September 15, 2000. AMORTIZATION.................. Principal of the bonds will be repaid in accordance with the schedule set forth under "Description of the Bonds -- Amortization." INITIAL AVERAGE LIFE.......... Series A-1 Senior Secured Bonds due 2016: approximately 9.9 years; Series B-1 Senior Secured Bonds due 2024: approximately 20.2 years. DENOMINATIONS................. NRG South Central will issue the bonds in minimum denominations of $100,000 or any integral multiple of $1,000 in excess thereof. RATINGS....................... "Baa2" from Moody's Investors Services, Inc., or Moody's, and "BBB-" from Standard & Poor's Rating Services, or S&P. GUARANTOR..................... Louisiana Generating will guarantee the bonds. If NRG South Central or Louisiana Generating acquires or creates additional subsidiaries as permitted under the indenture or the guarantor loan agreement, then those subsidiaries will guarantee the bonds unless designated as unrestricted subsidiaries. NRG New Roads Holdings, NRG Sterlington Power and Big Cajun I Peaking Power are 3 7 wholly-owned subsidiaries of NRG South Central, however, they are not guarantors of the bonds and their operations are not restricted by the indenture. NATURE OF OBLIGATIONS......... NRG South Central is obligated to make payments on the bonds. Neither NRG Energy nor its parent, Xcel Energy, nor any of their affiliates (other than NRG South Central, Louisiana Generating or any additional guarantor) will guarantee payment of the bonds nor will they have any obligation to make payments on the bonds (other than NRG Energy's or any affiliate's obligation under any debt service reserve credit support). OPTIONAL REDEMPTION........... NRG South Central may redeem the bonds in whole or in part at any time at a redemption price equal to: - 100% of the principal amount of the bonds being redeemed, plus - interest on the bonds being redeemed, accrued and unpaid to, but excluding, the date of redemption, plus - a make-whole premium based on an amount equal to the excess, if any, of (a) the discounted present value of all interest and principal payments scheduled to become due in respect to the bonds to be redeemed (such discounted present value to be determined on the basis of a discount rate equal to the sum of (i) the treasury rate and (ii) 50 basis points), over (b) the outstanding principal amount of the applicable bonds to be redeemed. MANDATORY REDEMPTION.......... The bonds will be subject to a mandatory redemption in whole or in part in an aggregate amount equal to the loss proceeds we receive in respect of any loss or damage to or condemnation or other governmental taking of or title event regarding any of our facilities owned by Louisiana Generating, which we refer to as the Cajun facilities, or any of the other assets of NRG South Central or Louisiana Generating or any part thereof, in excess of $10.0 million; provided that we will first be permitted to replace, repair or rebuild such facilities or assets, or parts thereof, where there are sufficient funds (including such loss proceeds) to do so and if we provide an officer's certificate that certifies that no material adverse effect would reasonably be expected to result. In the event that the Cajun facilities or our other assets are replaced, repaired or rebuilt and the loss proceeds are greater than the cost of such replacement, repair or rebuilding and if such excess amount is greater than $5.0 million, only the remaining loss proceeds over $5.0 million will be used for a mandatory redemption. The bonds will be subject to a mandatory redemption in whole or in part in the event we receive proceeds from an involuntary or voluntary buy-out of a power supply agreement in excess of $5.0 million. However, there will be no mandatory redemption if either (a) the rating agencies provide confirmation that no ratings downgrade will occur following such involuntary or voluntary buy-out or (b) we enter into a replacement power supply agreement contain- 4 8 ing substantially similar terms to the terminated agreement and provide an officer's certificate that certifies that no material adverse effect would reasonably be expected to result. In the event of a mandatory redemption, the redemption price for the bonds will be 100% of the principal amount of the bonds being redeemed plus interest accrued and unpaid to but excluding the date of redemption plus, in the event of a voluntary buy-out of a power supply agreement only, a make-whole premium equal to that paid in the case of any optional redemption of the same bonds. Upon the occurrence of any event requiring a redemption of the bonds, we will be required to redeem the bonds and repay other senior secured indebtedness on a pro rata basis in an aggregate amount equal to the proceeds to be applied as described above. CHANGE OF CONTROL............. Upon the occurrence of certain events involving a change of control, NRG South Central will be required to offer to repurchase all or any part of the outstanding bonds held by any holder of bonds on the immediately following payment date at a cash price equal to 101% of the then outstanding principal amount of the bonds plus accrued and unpaid interest to but excluding the date of payment. A change of control means the acquisition of, directly or indirectly, beneficially or of record or otherwise, by any person or group other than NRG Energy or its controlled subsidiaries, the power to direct or cause the direction of the management and policies of NRG South Central through the ownership of voting securities, by contract or otherwise. However, there shall be no change of control if either: - NRG South Central receives a confirmation from the rating agencies that no ratings downgrade will occur after such change of control; or - such change of control is approved by holders of at least 66 2/3% in aggregate principal amount of the then-outstanding bonds. DEBT SERVICE RESERVE ACCOUNT....................... NRG South Central established a debt service reserve account for the benefit of the bondholders. This account must constitute at all times a sufficient fund to pay the scheduled principal and interest on the bonds due in the next six months. NRG South Central may fund this account with cash or credit support. NRG South Central has obtained credit support and therefore need not fund this account with cash. Credit support may be either: - an unconditional guarantee by NRG Energy or one of its affiliates other than us (so long as NRG Energy or such affiliate maintains a long-term senior unsecured debt rating of at least "Baa3" from Moody's and at least "BBB-" with a stable outlook from S&P); or - a letter of credit provided by a commercial bank or other financial institution with a long-term senior unsecured debt rating of at least "A2" from Moody's and at least "A" from S&P. 5 9 Currently, the debt service reserve requirement is being satisfied by a guarantee given by NRG Energy. RANKING....................... The bonds: - are NRG South Central's senior obligations; - are equal in right of payment to all of NRG South Central's existing and future senior indebtedness; and - rank senior in right of payment to all of the future subordinated indebtedness of NRG South Central. The guarantee of the bonds: - is Louisiana Generating's senior obligation; and - is equal in right of payment to all of Louisiana Generating's existing and future senior indebtedness. COLLATERAL.................... The obligations of NRG South Central are secured by a security interest in the following: - NRG Central U.S. LLC's and South Central Generation Holding LLC's membership interests in NRG South Central and NRG South Central's membership interests in Louisiana Generating; - all of NRG South Central's assets related to the Cajun facilities, including its rights under a guarantor loan agreement and all intercompany notes between it and Louisiana Generating; and - a revenue account and the debt service reserve account. The obligations of Louisiana Generating under the guarantee of the bonds and the guarantor loan agreement are secured by a mortgage with respect to the two power plants at the Cajun facilities, which we refer to as Big Cajun I and Big Cajun II, and a security interest in the following: - all of Louisiana Generating's ownership rights in the Cajun facilities and substantially all the personal property associated with the Cajun facilities except for fixtures not located on the Cajun facilities and the assets specifically held for resale; - substantially all contracts associated with the Cajun facilities to which Louisiana Generating is a party and all consents to the assignment of these contracts that have been obtained; - all licenses, permits and governmental approvals associated with the Cajun facilities; - all insurance policies associated with the Cajun facilities and all monies paid to Louisiana Generating on these policies; - all revenues of the Cajun facilities, including revenues from power sales contracts entered into by NRG Power Market- 6 10 ing or any other entity which has entered into a power marketing agreement with Louisiana Generating associated with the Cajun facilities; and - the revenue account. COVENANTS OF NRG SOUTH CENTRAL....................... The terms of the indenture require NRG South Central to, among other things: - provide financial statements, default notices and other notices to the bond trustee and the rating agencies; - maintain its property and existence; - maintain certain insurance coverage; - maintain certain agreements and comply with certain regulatory requirements; - comply with applicable laws; - pay taxes and maintain books and records; - retain a controlling ownership interest in Louisiana Generating and any additional guarantor; - maintain the revenue account and the debt service reserve account; - comply with the financial information requirements under the indenture; and - maintain registration under the Exchange Act following issuance of the exchange bonds issued in the exchange offer so long as required by law. The terms of the indenture restrict NRG South Central's ability to, among other things: - incur additional debt; - incur liens on its property or pledge its assets; - engage in mergers, consolidations and sales of assets; - guarantee the obligations of others; - make distributions; - make investments and acquisitions; - enter into specified transactions with affiliates; and - enter into businesses other than (a) acquisition and ownership of Louisiana Generating, any additional guarantor or any unrestricted subsidiary and (b) acquisition, development, construction, operation and maintenance of any non- nuclear electric generating or district energy assets in the United States. These limitations are subject to a number of important qualifications and exceptions which are described under "Description of Principal Financing Documents -- Indenture." 7 11 COVENANTS OF LOUISIANA GENERATING.................... The terms of the guarantor loan agreement require Louisiana Generating to, among other things: - provide notices of material litigation related to the Cajun facilities and copies of material notices received under certain contracts to NRG South Central; - maintain its property and existence; - maintain specified insurance coverage; - maintain specified agreements and comply with specified regulatory requirements; - pay taxes and maintain books and records; - operate the Cajun facilities in accordance with prudent independent power industry practice; - comply with applicable laws; and - maintain the revenue account. The terms of the guarantor loan agreement restrict Louisiana Generating's ability to, among other things: - incur additional debt; - incur liens on its property or pledge its assets; - engage in mergers, consolidations or sales of assets; - guarantee the obligations of others; - make distributions; - make investments and acquisitions; - enter into certain transactions with affiliates; - enter into businesses other than (a) the acquisition, ownership, operation and maintenance of the Cajun facilities and certain related assets and (b) the acquisition and ownership of subsidiaries which are additional guarantors; and - amend or assign its material contracts. These limitations are subject to a number of important qualifications and exceptions which are described under the caption "Description of Principal Financing Documents -- Guarantor Loan Agreement." ADDITIONAL GUARANTORS......... We may designate subsidiaries as additional guarantors so long as prior to doing so, we obtain a ratings affirmation from both rating agencies and cause the additional guarantor to (a) enter into a loan agreement with material covenants similar to those made by Louisiana Generating in the guarantor loan agreement and (b) execute a guarantee with respect to the bonds. NRG New Roads Holdings, NRG Sterlington Power and Big Cajun I Peaking Power are not additional guarantors of the bonds. 8 12 GOVERNING LAW................. The bonds and the documents related to the issuance of the bonds are governed by, and construed in accordance with, the laws of the State of New York, except for certain security documents which are governed by the laws of the State of Louisiana. NRG SOUTH CENTRAL AND LOUISIANA GENERATING NRG South Central is a Delaware limited liability company which, through its wholly-owned subsidiary, Louisiana Generating acquired 1,708 capable MW of electric power generation facilities located in New Roads, Louisiana. We refer to these facilities as the Cajun facilities. We sell a significant amount of the energy and capacity produced by the Cajun facilities under long-term, all-requirements power supply agreements. NRG South Central is an indirect, wholly-owned subsidiary of NRG Energy, Inc. In March 2000, NRG Energy made an equity contribution of approximately $268.6 million to NRG South Central. We purchased the Cajun facilities on March 31, 2000 for approximately $1,055.9 million. The Cajun facilities were sold as part of a competitive bidding process following a Chapter 11 bankruptcy filing by Cajun Electric Power Cooperative, Inc., a non-profit Louisiana electric membership cooperative corporation, which we refer to as Cajun Electric. Cajun Electric sold wholesale energy and capacity generated by the Cajun facilities to its cooperative members for more than 20 years under long-term, all-requirements power supply agreements. We have continued to sell energy and capacity to all 11 of Cajun Electric's former members, which we refer to collectively as the distribution cooperatives, as well as to two municipal power authorities and one investor-owned utility that were Cajun Electric's former contract power purchasers. The Cajun facilities consist of 100% of each of two gas-fired electric power generation units, which we collectively refer to as Big Cajun I, and 100% of each of two coal-fired electric power generation units and 58% of a third coal-fired unit, which we collectively refer to as Big Cajun II. The remaining 42% of the third coal-fired unit is owned by Entergy Gulf States, Inc., a subsidiary of Entergy Corporation. The following table summarizes the characteristics of the Cajun facilities: CHARACTERISTICS OF THE CAJUN FACILITIES
CAPABLE YEAR GENERATING PLACED CAPACITY GENERATING UNIT IN SERVICE (MW) FUEL DISPATCH TYPE - --------------- ---------- ---------- ---- -------------------- Big Cajun I Unit 1 ........................ 1972 110 Gas Intermediate/Peaking Unit 2 ........................ 1972 110 Gas Intermediate/Peaking ----- Subtotal, Big Cajun I.................... 220 Big Cajun II Unit 1 ........................ 1981 577 Coal Base Load Unit 2 ........................ 1981 577 Coal Base Load Unit 3 (58% of 575 MW)......... 1983 334 Coal Base Load ----- Subtotal, Big Cajun II................... 1,488 ----- Total, Cajun facilities........... 1,708 =====
The distribution cooperatives have purchased energy and capacity generated by the Cajun facilities for more than 20 years and have committed to do so with us for varying time periods. In addition to being the primary source of energy and capacity for the distribution cooperatives, we believe that we are well positioned to operate as a competitive exempt wholesale generator in the southeast power market, which consists of 9 13 Louisiana, Mississippi, Tennessee, Alabama, Georgia, Arkansas, northwest Florida and east Texas. Here are some of the reasons why: - the Cajun facilities are among the lowest production cost fossil fuel, electricity generation assets in the southeast power market; - we entered into 25-year, all-requirements power supply agreements with seven of the distribution cooperatives and two- to four-year power supply agreements with the remaining four distribution cooperatives. The distribution cooperatives are permitted to pass on to their retail customers the cost of their wholesale power purchases under these power supply agreements; - the Cajun facilities are modern and well maintained power generation assets, having benefited from an extensive maintenance program over their history and from capital expenditures totaling over $26.0 million from 1997 through 1999 while under the bankruptcy trustee's stewardship; - we retained 313 former employees of Cajun Electric who have an average of approximately 15 years of work experience with Cajun Electric and are responsible for the day-to-day operation and maintenance of the Cajun facilities; - we benefit from recently negotiated and competitively priced coal supply and transportation arrangements; - we operate as a load control area under the auspices of the Southwest Power Pool and the North American Electric Reliability Council, which enables us to directly serve the needs of our customers without reliance on third-party transmission scheduling; - the Cajun facilities are in compliance with all existing environmental requirements. Moreover, our power supply agreements allow Louisiana Generating to pass through to the distribution cooperatives their share of increased costs resulting from changes in environmental law; and - our relationship with NRG Energy allows us to draw on its extensive experience in the competitive power industry by contracting with it and its affiliates for administrative, fuel supply, power marketing and operational services. In addition, we believe the Cajun facilities' sites and existing infrastructure provide significant opportunities for expansion of our generation capacity. A feasibility study has been completed and the permitting process has been commenced with respect to an approximately 240 MW expansion of the Big Cajun I site. We have formed Big Cajun I Peaking Power, a wholly-owned subsidiary, to develop, construct and own the expansion project, which is targeted to begin commercial operation in June 2001. Big Cajun I Peaking Power is not a guarantor of the bonds. NRG South Central and Louisiana Generating were formed for the purpose of financing, acquiring, owning, operating and maintaining the Cajun facilities and any other facilities that NRG South Central or its subsidiaries may acquire in the future. Our headquarters and principal executive offices are located at 901 Marquette Avenue, Suite 2300, Minneapolis, Minnesota 55402-3265. Our telephone number is (612) 373-5300. OUR CONTRACTUAL ARRANGEMENTS We have entered into or assumed significant agreements for the wholesale sale of energy and capacity and the supply and transportation of coal, as well as agreements for marketing, operational and corporate services. CONTRACT POWER SALES. The distribution cooperatives have all entered into power supply agreements with Louisiana Generating. While the forms of the power supply agreements differ with respect to certain terms, each agreement contains the following: - an obligation of the distribution cooperative to purchase all of its energy and capacity from Louisiana Generating; 10 14 - a demand charge component which is determined by the amount of capacity reserved by the distribution cooperative; - an energy charge component which covers variable operation and maintenance expenses and fuel costs; - multiple fuel options within the energy charge component, including fixed fuel, fuel pass through and/or formula escalation; - multiple escalation mechanisms in the tariffs; - a pass through mechanism for costs of transmission services incurred by Louisiana Generating; and - a pass through mechanism for costs incurred by Louisiana Generating resulting from changes in environmental law. In addition, we assumed four power supply agreements with two municipal power authorities and one investor-owned utility that were Cajun Electric's former customers. OTHER POWER SALES. Our energy and capacity that is not contracted for is marketed under a 30-year power sales and agency agreement between Louisiana Generating and NRG Power Marketing. Under the agreement, NRG Power Marketing provides all power marketing services for Louisiana Generating including scheduling, power sales contract management, and bilateral sales of energy and capacity. NRG Power Marketing has the exclusive right to market all energy and capacity from Louisiana Generating that Louisiana Generating has not committed under other contracts. All net revenues collected by NRG Power Marketing from these activities flow to Louisiana Generating. FUEL SUPPLY AND TRANSPORTATION. Louisiana Generating has entered into a five-year coal supply agreement under which Triton Coal Company sells to Louisiana Generating sufficient quantities of coal to satisfy the full coal requirements of Big Cajun II. Louisiana Generating has entered into a five-year coal transportation agreement with The Burlington Northern and Santa Fe Railway Company and American Commercial Terminal LLC under which the railroad transports coal from the Triton Coal mines in the Powder River Basin in Wyoming to St. Louis, Missouri. American Commercial Terminal transports coal by barge down the Mississippi River from St. Louis to the Cajun facilities. The Cajun facilities include a 17.5 mile gas pipeline with interconnections to Bridgeline Gas Distribution LLC, Acadian Gas Pipeline System and Texas Eastern Transmission Corporation. Under the power sales and agency agreement, NRG Power Marketing acquires natural gas and gas transportation rights for the benefit of Louisiana Generating. OPERATIONS AND MAINTENANCE. Louisiana Generating entered into an operation and management services agreement with NRG Operating Services, Inc. under which, upon the request of Louisiana Generating, NRG Operating Services manages, oversees and supplements the operation and maintenance of the Cajun facilities. NRG Operating Services is a direct, wholly-owned subsidiary of NRG Energy. CORPORATE SERVICES. Louisiana Generating and NRG South Central each entered into a corporate services agreement with NRG Energy pursuant to which NRG Energy, upon request, provides services relating to any corporate business function, including human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. OUR CUSTOMERS Our primary customers, the distribution cooperatives, purchased their requirements for energy and capacity from Cajun Electric for more than 20 years. They continue to purchase their requirements from Louisiana Generating. As of 1998, these distribution cooperatives supplied power to over 319,000 metered customers of which approximately 91% were residential customers, 8% were industrial or commercial customers and 1% were public or other customers. When compared to their power costs prior to Cajun Electric's Chapter 11 bankruptcy filing, the new power supply agreements that the distribution cooperatives have entered into with us provide for a significant reduction in their cost of energy and capacity. The 11 15 distribution cooperatives are permitted to pass on to their retail customers the reduced cost of their wholesale power purchases under these power supply agreements. In addition to sales to the distribution cooperatives, Louisiana Generating sells capacity and energy to two municipal power authorities and one investor-owned utility. Any remaining energy and capacity that is available after Louisiana Generating's sales to the distribution cooperatives, the municipal power authorities and the investor-owned utility is marketed by NRG Power Marketing on behalf of Louisiana Generating. OUR OWNERSHIP Louisiana Generating is a wholly-owned subsidiary of NRG South Central. NRG South Central is a subsidiary of NRG Energy, a leading global participant in the independent electric power generation industry. Established in 1989, NRG Energy is primarily engaged in the acquisition, development, ownership and operation of power generation facilities and the sale of energy, capacity and related products. In August 2000, the former parent company of NRG Energy, Northern States Power Company, and New Centuries Energy, Inc. completed their merger. The surviving company operates under the new name Xcel Energy, Inc. As a result of the merger, the shares of NRG Energy previously owned by Northern States Power are now indirectly owned by Xcel Energy. As of the date of this prospectus, Xcel Energy, through its wholly-owned subsidiary Xcel Wholesale Energy Group, owns approximately 82% of the common equity and 98% of the combined voting power of NRG Energy's common stock and class A common stock. 12 16 ORGANIZATIONAL STRUCTURE [ORGANIZATIONAL STRUCTURE FLOW CHART] - --------------- (1) Xcel Energy, Inc. indirectly owns approximately 82% of the common equity and 98% of the combined voting power of NRG Energy, Inc.'s common stock and class A common stock. (2) Formerly Koch Power Louisiana LLC, a Delaware limited liability company acquired from Koch Power, Inc. and renamed NRG Sterlington Power LLC, formed for the purpose of developing, constructing, owning and operating an approximately 200 MW simple cycle gas peaking facility in Sterlington, Louisiana. (3) A Delaware limited liability company formed for the purpose of developing, constructing, owning and operating an approximately 240 MW simple cycle gas peaking facility at the Big Cajun I site in New Roads, Louisiana. (4) A Delaware limited liability company formed for the purpose of holding assets acquired by Louisiana Generating in conjunction with the purchase of the Cajun facilities which are not necessary for the operation of the Cajun facilities and, with respect to some of these assets, may not be held by Louisiana Generating under applicable federal regulations. 13 17 RISK FACTORS In addition to the information contained elsewhere in this prospectus, you should carefully consider the following risk factors in evaluating the exchange offer and an investment in the bonds. YOU MAY HAVE DIFFICULTY SELLING THE OUTSTANDING BONDS THAT YOU DO NOT EXCHANGE. If you do not exchange your outstanding bonds for the bonds offered in this exchange offer, you will continue to be subject to the restrictions on the transfer of your bonds. Those transfer restrictions are described in the indenture governing the outstanding bonds and in the legend contained on the outstanding bonds, and arose because we originally issued the outstanding bonds under exemptions from, and in transactions not subject to, the registration requirements of the Securities Act. In general, you may offer or sell your outstanding bonds only if they are registered under the Securities Act and applicable state securities laws, or if they are offered and sold under an exemption from those requirements. We do not intend to register the outstanding bonds under the Securities Act. If a large number of outstanding bonds are exchanged for bonds issued in the exchange offer, it may be more difficult for you to sell your unexchanged bonds. In addition, if you do not exchange your outstanding bonds in the exchange offer, you will no longer be entitled to have those bonds registered under the Securities Act. See "The Exchange Offer -- Consequences of Failure to Exchange Outstanding Bonds" for a discussion of the possible consequences of failing to exchange your bonds. A PORTION OF OUR REVENUE IS SUBJECT TO MARKET RISKS WHICH ARE BEYOND OUR CONTROL AND WHICH MAY HAVE AN ADVERSE IMPACT ON OUR NET OPERATING REVENUE. We are not guaranteed any rate of return on our capital investments through tariff rates payable by purchasers of electricity. Currently, 11 distribution cooperatives, two municipal power authorities and one investor-owned utility purchase the majority of the energy and capacity we generate under 15 power supply agreements. Only seven of these agreements, however, are 25-year, all-requirements power supply agreements. The remaining eight agreements are for shorter terms, four of which may be for as little as two years. The revenues generated from bilateral contracts that we may enter into for the sale of any future excess energy and capacity will be dependent upon prevailing market prices for energy and capacity. In addition, the willingness of the distribution cooperatives and our other power purchasers to enter into new power supply agreements with us upon the termination of their initial power supply agreements will be partially dependent on the prevailing market price for energy and capacity at that time. Our failure to enter into agreements for our initial excess energy and capacity with new customers or to enter into new agreements with our primary customers upon termination of their initial agreements could have an adverse impact on our operating revenues. Among the factors that will influence the market prices for energy and capacity in the southeast power market are: - prevailing market prices for fuel, labor and equipment; - the extent of additional supplies of energy and capacity from current competitors or new market entrants, including the development of new generation facilities or transmission lines, that may be able to produce or deliver electricity less expensively; - prevailing weather conditions from time to time; and - the possibility of a reduction in the projected rate of growth in electricity usage as a result of factors such as regional economic conditions and the implementation of conservation programs. Our industry is characterized by numerous strong and capable competitors, some of which may have more experience, larger staffs, better contractual arrangements or greater financial resources than are available to us. This competition may adversely affect our ability to compete under various market conditions. Should 14 18 additional competitors enter the southeast power market, their actions may also adversely affect the market prices for energy and capacity. WE CURRENTLY RELY ON A LIMITED NUMBER OF CUSTOMERS AND MAY BE ADVERSELY AFFECTED IF ANY SIGNIFICANT CUSTOMER FAILS TO FULFILL ITS OBLIGATIONS. Currently, 11 distribution cooperatives, two municipal power authorities and one investor-owned utility purchase the majority of the energy and capacity we generate under power supply agreements. The failure or inability of any significant power purchaser to fulfill its obligations could adversely affect the revenues we receive and, therefore, our ability to meet our debt service obligations under the bonds. The ability to amend or terminate our power supply agreements is limited. However, it is possible that a court or a regulatory authority could order an amendment to or early termination of any of our power supply agreements following a change in law. In addition, the terms of our power supply agreements do allow amendment or early termination under certain limited circumstances. The amendment or early termination of any power supply agreement could adversely affect the revenues we receive and, therefore, our ability to meet our debt service obligations under the bonds. WE FACE RISKS ASSOCIATED WITH OBTAINING FUEL FOR OUR ELECTRIC POWER GENERATION FACILITIES WHICH MAY RESULT IN DECREASED NET OPERATING REVENUE. Louisiana Generating's coal requirements are satisfied under a coal supply agreement with a term of five years, beginning in March 2000. Transportation of coal to the Cajun facilities is by means of a rail and barge transportation agreement with a term of five years, beginning in March 2000. As a result of these arrangements, we may be exposed to future changes in fuel and fuel transportation costs and fuel supply interruptions which may result in decreased net operating revenue. Louisiana Generating's natural gas requirements are satisfied through purchases on the spot market. This arrangement exposes us to changes in the market price of natural gas. Additionally, because we depend on a limited number of companies to supply and transport our fuel requirements, the failure of any fuel supplier or transporter to fulfill its contractual obligations could decrease our revenues or increase our expenses, which would decrease the funds available to meet our debt service obligations under the bonds. THE DAY-TO-DAY OPERATION OF POWER GENERATING FACILITIES INVOLVES OPERATIONAL RISKS THAT COULD DECREASE OR ELIMINATE FUNDS AVAILABLE TO US TO MEET OUR DEBT SERVICE OBLIGATIONS UNDER THE BONDS. Operation of the Cajun facilities involves many operating risks common to most power generating facilities, including: - performance below expected levels of output or efficiency; - interruptions in fuel supply; - disruptions in the transmission of electricity; - breakdown or failure of equipment or processes; - violation of permit requirements; and - operator error or catastrophic events such as fires, earthquakes, explosions, floods, hurricanes or other similar occurrences. A decrease or elimination of revenues generated by the Cajun facilities or an increase in the costs of operating the Cajun facilities or performing under our power supply agreements caused by the occurrence of any of the events listed above could decrease or eliminate funds available to us to meet our debt service obligations under the bonds. In addition, we have a limited history of owning or operating the Cajun facilities and they only recently have been operated in a competitive environment. We cannot assure you that operational issues will not arise as a result of these changes. 15 19 OUR BUSINESS IS SUBJECT TO SUBSTANTIAL REGULATION AND PERMITTING REQUIREMENTS AND MAY BE ADVERSELY AFFECTED BY ANY FUTURE INABILITY TO COMPLY WITH EXISTING REGULATIONS OR REQUIREMENTS OR CHANGES IN APPLICABLE REGULATIONS OR REQUIREMENTS. ENVIRONMENTAL REGULATION. Our business is subject to extensive environmental regulation by federal, state and local authorities. We are required to comply with numerous laws and regulations, and to obtain numerous governmental permits, in operating the Cajun facilities. We may incur significant additional costs because of our compliance with these requirements. If we fail to comply with these requirements, then we could be subject to loss of operating rights, civil or criminal liability and the imposition of liens or fines. We cannot assure you that existing regulations will not be revised or reinterpreted, that new laws and regulations will not be adopted or become applicable to us or the Cajun facilities or that future changes in laws and regulation will not have a detrimental effect on our business, including potential regulatory developments related to emissions of greenhouse gases, mercury, SO(2) and NO(x). We cannot guarantee you that we will at all times be in compliance with all applicable environmental laws and regulations or that steps to bring the Cajun facilities into compliance would not materially and adversely affect our ability to meet our debt service obligations under the bonds. PUBLIC UTILITY REGULATION. We may be required to obtain additional federal, state and local approvals concerning public utility regulation to operate the Cajun facilities in the future due to a change in laws and regulations, a change in our customers or for other reasons. We cannot guarantee that we will be able to obtain all regulatory approvals that may be required in the future, obtain any necessary modifications to existing regulatory approvals or maintain all required regulatory approvals. If there is a delay in obtaining any required regulatory approvals or if we fail to obtain or comply with any required regulatory approvals, the operation of the Cajun facilities or the sale of electricity to third parties could be prevented or subject to additional costs. WE FACE ONGOING CHANGES IN THE UNITED STATES POWER INDUSTRY WHICH COULD AFFECT OUR COMPETITIVENESS. The United States power industry is currently experiencing increasing competitive pressures, primarily in wholesale markets, as a result of consumer demands, technological advances, greater availability of natural gas-fired generation, potential legislative and regulatory activity and other factors. FERC has implemented and continues to propose regulatory changes to increase access to the nationwide transmission grid by utility and non-utility purchasers and sellers of electricity, which could increase the ability of low-cost producers of electricity to transmit their electricity to areas which currently have higher electricity costs, thereby generally driving down the cost of electricity. In addition a number of states are considering or implementing methods to introduce and promote retail competition. In Louisiana, the Louisiana Public Service Commission, or LPSC, has been reviewing the issue of whether retail electric competition is in the public interest. In 1999, the LPSC staff recommended that the LPSC find that it is not in the public interest if retail access would not produce the opportunity for lower billings for electric service to all rate payers in Louisiana. Although ongoing proceedings continue to focus on the appropriateness of retail access in connection with electric industry restructuring in Louisiana, the LPSC has not made any final decisions regarding retail competition and it is uncertain when or if the LPSC will act on any proposal regarding the allowance of, or continued prohibition against, retail competition. If the current restrictions which prohibit competitors from entering the retail market in Louisiana are eliminated, then our customers' energy and capacity requirements may decline as a result of their loss of retail customers. We have intervened in these proceedings, becoming parties thereto, and are closely monitoring their status. OUR COMPETITION IS INCREASING. The independent power industry is characterized by numerous strong and capable competitors, some of which may have more extensive operating experience, more extensive experience in the acquisition and development of power generation facilities, larger staffs or greater financial resources than we do. In addition, regulatory changes have also been proposed to increase access to transmission grids by utility and non-utility purchasers and sellers of electricity. Industry deregulation may encourage the disaggregation of 16 20 vertically integrated utilities into separate generation, transmission and distribution businesses. As a result, significant additional competitors could become active in the generation segment of our industry. WE ARE CONTROLLED BY NRG ENERGY AND XCEL ENERGY AND DEPEND ON THEM AND THEIR AFFILIATES. NRG Energy indirectly owns a 100% membership interest in us, and in turn Xcel Energy indirectly owns approximately 82% of the common equity and 98% of the combined voting power of NRG Energy's common stock and class A common stock. In circumstances involving a conflict of interest between NRG Energy, Xcel Energy or their affiliates, on the one hand, and our creditors, on the other, we cannot guarantee that NRG Energy or Xcel Energy would not exercise their power to control us in a manner that would benefit NRG Energy, Xcel Energy and their affiliates to the detriment of the holders of the bonds. Moreover, we cannot guarantee that NRG Energy or Xcel Energy will not in the future elect to compete with us, directly or indirectly, including by acquiring electrical generation assets which sell energy, capacity or ancillary services into the southeast power market. We rely on contractual arrangements with NRG Energy, NRG Power Marketing and NRG Operating Services to perform certain services for the Cajun facilities. We are not certain that we could easily replace any of these contractual arrangements with a third party on substantially similar terms if any existing arrangement were to be terminated. Furthermore, the risk of poor performance by any of these contracting parties could be borne by us under certain circumstances. WE ARE UNCERTAIN ABOUT OUR FUTURE ACCESS TO CAPITAL AND MAY BE UNSUCCESSFUL IN FUNDING ALL OF OUR FUTURE REQUIREMENTS. The capital for the acquisition of the Cajun facilities was provided by an equity contribution from NRG Energy and the offering of the outstanding bonds. We cannot guarantee that we will be successful in obtaining sufficient additional capital from NRG Energy or additional borrowings to enable us to fund all of our future requirements. WE MAY INCUR ADDITIONAL DEBT WHICH COULD ADVERSELY AFFECT OUR ABILITY TO MEET OUR DEBT SERVICE OBLIGATIONS UNDER THE BONDS. Subject to the terms of the indenture, we may incur additional debt and certain types of this additional debt may rank equally with the bonds. The requirement that we pay the debt service on any of this additional debt may adversely affect our ability to meet our debt service obligations under the bonds. THE INSURANCE COVERAGE FOR OUR ELECTRIC POWER GENERATION FACILITIES MAY NOT BE ADEQUATE TO COVER POTENTIAL LIABILITIES AND LOSSES. We are required by the indenture to have insurance for the Cajun facilities in amounts and against risks as are customarily maintained by companies engaged in the same or similar operations and operating in the same or similar locations. We cannot guarantee that such insurance coverage for the Cajun facilities will be available in the future on commercially reasonable terms and such insurance coverage may not be sufficient to cover some types of loss. WE ARE THE ONLY ONES REQUIRED TO MAKE PAYMENTS ON THE BONDS AND OUR ABILITY TO DO SO IS DEPENDENT ON CIRCUMSTANCES THAT MAY BE BEYOND OUR CONTROL. Neither NRG Energy, Xcel Energy, nor any of their affiliates, other than us or any additional guarantor, have guaranteed payment of the bonds nor do they have any obligation to make payments on the bonds other than NRG Energy's or any affiliate's obligation under any debt service reserve credit support. NRG South Central's ability to make payments on the bonds, including prepayment obligations triggered by specific kinds of change of control events which we cannot necessarily control, is dependent on the ability of Louisiana Generating to make current payments under the guarantor loan agreement or make membership distributions to NRG South Central. 17 21 YOU MAY FIND IT DIFFICULT TO SELL YOUR BONDS BECAUSE THERE IS NO EXISTING TRADING MARKET FOR THE BONDS. There is no existing trading market for the bonds. You may find it difficult to sell your bonds because an active trading market for the bonds may not develop. We do not intend to apply for listing or quotation of the bonds on any exchange. The bonds are being offered to the holders of the outstanding bonds. The outstanding bonds were issued in March 2000 to a small number of institutional investors. Therefore, we do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market may be. Although we were informed by the initial purchasers of the outstanding bonds that they intended to make a market in the bonds, they are not required to do so and they may cease market-making at any time without notice. Consequently, the market price of the bonds issued in this exchange offer could be adversely effected and you may not be able to liquidate your investment readily. Also, after the exchange offer, the trading market for the remaining outstanding bonds could be adversely affected. FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID SUBSIDIARY GUARANTEES AND REQUIRE HOLDERS OF BONDS TO RETURN PAYMENTS RECEIVED FROM GUARANTORS. Under the federal bankruptcy law and comparable provisions of state fraudulent transfer laws, Louisiana Generating's or an additional guarantor's guarantee of the bonds could be voided, or claims in respect thereof could be subordinated to all other debts of Louisiana Generating or any additional guarantors, as the case may be, if, among other things, Louisiana Generating or the pertinent additional guarantor, at the time it incurred the indebtedness evidenced by the guarantee: - received less than fair consideration or reasonably equivalent value for the guarantee; - was insolvent or rendered insolvent by reason of such issuance; - was engaged in a business or transaction for which its remaining assets constituted unreasonably small capital; or - intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature. In addition, any payment by Louisiana Generating or any additional guarantor pursuant to a guarantee could be voided and required to be returned to Louisiana Generating or the pertinent additional guarantor, or to a fund for the benefit of the creditors of Louisiana Generating or the pertinent additional guarantor. The liabilities of Louisiana Generating or any additional guarantor under the guarantee are contractually limited to the maximum amount they could pay without the guarantee being deemed to be a fraudulent transfer. We cannot guarantee, however, that this limitation would be effective and, if it were effective, if the limited amount would be sufficient to meet our debt service obligations under the bonds. IT MAY BE DIFFICULT TO REALIZE THE VALUE OF THE COLLATERAL PLEDGED TO SECURE THE BONDS, AND THE PROCEEDS RECEIVED FROM A SALE OF THE COLLATERAL MAY BE INSUFFICIENT TO REPAY THE BONDS. Our obligation to make payments on the bonds is secured only by the collateral described in this prospectus. The collateral agent's ability to foreclose on the collateral on your behalf may be subject to perfection and priority issues and to practical problems associated with the realization of the collateral agent's security interest in the collateral. For example, the collateral agent may need to obtain the consent of a third party prior to perfecting its security interest in, or transferring a, contract and without such consent the collateral agent will have limited rights to cure any defaults under a contract or transfer the contract to a substitute owner. We cannot assure you that the collateral agent will be able to obtain such consent. Further, we cannot assure you that enforcement of the security interest with respect to the collateral would provide sufficient funds to repay all amounts due on the bonds. In addition, senior debt that we are permitted to incur will rank equally with the bonds and may share ratably in the collateral which secures the bonds. This would reduce the benefits of the collateral to you and your ability to control certain actions taken with respect to the collateral. 18 22 FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements, which give our current expectations of future events. You will recognize these statements because they do not strictly relate to historical or current facts. Such statements may use words such as "anticipate," "estimate," "expect," "project," "intend," "think," "believe," "will," "should" and other words or terms of similar meaning in connection with any discussion of our future performance. For example, these include statements relating to future actions, future performance, expenses and the impact of the capital markets on our liquidity. From time to time, we also may provide oral or written forward-looking statements in other material released to the public. Any or all of our forward-looking statements in this prospectus and in any other public statements we make may turn out to be incorrect. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. Many factors, which cannot be predicted with certainty, will be important in determining our future results. Among such factors are: - you may have difficulty selling the outstanding bonds that you do not exchange; - a portion of our revenue is subject to market risks which are beyond our control and which may have an adverse impact on our net operating revenue; - we currently rely on a limited number of customers and may be adversely affected if any significant customer fails to fulfill its obligations; - we face risks associated with obtaining fuel for our electric power generation facilities which may result in decreased net operating revenue; - the day-to-day operation of power generating facilities involves operational risks that could decrease or eliminate funds available to us to meet our debt service obligations under the bonds; - our business is subject to substantial regulation and permitting requirements and may be adversely affected by any future inability to comply with existing regulations or requirements or changes in applicable regulations or requirements; - we face ongoing changes in the United States power industry which could affect our competitiveness; - our competition is increasing; - we are controlled by NRG Energy and Xcel Energy and depend on them and their affiliates; - we are uncertain about our future access to capital and may be unsuccessful in funding all of our future requirements; - we may incur additional debt which could adversely affect our ability to meet our debt service obligations under the bonds; - the insurance coverage for our electric power generation facilities may not be adequate to cover potential liabilities and losses; - we are the only ones required to make payments on the bonds and our ability to do so is dependent on circumstances that may be beyond our control; - you may find it difficult to sell your bonds because there is no existing trading market for the bonds; - federal and state statutes allow courts, under specific circumstances, to void subsidiary guarantees and require holders of bonds to return payments received from guarantors; and - it may be difficult to realize the value of the collateral pledged to secure the bonds, and the proceeds received from a sale of the collateral may be insufficient to repay the bonds. As a result of these factors, actual future results may vary materially. Also, please note that the factors we discuss in this prospectus are those we think could cause our actual results to differ materially from expected and historical results. Other factors besides those listed above or under "Risk Factors" could also adversely affect us. SOME OF THESE FACTORS AND OTHERS ARE MORE FULLY DISCUSSED UNDER THE CAPTION "RISK FACTORS." 19 23 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER When we sold the outstanding bonds in March 2000, we entered into a registration rights agreement with the initial purchasers of those bonds. Under the registration rights agreement, we agreed to use our reasonable best efforts to file the registration statement of which this prospectus forms a part regarding the exchange of the outstanding bonds for bonds which are registered under the Securities Act and cause this registration statement to be declared effective by the SEC by December 25, 2000. We also agreed to conduct this exchange offer for at least 30 days after the date notice of the exchange offer is mailed to the holders of the outstanding bonds and to use our reasonable best efforts to keep this registration statement effective until the exchange offer is completed. The registration rights agreement provides that we are required to pay liquidated damages to the holders of the outstanding bonds whose bonds are subject to transfer restrictions if: - the registration statement is not declared effective by December 25, 2000; or - the exchange offer has not been consummated by February 8, 2001. A copy of the registration rights agreement is filed as an exhibit to this registration statement. TERMS OF THE EXCHANGE OFFER This prospectus and the accompanying letter of transmittal together constitute the exchange offer. Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept for exchange outstanding bonds which are properly tendered on or before the expiration date and are not withdrawn as permitted below. The expiration date for this exchange offer is 5:00 p.m., New York City time, on [ ], 2000, or such later date and time to which we, in our sole discretion, extend the exchange offer. The form and terms of the bonds being issued in the exchange offer are the same as the form and terms of the outstanding bonds, except that the bonds being issued in the exchange offer: - will have been registered under the Securities Act; - will not bear the restrictive legends restricting their transfer under the Securities Act; and - will not contain the registration rights and liquidated damages provisions contained in the outstanding bonds. Bonds tendered in the exchange offer must be in denominations of the principal amount of $100,000 and any integral multiples of $1,000 in excess thereof. We expressly reserve the right, in our sole discretion: - to extend the expiration date; - to delay accepting any outstanding bonds; - if any of the conditions set forth below under "-- Conditions to the Exchange Offer" have not been satisfied, to terminate the exchange offer and not accept any bonds for exchange; and - to amend the exchange offer in any manner. We will give oral or written notice of any extension, delay, non-acceptance, termination or amendment as promptly as practicable by a public announcement, and in the case of an extension, no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. During an extension, all outstanding bonds previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. Any outstanding bonds not accepted for exchange for any reason will be returned without cost to the holder that tendered them as promptly as practicable after the expiration or termination of the exchange offer. 20 24 HOW TO TENDER OUTSTANDING BONDS FOR EXCHANGE When the holder of outstanding bonds tenders and we accept bonds for exchange, a binding agreement between us and the tendering holder is created, subject to the terms and conditions set forth in this prospectus and the accompanying letter of transmittal. Except as set forth below, a holder of outstanding bonds who wishes to tender bonds for exchange must, on or prior to the expiration date: (1) transmit a properly completed and duly executed letter of transmittal, including all other documents required by such letter of transmittal, to The Chase Manhattan Bank, the exchange agent, at the address set forth below under the heading "-- The Exchange Agent"; or (2) if bonds are tendered pursuant to the book-entry procedures set forth below, the tendering holder must transmit an agent's message to the exchange agent at the address set forth below under the heading "-- The Exchange Agent." In addition, either: (1) the exchange agent must receive the certificates for the outstanding bonds and the letter of transmittal; (2) the exchange agent must receive, prior to the expiration date, a timely confirmation of the book-entry transfer of the bonds being tendered into the exchange agent's account at the Depository Trust Company, or DTC, along with the letter of transmittal or an agent's message; or (3) the holder must comply with the guaranteed delivery procedures described below. The term "agent's message" means a message, transmitted to DTC and received by the exchange agent and forming a part of a book-entry transfer, referred to as a "book-entry confirmation", which states that DTC has received an express acknowledgment that the tendering holder agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against such holder. The method of delivery of the outstanding bonds, the letters of transmittal and all other required documents is at the election and risk of the holders. If such delivery is by mail, we recommend registered mail, properly insured, with return receipt requested. In all cases, you should allow sufficient time to assure timely delivery. No letters of transmittal or bonds should be sent directly to us. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the bonds surrendered for exchange are tendered: (1) by a holder of outstanding bonds who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or (2) for the account of an eligible institution. An "eligible institution" is a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States. If signatures on a letter of transmittal or notice of withdrawal are required to be guaranteed, the guarantor must be an eligible institution. If bonds are registered in the name of a person other than the signer of the letter of transmittal, the bonds surrendered for exchange must be endorsed by, or accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by us in our sole discretion, duly executed by the registered holder with the holder's signature guaranteed by an eligible institution. 21 25 We will determine all questions as to the validity, form, eligibility (including time of receipt) and acceptance of bonds tendered for exchange in our sole discretion. Our determination will be final and binding. We reserve the absolute right to: (1) reject any and all tenders of any bond improperly tendered; (2) refuse to accept any bond if, in our judgment or the judgment of our counsel, acceptance of the bond may be deemed unlawful; and (3) waive any defects or irregularities or conditions of the exchange offer as to any particular bond either before or after the expiration date, including the right to waive the ineligibility of any holder who seeks to tender bonds in the exchange offer. Our interpretation of the terms and conditions of the exchange offer as to any particular bonds either before or after the expiration date, including the letter of transmittal and the instructions to it, will be final and binding on all parties. Holders must cure any defects and irregularities in connection with tenders of bonds for exchange within such reasonable period of time as we will determine, unless we waive such defects or irregularities. Neither we, the exchange agent nor any other person will be under any duty to give notification of any defect or irregularity with respect to any tender of bonds for exchange, nor will any of us incur any liability for failure to give such notification. If a person or persons other than the registered holder or holders of the outstanding bonds tendered for exchange signs the letter of transmittal, the tendered bonds must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name or names of the registered holder or holders that appear on the outstanding bonds. If trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity sign the letter of transmittal or any bonds or any power of attorney, such persons should so indicate when signing, and you must submit proper evidence satisfactory to us of such person's authority to so act unless we waive this requirement. By tendering, each holder will represent to us that, among other things, the person acquiring bonds in the exchange offer is obtaining them in the ordinary course of its business, whether or not such person is the holder, and that neither the holder nor such other person has any arrangement or understanding with any person to participate in the distribution of the bonds issued in the exchange offer. If any holder or any such other person is an "affiliate," as defined under Rule 405 of the Securities Act, of our company, or is engaged in or intends to engage in or has an arrangement or understanding with any person to participate in a distribution of such bonds to be acquired in the exchange offer, such holder or any such other person: (1) may not rely on the applicable interpretations of the staff of the SEC; and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives bonds under this exchange offer for its own account in exchange for outstanding bonds, where the outstanding bonds were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such bonds issued in the exchange offer. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "Plan of Distribution" for a discussion of the exchange and resale obligations of broker-dealers in connection with the exchange offer. ACCEPTANCE OF OUTSTANDING BONDS FOR EXCHANGE; DELIVERY OF BONDS ISSUED IN THE EXCHANGE OFFER Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date, all outstanding bonds properly tendered and will issue bonds registered under the Securities Act. For purposes of the exchange offer, we will be deemed to have accepted properly tendered outstanding bonds for exchange when, as and if we have given oral or written notice to the exchange agent, 22 26 with written confirmation of any oral notice to be given promptly thereafter. See "-- Conditions to the Exchange Offer" for a discussion of the conditions that must be satisfied before we accept any bonds for exchange. For each outstanding bond accepted for exchange, the holder will receive a bond registered under the Securities Act having a principal amount equal to, and in the denomination of, that of the surrendered outstanding bond. Accordingly, registered holders of bonds issued in the exchange offer on the relevant record date for the first interest payment date following the consummation of the exchange offer will receive interest accruing from the most recent date to which interest has been paid. Outstanding bonds that we accept for exchange will cease to accrue interest from and after the date of consummation of the exchange offer. Under the registration rights agreement, we may be required to make additional payments in the form of liquidated damages to the holders of the outstanding bonds under circumstances relating to the timing of the exchange offer. In all cases, we will issue bonds in the exchange offer for outstanding bonds that are accepted for exchange only after the exchange agent timely receives: (1) certificates for such outstanding bonds or a timely book-entry confirmation of such outstanding bonds into the exchange agent's account at DTC; (2) a properly completed and duly executed letter of transmittal or an agent's message; and (3) all other required documents. If for any reason set forth in the terms and conditions of the exchange offer we do not accept any tendered outstanding bonds, or if a holder submits outstanding bonds for a greater principal amount than the holder desires to exchange, we will return such unaccepted or non-exchanged bonds without cost to the tendering holder. In the case of bonds tendered by book-entry transfer into the exchange agent's account at DTC, such non-exchanged bonds will be credited to an account maintained with DTC. We will return the bonds or have them credited to DTC as promptly as practicable after the expiration or termination of the exchange offer. BOOK ENTRY TRANSFERS The exchange agent will make a request to establish an account at DTC for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in DTC's system must make book-entry delivery of outstanding bonds denominated in dollars by causing DTC to transfer the outstanding bonds into the exchange agent's account at DTC in accordance with DTC's procedures for transfer. Such participant should transmit its acceptance to DTC on or prior to the expiration date or comply with the guaranteed delivery procedures described below. DTC will verify such acceptance, execute a book-entry transfer of the tendered outstanding bonds into the exchange agent's account at DTC and then send to the exchange agent confirmation of such book-entry transfer. The confirmation of such book-entry transfer will include an agent's message confirming that DTC has received an express acknowledgment from such participant that such participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against such participant. Delivery of bonds issued in the exchange offer may be effected through book-entry transfer at DTC as applicable. However, the letter of transmittal or facsimile thereof or an agent's message, with any required signature guarantees and any other required documents, must: (1) be transmitted to and received by the exchange agent at the address set forth below under "-- Exchange Agent" on or prior to the expiration date; or (2) comply with the guaranteed delivery procedures described below. GUARANTEED DELIVERY PROCEDURES If a holder of outstanding bonds desires to tender such bonds and the holder's bonds are not immediately available, or time will not permit such holder's bonds or other required documents to reach the exchange agent 23 27 before the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if: (1) the holder tenders the bonds through an eligible institution; (2) prior to the expiration date, the exchange agent receives from such eligible institution a properly completed and duly executed notice of guaranteed delivery, substantially in the form we have provided, by facsimile transmission, mail or hand delivery, setting forth the name and address of the holder of the bonds being tendered and the amount of the bonds being tendered. The notice of guaranteed delivery will state that the tender is being made and guarantee that within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery, the certificates for all physically tendered bonds, in proper form for transfer, or a book-entry confirmation, as the case may be, together with a properly completed and duly executed letter of transmittal or agent's message with any required signature guarantees and any other documents required by the letter of transmittal will be deposited by the eligible institution with the exchange agent; and (3) the exchange agent receives the certificates for all physically tendered outstanding bonds, in proper form for transfer, or a book-entry confirmation, as the case may be, together with a properly completed and duly executed letter of transmittal or agent's message with any required signature guarantees and any other documents required by the letter of transmittal, within three New York Stock Exchange trading days after the date of execution of the notice of guaranteed delivery. WITHDRAWAL RIGHTS You may withdraw tenders of your outstanding bonds at any time prior to 5:00 p.m., New York City time, on the expiration date. For a withdrawal to be effective, you must send a written notice of withdrawal to the exchange agent at one of the addresses set forth below under "-- Exchange Agent." Any such notice of withdrawal must: (1) specify the name of the person having tendered the outstanding bonds to be withdrawn; (2) identify the outstanding bonds to be withdrawn, including the principal amount of such outstanding bonds; and (3) where certificates for outstanding bonds are transmitted, specify the name in which outstanding bonds are registered, if different from that of the withdrawing holder. If certificates for outstanding bonds have been delivered or otherwise identified to the exchange agent, then, prior to the release of such certificates the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and signed notice of withdrawal with signatures guaranteed by an eligible institution unless such holder is an eligible institution. If bonds have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn bonds and otherwise comply with the procedures of such facility. We will determine all questions as to the validity, form and eligibility (including time of receipt) of such notices and our determination will be final and binding on all parties. Any tendered bonds so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any bonds which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder. In the case of bonds tendered by book-entry transfer into the exchange agent's account at DTC, the bonds withdrawn will be credited to an account maintained with DTC for the outstanding bonds. The bonds will be returned or credited to this account as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn bonds may be re-tendered by following one of the procedures described under "-- How to Tender Bonds for Exchange" above at anytime on or prior to 5:00 p.m., New York City time, on the expiration date. 24 28 CONDITIONS TO THE EXCHANGE OFFER We are not required to accept for exchange, or to issue bonds in the exchange offer for, any outstanding bonds. We may terminate or amend the exchange offer at any time before the acceptance of such outstanding bonds for exchange if: (1) any federal law, statute, rule or regulation is adopted or enacted which, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offer; (2) any stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939, as amended; (3) there is a change in the current interpretation by staff of the SEC which permits the bonds issued in the exchange offer in exchange for the outstanding bonds to be offered for resale, resold and otherwise transferred by such holders, other than broker-dealers and any such holder which is an "affiliate" of our company within the meaning of Rule 405 under the Securities Act, without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such bonds acquired in the exchange offer are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such bonds issued in the exchange offer; (4) there is a general suspension of or general limitation on prices for, or trading in, securities on any national exchange or in the over-the-counter market; (5) any governmental agency creates limits that adversely affect our ability to complete the exchange offer; (6) there is any declaration of war, armed hostilities or other similar international calamity directly or indirectly involving the United States, or the worsening of any such condition that existed at the time that we commence the exchange offer; (7) there is a change or a development involving a prospective change in our and our subsidiaries' businesses, properties, assets, liabilities, financial condition, operations, results of operations taken as a whole, that is or may be adverse to us; or (8) we become aware of facts that, in our reasonable judgment, have or may have adverse significance with respect to the value of the outstanding bonds or the bonds to be issued in the exchange offer. The preceding conditions are for our sole benefit and we may assert them regardless of the circumstances giving rise to any such condition. We may waive the preceding conditions in whole or in part at any time and from time to time in our sole discretion. If we do so, the exchange offer will remain open for at least three business days following any waiver of the preceding conditions. Our failure at any time to exercise the foregoing rights will not be deemed a waiver of any such right and each such right will be deemed an ongoing right which we may assert at any time and from time to time. THE EXCHANGE AGENT The Chase Manhattan Bank has been appointed as our exchange agent for the exchange offer. All executed letters of transmittal should be directed to our exchange agent at the address set forth below. Questions and requests for assistance, requests for additional copies of this prospectus or of the letter of 25 29 transmittal and requests for notices of guaranteed delivery should be directed to the exchange agent addressed as follows: Main Delivery To: The Chase Manhattan Bank By mail, hand delivery or overnight courier: The Chase Manhattan Bank 55 Water Street, Room 234 New York, New York 10041 Attention: Carlos Esteves -- Confidential By facsimile transmission: (for eligible institutions only) 212-638-7380 Confirm by Telephone: 212-638-0828 Delivery of the letter of transmittal to an address other than as set forth above or transmission of such letter of transmittal via facsimile other than as set forth above does not constitute a valid delivery of such letter of transmittal. FEES AND EXPENSES We will not make any payment to brokers, dealers, or others soliciting acceptance of the exchange offer except for reimbursement of mailing expenses. We will pay the cash expenses to be incurred in connection with the exchange offer, including accounting, legal, printing, and related fees and expenses. The estimated cash expenses to be incurred in connection with the exchange offer are estimated in the aggregate to be approximately $400,000. TRANSFER TAXES Holders who tender their outstanding bonds for exchange will not be obligated to pay any transfer taxes in connection with the exchange. If, however, bonds issued in the exchange offer are to be delivered to, or are to be issued in the name of, any person other than the holder of the bonds tendered, or if a transfer tax is imposed for any reason other than the exchange of outstanding bonds in connection with the exchange offer, then the holder must pay any of these transfer taxes, whether imposed on the registered holder or on any other person. If satisfactory evidence of payment of, or exemption from, these taxes is not submitted with the letter of transmittal, the amount of these transfer taxes will be billed directly to the tendering holder. CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING BONDS Holders who desire to tender their outstanding bonds in exchange for bonds registered under the Securities Act should allow sufficient time to ensure timely delivery. Neither the exchange agent nor we are under any duty to give notification of defects or irregularities with respect to the tenders of bonds for exchange. Outstanding bonds that are not tendered or are tendered but not accepted will, following the consummation of the exchange offer, continue to be subject to the provisions in the indenture regarding the transfer and exchange of the outstanding bonds and the existing restrictions on transfer set forth in the legend on the outstanding bonds and in the offering circular dated March 27, 2000, relating to the outstanding bonds. Except in limited circumstances with respect to specific types of holders of outstanding bonds, we will have no further obligation to provide for the registration under the Securities Act of such outstanding bonds. In general, outstanding bonds, unless registered under the Securities Act, may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We 26 30 do not currently anticipate that we will take any action to register the outstanding bonds under the Securities Act or under any state securities laws. Upon completion of the exchange offer, holders of the outstanding bonds will not be entitled to any further registration rights under the registration rights agreement, except under limited circumstances. Holders of the bonds issued in the exchange offer and any outstanding bonds which remain outstanding after consummation of the exchange offer will vote together as a single class for purposes of determining whether holders of the requisite percentage of the class have taken certain actions or exercised certain rights under the indenture. CONSEQUENCES OF EXCHANGING OUTSTANDING BONDS Based on interpretations of the staff of the SEC, as set forth in no-action letters to third parties, we believe that the bonds issued in the exchange offer may be offered for resale, resold or otherwise transferred by holders of those bonds, other than by any holder which is our "affiliate" within the meaning of Rule 405 under the Securities Act. The bonds may be offered for resale, resold or otherwise transferred without compliance with the registration and prospectus delivery provisions of the Securities Act, if: (1) the bonds issued in the exchange offer are acquired in the ordinary course of the holder's business; and (2) the holder, other than broker-dealers, has no arrangement or understanding with any person to participate in the distribution of the bonds issued in the exchange offer. However, the SEC has not considered the exchange offer in the context of a no-action letter and we cannot guarantee that the staff of the SEC would make a similar determination with respect to the exchange offer as in such other circumstances. Each holder, other than a broker-dealer, must furnish a written representation, at our request, that: (1) it is not an affiliate of ours; (2) it is not engaged in, and does not intend to engage in, a distribution of the bonds issued in the exchange offer and has no arrangement or understanding to participate in a distribution of bonds issued in the exchange offer; (3) it is acquiring the bonds issued in the exchange offer in the ordinary course of its business; and (4) it is not acting on behalf of a person who could not make representations (1)-(3). Each broker-dealer that receives bonds issued in the exchange offer for its own account in exchange for outstanding bonds must acknowledge that: (1) such outstanding bonds were acquired by such broker-dealer as a result of market-making or other trading activities, and (2) it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, including the delivery of a prospectus that contains information with respect to any selling holder required by the Securities Act in connection with any resale of such bonds issued in the exchange offer. Furthermore, any broker-dealer that acquired any of its outstanding bonds directly from us: (1) may not rely on the applicable interpretation of the SEC staff's position contained in Exxon Capital Holdings Corp., SEC No-Action Letter (April 13, 1989), Morgan, Stanley & Co., Inc., SEC No-Action Letter (June 5, 1991) and Shearman & Sterling, SEC No-Action Letter (July 2, 1983), and (2) must also be named as a selling holder of the bonds in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction. 27 31 See "Plan of Distribution" for a discussion of the exchange and resale obligations of broker-dealers in connection with the exchange offer. In addition, to comply with state securities laws of certain jurisdictions, the bonds issued in the exchange offer may not be offered or sold in any state unless they have been registered or qualified for sale in such state or an exemption from registration or qualification is available and complied with by the holders selling the bonds. We have agreed in the registration rights agreement that, prior to any public offering of transfer restricted bonds, we will register or qualify the transfer restricted bonds for offer or sale under the securities laws of any jurisdiction requested by a holder. Unless a holder requests, we currently do not intend to register or qualify the sale of the bonds issued in the exchange offer in any state where an exemption from registration or qualification is required and not available. "Transfer restricted bonds" means each bond until the date on which it: (1) has been exchanged for a freely transferable bond in the exchange offer; (2) has been effectively registered under the Securities Act and disposed of in accordance with a shelf registration statement that we file in accordance with the registration rights agreement; or (3) is distributed to the public under Rule 144 of the Securities Act or is saleable under Rule 144(k) under the Securities Act. USE OF PROCEEDS We will not receive any proceeds from the exchange offer. The proceeds from the sale of the outstanding bonds, together with an equity contribution from NRG Energy, were used to fund the acquisition of the Cajun facilities and to pay certain fees, costs, expenses and taxes in connection with the acquisition. 28 32 CAPITALIZATION The following table sets forth the actual consolidated capitalization of NRG South Central as of June 30, 2000.
CAPITALIZATION AT JUNE 30, 2000 (IN THOUSANDS) ----------------- SHORT TERM DEBT: Current portion of long term debt(1)........................ $ 23,750 LONG-TERM DEBT: Bonds(1).................................................... $ 776,250 ---------- TOTAL DEBT.................................................. $ 800,000 MEMBERS' EQUITY(1).......................................... $ 274,164 ---------- TOTAL DEBT AND MEMBERS' EQUITY.............................. $1,074,164 ==========
- --------------- (1) On March 30, 2000, NRG South Central issued $800.0 million of senior secured bonds. The proceeds from the sale of the bonds, together with an equity contribution from NRG Energy, were used to fund the acquisition of the Cajun facilities. The Capitalization Structure presented for NRG South Central is comprised primarily of that of Louisiana Generating which, as of the date of this prospectus, is the only guarantor of the bonds. 29 33 SELECTED HISTORICAL FINANCIAL DATA The table that follows sets forth historical financial data that have been derived from the "carve-out" financial statements of Cajun Electric solely for the Cajun facilities and other assets that are included as part of our acquisition of the Cajun facilities. The selected financial data set forth below as of December 31, 1997, 1998 and 1999 and for the three years then ended have been derived from the Cajun Electric audited "carve-out" financial statements. The selected financial data set forth below as of June 30, 2000 and for the period of March 30, 2000 (Inception) through June 30, 2000 have been derived from the NRG South Central audited financial statements. The following data should be read in conjunction with the financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this prospectus. The following financial data are of extremely limited use in making an investment decision. Our results of operations in the future will be different from Cajun Electric's carve-out historical results for several reasons. Cajun Electric operated as a non-profit electric power cooperative which for the years shown below was operating pursuant to Chapter 11 of the United States Bankruptcy Code. Cajun Electric sold energy and capacity under power supply agreements and at rates which are materially different from our power supply agreements and rates. In addition, the delivered cost of Cajun Electric's coal is materially different from our delivered cost of coal. As a result, Cajun Electric's historical financial data is not meaningful or indicative of our future results and should not be relied on in making an investment decision.
CARVE-OUT STATEMENTS OF CERTAIN REVENUE AND EXPENSES (PREDECESSOR) ------------------------------------------------------------------ FOR THE FOR THE PERIOD THREE OF MARCH 30, MONTHS 2000 YEAR ENDED DECEMBER 31, ENDED (INCEPTION) ---------------------------------------------------- MARCH 31, THROUGH 1995 1996 1997 1998 1999 2000 JUNE 30, 2000 -------- -------- -------- -------- -------- ----------- -------------- (IN THOUSANDS) (SUCCESSOR) Operating revenues: Sales of electric energy......... $343,796 $359,686 $345,824 $356,197 $367,348 $ 79,724 $ 88,087 Other............................ 1,047 863 958 1,379 1,214 258 449 -------- -------- -------- -------- -------- -------- -------- Total operating revenues................ 344,843 360,549 346,782 357,576 368,562 79,982 88,536 Operating costs and expenses: Cost of operations............... 217,996 251,907 255,014 242,117 251,137 58,628 55,637 Depreciation and amortization(1)................ 38,604 38,933 39,537 38,117 37,930 9,647 6,827 Administrative and general....... 11,499 9,386 9,437 9,122 9,711 2,423 1,841 -------- -------- -------- -------- -------- -------- -------- Total operating costs and expenses................ 268,099 300,226 303,988 289,356 298,778 70,698 64,305 -------- -------- -------- -------- -------- -------- -------- Operating income................... 76,744 60,323 42,794 68,220 69,784 9,284 24,231 Other income (expense): Rents and leases................. 1,156 655 695 456 463 -- -- Other income (expense), net...... 451 470 730 787 545 -- 227 Gain (loss) on asset dispositions................... 191 (757) (481) (5,900) (2,878) 521 -- Litigation settlement.............. 5,512 -- -- -- -- -- -- Interest Expense................... -- -- -- -- -- -- (18,861) -------- -------- -------- -------- -------- -------- -------- Total other income (expense)............... 7,310 368 944 (4,657) (1,870) 521 (18,634) -------- -------- -------- -------- -------- -------- -------- Excess of revenues over costs and expenses......................... $ 84,054(2) $ 60,691 $ 43,738 $ 63,563 $ 67,914 $ 9,805 ======== ======== ======== ======== ======== ======== Net Income......................... $ 5,597 ========
- --------------- (1) Depreciation and amortization expense is considered to be a cost of operations. (2)Excludes a recorded charge of $4.7 million representing the cumulative effect of adopting Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Post-retirement Benefits Other Than Pensions." 30 34
CARVE-OUT STATEMENTS OF NET ASSETS (PREDECESSOR) ---------------------------------------------------- AT DECEMBER 31, ACTUAL ---------------------------------------------------- AS OF 1995 1996 1997 1998 1999 JUNE 30, 2000 -------- -------- -------- -------- -------- ------------- (IN THOUSANDS) (SUCCESSOR) Assets: Current assets..................... $ 86,547 $ 71,077 $ 68,600 $ 72,166 $ 69,676 $ 84,473 Net property, plant and equipment....................... 715,966 684,064 643,043 608,195 579,929 1,036,343 Other property and investments..... 3,079 3,336 3,607 3,895 4,188 21,342 -------- -------- -------- -------- -------- ---------- Total assets............... $805,592 $758,477 $715,250 $684,256 $653,793 $1,142,158 -------- -------- -------- -------- -------- ---------- Liabilities: Current liabilities................ $ 13,685 $ 20,821 $ 20,568 $ 16,233 $ 13,922 $ 87,569 Decommissioning.................... 2,409 2,666 2,937 3,225 3,518 -- Long-term debt..................... -- -- -- -- -- 776,250 Other non-current liabilities...... -- -- -- -- -- 4,175 -------- -------- -------- -------- -------- ---------- Total liabilities.................... $ 16,094 $ 23,487 $ 23,505 $ 19,458 $ 17,440 867,994 -------- -------- -------- -------- -------- ---------- Net Assets................. $789,498 $734,990 $691,745 $664,798 $636,353 -- ======== ======== ======== ======== ======== Members' equity............ $ 274,164 ---------- Total liabilities and members' equity............................. $1,142,158 ==========
31 35 PRO FORMA FINANCIAL DATA The table that follows sets forth for the periods indicated: - historical financial data that have been derived from the "carve-out" financial statements of Cajun Electric solely for the Cajun facilities and other assets that were included as part of our acquisition of the Cajun facilities; - historical financial data that have been derived from the audited consolidated financial statements of NRG South Central; and - pro forma financial data reflecting the pro forma adjustments to the above historical operating results as if the establishment of NRG South Central, the acquisition of the Cajun facilities and the offering of the outstanding bonds occurred on January 1, 2000 and 1999 with respect to income statement data. The following financial data are only of extremely limited use in making an investment decision. Our results of operations in the future will be different from Cajun Electric's carve-out historical results for several reasons. Cajun Electric operated as a non-profit electric power cooperative which for the period shown on the following page was operating under to Chapter 11 of the United States Bankruptcy Code. Cajun Electric sold energy and capacity under power supply agreement and at rates which were materially different from our power supply agreements and rates. In addition, the delivered cost of Cajun Electric's coal was materially different from our delivered cost of coal. As a result, Cajun Electric's historical financial data is not meaningful or indicative of our future results and should not be relied on in making an investment decision. The pro forma data is presented for information purposes only and is not necessarily indicative of future earnings or financial position or what the financial position would have been if these events had occurred on January 1, 2000 and 1999. The following data should be read in conjunction with the financial statements and "Management's Discussion And Analysis Of Financial Condition And Results Of Operations" included elsewhere in this prospectus. 32 36
"CARVE-OUT BASIS" CAJUN PRO FORMA NRG SOUTH ELECTRIC (CAJUN NRG SOUTH CENTRAL FACILITIES) CENTRAL ---------------- --------------- ------------- FOR THE PERIOD OF MARCH 30, 2000 (INCEPTION) FOR THE THREE FOR THE SIX THROUGH MONTHS ENDED PRO FORMA MONTHS ENDED JUNE 30, 2000 MARCH 31, 2000 ADJUSTMENTS JUNE 30, 2000 (IN THOUSANDS) ---------------- --------------- ----------- ------------- INCOME STATEMENT DATA Operating revenues: Sales of electric energy........... $ 88,087 $79,724 $ -- $167,811 Other.............................. 449 258 -- 707 -------- ------- -------- -------- Total operating revenues... 88,536 79,982 -- 168,518 Operating costs and expenses: Cost of operations................. 55,637 58,628 -- 114,265 Depreciation and amortization...... 6,827 9,647 (2,590)(1) 13,884 Administrative and general......... 1,841 2,423 -- 4,264 -------- ------- -------- -------- Total operating costs and expenses................. 64,305 70,698 (2,590) 132,413 -------- ------- -------- -------- Operating Income..................... 24,231 9,284 (2,590) 36,105 Other Income (expense): Other income (expense) Net......... 227 521 -- 748 Interest expense................... (18,861) -- (18,312)(2) (37,173) -------- ------- -------- -------- Total other income (expense)................ (18,634) 521 (18,312) (36,425) -------- ------- -------- -------- Net income........................... $ 5,597 $ 9,805 $(15,722) $ (320) ======== ======= ======== ========
- --------------- (1) Reflects lower net depreciation/amortization resulting from assets and capitalized costs being depreciated over a longer estimated useful life. (2) Reflects interest accrued at a rate of 9.156% per annum on $800.0 million principal amount of bonds issued in connection with the acquisition. 33 37
"CARVE-OUT BASIS" CAJUN ELECTRIC NRG SOUTH (CAJUN PRO FORMA NRG CENTRAL FACILITIES) SOUTH CENTRAL --------- ------------- ----------------- FOR THE FOR THE YEAR ENDED PRO FORMA YEAR ENDED DECEMBER 31, 1999 ADJUSTMENTS DECEMBER 31, 1999 -------------------------- ----------- ----------------- (IN THOUSANDS) INCOME STATEMENT DATA Operating revenues: Sales of electric energy............. $ -- $367,348 $ -- $367,348 Other................................ -- 1,214 1,214 ------- -------- -------- -------- Total operating revenues..... -- 368,562 -- 368,562 Operating costs and expenses: Cost of operations................... -- 251,137 -- 251,137 Depreciation and amortization........ -- 37,930 (10,361)(1) 27,569 Administrative and general........... -- 9,711 -- 9,711 ------- -------- -------- -------- Total operating costs and expenses................... -- 298,778 (10,361) 288,417 ------- -------- -------- -------- Operating income....................... -- 69,784 10,361 80,145 Other income (expense): Rents and leases..................... -- 463 -- 463 Interest expense..................... -- -- (73,248)(2) (73,248) Other income (expense), net.......... -- 545 -- 545 Loss on asset dispositions........... -- (2,878) -- (2,878) ------- -------- -------- -------- Total other income (expense).................. -- (1,870) (73,248) (75,118) ------- -------- -------- -------- Excess of revenues over costs and expenses............................. $ $ 67,914 $(62,887) $ 5,027 ======= ======== ======== ========
- --------------- (1) Reflects lower net depreciation/amortization resulting from assets and capitalized costs being depreciated over a longer estimated useful life. (2) Reflects interest accrued at a rate of 9.156% per annum on $800.0 million principal amount of bonds issued in connection with the acquisition. 34 38 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion contains forward-looking statements. These statements are based on our current plans and expectations and involve risks and uncertainties that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include risks set forth in "Risk Factors." NRG South Central, an indirect wholly-owned subsidiary of NRG Energy, was formed for the purpose of financing, acquiring, owning, operating and maintaining, through Louisiana Generating, the Cajun facilities and making other potential acquisitions and developments in the region. NRG South Central has four wholly-owned subsidiaries, Louisiana Generating, NRG New Roads Holdings, NRG Sterlington Power and Big Cajun I Peaking Power, each a Delaware limited liability company. Louisiana Generating owns, operates and maintains the Cajun facilities. NRG New Roads Holdings was formed to hold assets acquired in conjunction with the purchase of the Cajun facilities which are not necessary for the operation of the Cajun facilities and, with respect to some of these assets, may not be held by Louisiana Generating under applicable federal regulations. NRG Sterlington Power was formed for the purpose of developing, owning and operating an approximately 200 MW simple cycle gas peaking facility in Sterlington, Louisiana. Under the terms of an agreement between Louisiana Generating and NRG Sterlington Power, Louisiana Generating has a right of first refusal on any sale of capacity and energy by NRG Sterlington Power. Big Cajun I Peaking Power was formed for the purpose of developing, owning and operating an approximately 240 MW simple cycle gas peaking facility at the Big Cajun I site in New Roads, Louisiana. NRG New Roads Holdings, NRG Sterlington Power and Big Cajun I Peaking Power are not guarantors of the bonds and their operations are not restricted by the indenture. The Cajun facilities were acquired on March 31, 2000 for a purchase price of approximately $1,055.9 million. This purchase price was funded by the offering of the outstanding bonds and an equity contribution by NRG Energy. See "Business of NRG South Central And Louisiana Generating -- Our Acquisition of the Cajun Facilities." Of our total revenues for the period of March 30, 2000 (Inception) through June 30, 2000, approximately 78% was derived from sales to the distribution cooperatives and approximately 10.1% was derived from agreements with two municipal power authorities and one investor-owned utility. The remainder was primarily derived from market sales arranged under a power sales and agency agreement with our power marketing affiliate, NRG Power Marketing. Of our total revenues during this period, approximately 37.4% were derived from 25-year, all-requirements power supply agreements. Prior to the acquisition of the Cajun facilities on March 31, 2000, we did not engage in any operations and consequently do not have any historical financial statements for these periods. The financial data of Cajun Electric for periods prior to our acquisition are of extremely limited use in making an investment decision. Our results of operations are different from Cajun Electric's carve-out historical results for several reasons. Cajun Electric was a non-profit electric power cooperative which for the periods presented in this prospectus was operating as a debtor in possession under Chapter 11 of the United States Bankruptcy Code. Cajun Electric sold energy and capacity under power supply agreements and at rates which are materially different from our power supply agreements and rates. In addition, the delivered cost of Cajun Electric's coal was materially different from our delivered cost of coal. As a result, Cajun Electric's historical financial data, including the "Selected Financial Data of Cajun Electric (Cajun Facilities)" and "Cajun Electric (Cajun Facilities) Carve-Out Financial Statements" presented in this prospectus, are not meaningful or indicative of our future results and should not be relied on in making an investment decision. RESULTS OF OPERATIONS FOR THE PERIOD OF MARCH 30, 2000 (INCEPTION) THROUGH JUNE 30, 2000 OPERATING REVENUES. Revenues for the period of March 30, 2000 (Inception) through June 30, 2000 were $88.5 million. Approximately $78.0 million or 88.1% of our total revenues were derived from sales pursuant to long-term contracts. Approximately 78% of our total revenues were derived from agreements with distribution cooperatives and approximately 10.1% were derived from agreements with two municipal power 35 39 authorities and one investor owned utility. Approximately 37.4% of our total revenues were derived from 25 year, all requirements power supply agreements. The remainder of our revenues were derived from merchant sales arranged under a power sales and agency agreement with our power marketing affiliate, NRG Power Marketing. OPERATING COSTS. Operating costs for the period of March 30, 2000 (Inception) through June 30, 2000 were $55.6 million. Operating costs represent approximately 63% of revenues. Operating costs consisted primarily of fuel costs, purchased power costs, transmission costs and operation and maintenance and other costs. FUEL COSTS. Fuel costs were $29.8 million for the period of March 30, 2000 (Inception) through June 30, 2000. Fuel costs consisted primarily of coal costs of $26.3 million, natural gas costs of $3.3 million and other costs of $0.2 million. OPERATION AND MAINTENANCE COSTS. Operation and maintenance costs were $11.6 million for the period of March 30, 2000 (Inception) through June 30, 2000. PURCHASED POWER COSTS. Purchased power costs were $7.9 million for the period of March 30, 2000 (Inception) through June 30, 2000. TRANSMISSION COSTS. Transmission costs were $6.3 million for the period of March 30, 2000 (Inception) through June 30, 2000. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was $6.8 million for the period of March 30, 2000 (Inception) through June 30, 2000. Depreciation and amortization expense represents 7.7% of revenues. ADMINISTRATIVE AND GENERAL COSTS. Administrative and general costs were $1.8 million for the period of March 30, 2000 (Inception) through June 30, 2000. Administrative and general costs represent 2.1% of revenues. INTEREST EXPENSE. Interest expense was $18.9 million for the period of March 30, 2000 (Inception) through June 30, 2000. The $18.9 million of interest expense relates primarily to the accrued interest on the $800.0 million of bonds issued in March 2000 the proceeds of which were used to acquire the Cajun facilities. RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998 NET MARGIN. Net margin for 1999 was $67.9 million, compared to $63.6 million for 1998. This increase in net margin of $4.3 million was due to increased non-member sales, partially offset by increased operating expenses, and a $3.0 million reduction in losses on asset dispositions. OPERATING REVENUES. For 1999, total revenues were $368.6 million, compared to $357.6 million for 1998, an increase of $11.0 million or 3%. OPERATING EXPENSES. Total operating expenses were $298.8 million for 1999, compared to $289.4 million for 1998, an increase of $9.4 million or 3%. As a percent of revenue, operating expenses for 1999 and 1998 were 81%. Fuel costs were $165.6 million for 1999, compared to $155.0 million for 1998. This increase in fuel costs resulted from higher output during 1999 and an increase in overall fuel prices. Operations and maintenance costs were $36.7 million for 1999, compared to $37.4 million for 1998. This decrease is primarily due to the timing of repairs and maintenance work. Administrative and general costs were $9.7 million for 1999, compared to $9.1 million for 1998. This increase was consistent with the overall increase in revenues for the period. Depreciation and amortization costs were $37.9 million for 1999, compared to $38.1 million for 1998. This decrease was due to an overall reduction in fixed assets. 36 40 OTHER INCOME (EXPENSE). Other expense was $1.9 million for 1999, compared to $4.7 million for 1998, a decrease of $2.8 million or 60%. This decrease was primarily due to a $4.2 million loss on 1998 asset disposals related to a control system upgrade. RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED DECEMBER 31, 1997 NET MARGIN. Net margin for 1998 was $63.6 million, compared to $43.7 million for 1997, an increase of $19.9 million. This increase was due to increased sales due to favorable weather conditions and a significant reduction in transmission costs. OPERATING REVENUES. Total revenues were $357.6 million in 1998, compared to $346.8 million for 1997, an increase of $10.8 million or 3%. This increase was primarily due to greater sales and favorable weather conditions. OPERATING EXPENSES. Total operating expenses for 1998 were $289.4 million, compared to $304.0 million for 1997, a decrease of $14.6 million or 5%. As a percent of revenue, operating expenses for 1998 were 81% as compared to 88% for 1997. Fuel costs were $155.0 million for 1998, compared to $154.3 million for 1997. This increase in fuel costs resulted from higher output during the year. Operations and maintenance costs were $37.4 million for 1998, compared to $37.2 million for 1997. This increase was due to the timing of repairs and maintenance work. Transmission costs were $29.9 million for 1998, compared to $41.7 million for 1997, a decrease of $11.8 million. This decrease resulted from a renegotiation of transmission contracts in 1998 resulting in lower ongoing costs. Depreciation and amortization costs were $38.1 million for 1998, compared to $39.5 million for 1997. This decrease was due to an overall reduction in fixed assets. OTHER INCOME (EXPENSE). Other expense for 1998 was $4.7 million, compared with income of $0.9 million for 1997. This decrease is primarily due to a $4.2 million loss on 1998 asset disposals related to control system upgrades. LIQUIDITY AND CAPITAL RESOURCES Through 2004, we plan to invest an average of approximately $5.0 million per year in the Cajun facilities for capital improvements, which will allow us to maintain environmental and regulatory compliance and to maintain existing equipment. In order to maintain a high availability factor for the Cajun facilities, we have implemented a maintenance philosophy utilizing standard major overhaul cycles for critical equipment, supplemented by routine maintenance for the balance of the Cajun facilities. The use of the proceeds from the sale of the outstanding bonds, together with an equity contribution by NRG Energy, were used to fund the purchase of the Cajun facilities and pay certain fees, costs, expenses and taxes in connection with the acquisition. Approximately $30.0 million of the assets that we acquired in conjunction with the purchase of the Cajun facilities are not necessary for the operation of the Cajun facilities and, with respect to some of these assets, may not be held by Louisiana Generating under applicable federal regulations. These assets were distributed to NRG New Roads Holdings, a wholly-owned unrestricted subsidiary of NRG South Central. NRG New Roads Holdings may at any time dividend these assets or the proceeds of a sale of these assets to NRG Energy or one of its affiliates. With the exception of certain railcars, which have been sold, NRG New Roads Holdings continues to hold these assets as of the date of this prospectus. In April 2000, we entered into a $40.0 million floating rate working capital facility. The lenders under this facility were granted a security interest in the same collateral (other than the debt service reserve account) 37 41 that secures the bonds and rank equally with the bonds. The interest rate on this facility is at our choice of the lender's prime rate or LIBOR. The facility contains covenants that are customary for facilities of this type, including restrictions on the incurrence of indebtedness, mergers, sale of assets and investments. The facility terminates in March 2001. As of June 30, 2000, the facility was undrawn. In addition, the indenture permits certain additional borrowings as described under "Description of Principal Financing Documents -- Indenture." We expect that the funds from our operations, borrowings under our working capital facility and other permitted borrowings will be sufficient for our cash needs for at least the next twelve months. Under the indenture, we were required to establish a debt service reserve account for the benefit of the holders of the bonds. This account must be funded at all times with a sufficient amount to meet our debt service obligations under the bonds for the next six months. We have the option of funding the debt service reserve account through cash or providing debt service reserve credit support. NRG Energy currently provides debt service reserve credit support in the form of a guarantee to satisfy our debt service reserve requirements with respect to the bonds. USE OF DERIVATIVES AND MARKET RISK We may from time to time use derivative financial instruments and commodity hedges to manage exposure to fluctuations in interest rates and commodity prices. The use of these instruments may expose us to market and credit risks. At June 30, 2000, there were no derivative financial instruments outstanding. 38 42 ABOUT US NRG SOUTH CENTRAL, ITS MEMBERS AND ITS SUBSIDIARIES NRG South Central is a Delaware limited liability company formed in January 2000 for the purpose of facilitating the financing of the acquisition of the Cajun facilities and other future acquisitions in the region. NRG South Central has four wholly-owned subsidiaries, Louisiana Generating, NRG New Roads Holdings, NRG Sterlington Power and Big Cajun I Peaking Power, each a Delaware limited liability company. Louisiana Generating was formed in June 1996 for the purpose of facilitating the acquisition of the Cajun facilities and owns, operates and maintains the Cajun facilities. NRG New Roads Holdings was formed in March 2000 to hold assets that we acquired in conjunction with the purchase of the Cajun facilities which are not necessary for the operation of the Cajun facilities and, with respect to some of these assets, may not be held by Louisiana Generating under applicable federal regulations. NRG Sterlington Power, which NRG Energy acquired and contributed to NRG South Central in August 2000, was formed for the purpose of developing, owning and operating an approximately 200 MW simple cycle gas peaking facility in Sterlington, Louisiana. Under the terms of an agreement between Louisiana Generating and NRG Sterlington Power, Louisiana Generating has a right of first refusal on any sale of capacity and energy by NRG Sterlington Power. Big Cajun I Peaking Power was formed in August 2000 for the purpose of developing, owning and operating an approximately 240 MW simple cycle gas peaking facility at the Big Cajun I site in New Roads, Louisiana. NRG New Roads Holdings, NRG Sterlington Power and Big Cajun I Peaking Power are not guarantors of the bonds and their operations are not restricted by the indenture. NRG South Central's members are NRG Central U.S. LLC and South Central Generation Holding LLC, each of which holds a 50% interest in NRG South Central. NRG Energy owns a 100% interest in each of NRG South Central's members. NRG Energy, in turn, is indirectly majority owned by Xcel Energy. Our headquarters and principal executive offices are located at 901 Marquette Avenue, Suite 2300, Minneapolis, Minnesota 55402-3265. Our telephone number is (612) 373-5300. NRG ENERGY NRG Energy is a leading participant in the independent electric power generation industry. Established in 1989, NRG Energy is primarily engaged in the acquisition, development, ownership and operation of power generation facilities and the sale of energy, capacity and related products. In August 2000, the former parent company of NRG Energy, Northern States Power Company, and New Centuries Energy, Inc. completed their merger. The surviving company operates under the new name Xcel Energy, Inc. As a result of the merger, the shares of NRG Energy previously owned by Northern States Power are now indirectly owned by Xcel Energy. As of the date of this prospectus, Xcel Energy indirectly owns approximately 82% of the common equity and 98% of the combined voting power of NRG Energy's common stock and class A common stock. Measured by net ownership in power generating facilities, NRG Energy is one of the three largest independent power generation companies in the United States and the fifth largest independent power generation company in the world. NRG Energy owns all or a portion of 63 generation projects that have total generating capacity of 24,533 MW. Its net ownership interest in those projects is 14,476 MW of which 10,917 MW is in the United States. NRG Energy has experienced significant growth in the last two years, having increased its net ownership interests from 3,300 MW on December 31, 1998. In addition to power generation projects, NRG Energy also has interests in district heating and cooling systems and steam transmission operations. NRG Energy's thermal and chilled water businesses have a steam and chilled water capacity equivalent to approximately 1,537 MW. NRG Energy, through its subsidiary, NEO Corporation, is also one of the largest landfill gas generation companies in the United States. NRG Energy has historically endeavored to make capital for additional investments available by allowing other companies to purchase a portion of NRG Energy's interests in companies wholly-owned by NRG Energy. While such a sell-down of NRG Energy's interest in NRG South Central is not currently 39 43 contemplated by NRG Energy, any potential holders of the bonds should consider that such a sell-down is a possibility. Additional and more detailed information concerning NRG Energy and its business is set forth in its annual and periodic reports filed with the SEC. See "Where You Can Find More Information." NRG POWER MARKETING NRG Power Marketing is a direct, wholly-owned subsidiary of NRG Energy which was formed in August 1997 for the purpose of serving the power marketing, fuel procurement and emissions credit management needs of NRG Energy and its affiliates. It has entered into a 30-year power sales and agency agreement to provide these services to Louisiana Generating. NRG OPERATING SERVICES NRG Operating Services is a direct, wholly-owned subsidiary of NRG Energy which was formed in October 1992 for the purpose of operating and maintaining electric power generation facilities owned by NRG Energy and its affiliates. It has entered into an operation and management services agreement with Louisiana Generating. NRG Energy, through NRG Operating Services or other subsidiaries, has total or shared operational responsibility for approximately 14,782 MW of power generation at 45 facilities worldwide, excluding the Cajun facilities. XCEL ENERGY In August 2000, the former parent company of NRG Energy, Northern States Power Company, and New Centuries Energy, Inc. completed their merger. The surviving company operates under the new name Xcel Energy, Inc. As a result of the merger the shares of NRG Energy previously owned by Northern States Power are now indirectly owned by Xcel Energy. As of the date of this prospectus, Xcel Energy, through its wholly-owned subsidiary Xcel Wholesale Energy Group, owns approximately 82% of the common equity and 98% of the combined voting power of NRG Energy's common stock and class A common stock. Xcel Energy is one of the ten largest electricity and natural gas companies in the United States. Xcel Energy has six public utility subsidiaries that collectively serve approximately 3,080,000 electric customers and 1,500,000 gas customers in 12 states. It also has numerous non-utility subsidiaries, including NRG Energy, which are engaged in energy related businesses. Additional and more detailed information concerning Xcel Energy and its business is set forth in its annual and periodic reports filed with the SEC. See "Where You Can Find More Information." 40 44 BUSINESS OF NRG SOUTH CENTRAL AND LOUISIANA GENERATING INDUSTRY OVERVIEW Until recently, the demand for power in the United States has been met by utilities which would construct large-scale electric generating plants under cost-of-service based regulation. Under this regulatory regime, in exchange for their status as the designated provider of electricity in a given area, the traditional electric utility agreed to submit its decisions regarding operation of its business (for example, construction and closure of plants) to state public service commission scrutiny, and in exchange it received a moderate guaranteed rate of return on the costs incurred in providing electric service. Beginning in 1978, legislative changes designed to increase competition in the electric industry spurred independent power producers to enter the power market, beginning with an entrepreneurial group of cogenerators and small power producers which was later joined by larger, better capitalized companies, such as subsidiaries of fuel supply companies, electric utilities, engineering companies, equipment manufacturers and affiliates of other industrial companies. While these independent power producers are not subject to state public service commission review and scrutiny with respect to decisions they make and costs they incur, they also are not guaranteed any specified rate of return with respect to their investments. The United States electric industry, including companies engaged in providing generation, transmission, distribution and ancillary services, has undergone significant change over the last several years, leading to significant deregulation and increased competition. Pursuant to Order No. 888 and Order No. 889, and as further refined and supplemented by Orders 888-A, -B and -C (collectively, known as the Open Access Rules), FERC requires the owners and operators of electric transmission facilities to make those facilities available for transmission on a non-discriminatory basis to all wholesale generators, sellers and buyers of electricity (this is referred to as wholesale wheeling). FERC has proposed further regulatory changes to improve access to the nationwide transmission grid by utility and non-utility purchasers and sellers of electricity and to promote wholesale market efficiency. In December 1999, FERC issued Order No. 2000, which set forth minimum requirements for the establishment and operation of Regional Transmission Organizations, or RTOs. Order No. 2000 also set forth a voluntary procedure by which RTOs would be established. In February 2000, FERC issued Order No. 2000-A, which affirmed Order No. 2000 on rehearing with a few minor modifications. Order No. 2000-A did not alter in any material respect the basic framework for Order No. 2000 nor the requirements for RTOs. In addition to wholesale wheeling, throughout the United States there has been an increasing number of proposals at the state level to allow retail customers to choose their electricity suppliers, with incumbent utilities required to deliver such electricity over their transmission and distribution systems (this is referred to as retail wheeling). Numerous electric utilities nationwide are in the process of divesting all or a portion of their generation business or are expected to commence such a process in the foreseeable future, as legislative and regulatory developments drive the industry to disaggregate. OUR ACQUISITION OF THE CAJUN FACILITIES Cajun Electric was a generation and transmission cooperative that was owned by, and sold wholesale electric power produced by the Cajun facilities to, the distribution cooperatives under long-term, all-requirements power supply agreements. Cajun Electric also sold wholesale electric power under power supply agreements to two municipal power authorities and one investor-owned utility. Previously, Cajun Electric owned nuclear and non-nuclear generation facilities in Louisiana and was one of the largest generation and transmission cooperatives in the nation. In December 1994, Cajun Electric filed for protection under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Middle District of Louisiana. We believe the bankruptcy was driven by Cajun Electric's inability to service approximately $4.2 billion in secured debt provided by the Rural Utilities Service of the United States Department of Agriculture, most of which was incurred as a result of the purchase by Cajun Electric of a 30% interest in the River Bend Nuclear Station Unit I, a nuclear electric generating facility located in Saint Francisville, Louisiana. Cajun 41 45 Electric's 30% interest in the River Bend nuclear facility was transferred to Entergy Gulf States in December 1997. Louisiana Generating has no ownership interest in the River Bend nuclear facility or responsibility for any of the liabilities relating to that facility. Louisiana Generating also has no responsibility for any indebtedness Cajun Electric incurred from the Rural Utilities Service, all of which was extinguished on the March 31, 2000 closing of the acquisition of the Cajun facilities and the consummation of the Cajun Electric bankruptcy plan of reorganization. In August 1995, the United States District Court for the Middle District of Louisiana appointed Ralph R. Mabey as trustee to administer Cajun Electric and to seek a resolution of its bankruptcy case. In January 1996, the trustee began a competitive bidding process for Cajun Electric's non-nuclear assets. In April 1996, the trustee selected the bid of Louisiana Generating and incorporated this bid into the trustee's proposed plan of reorganization. Louisiana Generating entered into an asset purchase agreement with the trustee in June 1996. In December 1996, the Bankruptcy Court commenced confirmation hearings on three competing plans of reorganization for Cajun Electric, including the trustee's plan proposing the asset sale to Louisiana Generating. The second plan of reorganization was jointly submitted by Southwestern Electric Power Company, also known as SWEPCO, and a committee of certain of the distribution cooperatives. This second plan proposed an asset sale to SWEPCO. The third plan of reorganization was jointly proposed by the Official Committee of Unsecured Creditors of Cajun Electric and Enron Capital & Trade Resources Corp. and proposed an asset sale to Enron. This third plan was subsequently withdrawn. In August 1999, the parties to the Cajun Electric bankruptcy proceeding reached a global settlement of the remaining issues in the case, which was approved that same month in an order by the United States District Court for the Middle District of Louisiana. Among other things, the settlement included the withdrawal of the plan of reorganization proposed by SWEPCO and certain of the distribution cooperatives. In October 1999, the bankruptcy court issued its confirmation order confirming the plan of reorganization (which was then proposed by the Official Committee of Unsecured Creditors of Cajun Electric after the withdrawal of the trustee as a plan proponent) which included the sale of the Cajun facilities to Louisiana Generating. Approximately $30.0 million of the assets that we acquired in conjunction with the purchase of the Cajun facilities are not necessary for the operation of the Cajun facilities and, with respect to some of these assets, may not be held by Louisiana Generating under applicable federal regulations. We refer to these assets as the assets specifically held for resale. These assets were distributed to NRG New Roads Holdings, a wholly-owned unrestricted subsidiary of NRG South Central. NRG New Roads Holdings may at any time dividend these assets or the proceeds of a sale of these assets to NRG Energy or one of its affiliates. These assets consisted primarily of: - a 4,157 acre parcel of land near Coushatta, Louisiana acquired by Cajun Electric for the construction of a new facility but now used for timber production, wildlife conservation and farming; - a 2,466 acre segment of the Big Cajun II property that has been held by Cajun Electric as a future ash disposal site but which is currently leased for farming; - mineral rights to a seven acre parcel of land in New Roads, Louisiana; - a 540 MW General Electric steam turbine generator; and - 848 steel rotary dump railcars (the railcars have subsequently been sold). We used the proceeds of the offering of the outstanding bonds, together with a cash equity contribution of approximately $268.6 million from NRG Energy, to fund the purchase of the Cajun facilities for approximately $1,055.9 million and to pay certain fees, costs, expenses and taxes in connection with the acquisition. THE CAJUN FACILITIES The Cajun facilities, located in New Roads, Louisiana, consist of two plants referred to as Big Cajun I and Big Cajun II. As of the date of this prospectus, the aggregate net capable capacity of the Cajun facilities is 1,708 MW. 42 46 BIG CAJUN I. Big Cajun I, Units 1 and 2, both of which are 100% owned by Louisiana Generating, are natural gas-fired generating facilities with a net capable capacity of 110 MW each. Big Cajun I is used for intermediate/peaking load seasonal operation and typically runs from May through September. As currently configured, Big Cajun I produces approximately 2% of our annual electric output (as measured in kWh) of the Cajun facilities. BIG CAJUN II. Big Cajun II, Units 1, 2 and 3, are coal-fired generating facilities. Units 1 and 2 are 100% owned by Louisiana Generating and each have a net capable capacity of 577 MW. Unit 3 has a net capable capacity of 575 MW, of which 58% is owned by Louisiana Generating and the remaining portion is owned by Entergy Gulf States. Big Cajun II is a base load facility and runs throughout the year. As currently configured, Big Cajun II produces approximately 98% of our annual electric output (as measured by kWh) of the Cajun facilities. Both Big Cajun I and II can accommodate additional generating units facilitated by available space and existing infrastructure. A feasibility study has been completed and the permitting process has been commenced with respect to an approximately 240 MW expansion of the Cajun facilities. We have formed Big Cajun I Peaking Power, a wholly-owned subsidiary, to develop, construct and own the expansion project, which is targeted to begin commercial operation in June 2001. Big Cajun I Peaking Power is not a guarantor of the bonds. The energy and capacity generated by the expansion project may be used to help meet our obligations under the existing power purchase agreements, with any excess power and capacity being marketed by NRG Power Marketing. OUR TRANSMISSION AND INTERCONNECTION ARRANGEMENTS Louisiana Generating has interconnection facilities consisting of one switchyard at Big Cajun I, one switchyard at Big Cajun II and varying amounts of equipment at approximately 115 points of delivery to the distribution cooperatives, including metering equipment and in some cases transformation equipment. One of the delivery points includes a 26 mile, 138kV transmission line and a substation at the end of that line. Power is taken by Jefferson Davis Electric Cooperative, Inc. at both ends of this line. These interconnection facilities were used by Cajun Electric exclusively for the delivery of power to its members from the transmission systems of wheeling utilities, and Louisiana Generating's use is similarly limited. Because no entity is likely to seek access to these interconnection facilities, Louisiana Generating requested a waiver of FERC's requirement to file an open access transmission tariff. As part of its waiver application, Louisiana Generating provided that if service is requested on Louisiana Generating's transmission facilities by any entity that would be eligible for access under FERC's pro forma tariff, Louisiana Generating will file within 60 days an open access tariff that meets FERC's then applicable standards. FERC has granted Louisiana Generating the waiver. To date, no other entity has requested service on the pertinent transmission facilities. Louisiana Generating assumed Cajun Electric's transmission agreements with Entergy Services, Inc., acting as agent for Entergy Arkansas, Inc., Entergy Gulf States, Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New Orleans, Inc., Central Louisiana Electric Company and SWEPCO. The Cajun facilities are connected to the transmission system of Entergy Gulf States and power is delivered to the distribution cooperatives at various delivery points throughout Louisiana on the transmission systems of Entergy Gulf States, Entergy Louisiana, Central Louisiana Electric Company and SWEPCO. Louisiana Generating also assumed from Cajun Electric 20 interchange and sales agreements with utilities and cooperatives, providing access to a 12 state area as far north as Illinois and into North Carolina and Florida. REGULATION FEDERAL POWER ACT. The Federal Power Act gives FERC exclusive rate-making jurisdiction over wholesale sales of electricity and the transmission of electricity in interstate commerce. Pursuant to the Federal Power Act, all public utilities subject to FERC's jurisdiction are required to file rate schedules with FERC prior to commencement of wholesale sales or transmission of electricity. Because Louisiana Generating sells energy and capacity in the wholesale market, it is deemed to be a public utility for purposes of the Federal Power Act and has been granted this authority by FERC. In its orders, FERC also granted waivers of certain 43 47 of the accounting, record-keeping and reporting requirements that are imposed on public utilities with cost-based rate schedules. In addition, FERC's orders, as is customary with market-based rate schedules, reserve the right to suspend, upon complaint, market-based rate authority on a prospective basis if it is subsequently determined that we exercised market power. If FERC were to suspend market-based rate authority, it would most likely be necessary to file, and obtain FERC acceptance of, cost-based rate schedules. In addition, the loss of market-based rate authority would likely subject us to the accounting, record-keeping and reporting requirements that are imposed on public utilities with cost-based rate schedules. PUBLIC UTILITY HOLDING COMPANY ACT. PUHCA provides that any corporation, partnership or other entity or organized group that owns, controls or holds power to vote 10% or more of the outstanding voting securities of a "public-utility company" or a company that is a "holding company" of a public utility company is subject to registration and regulation under PUHCA as a registered holding company, unless an exemption is obtained under applicable rules or an order is issued by the SEC declaring it not to be a holding company. Registered holding companies under PUHCA are required to limit their utility operation to a single integrated utility system and additional systems that cannot be operated independently without substantial losses of economies, and to divest any other operations not functionally related to the operation of the utility system. In addition, a public utility company that is a subsidiary of a registered holding company under PUHCA is subject to financial and organizational regulation, including approval by the SEC of certain of its financing transactions. However, under the Energy Policy Act, a company engaged exclusively in the business of owning and/or operating a facility used for the generation of electric energy exclusively for sale at wholesale may be exempted from PUHCA regulation by operation of its status as an EWG, as defined under Section 32 of PUHCA. Louisiana Generating is an EWG and has received confirmation from FERC of its EWG status. If a "material change" occurs in facts which might affect Louisiana Generating's continued eligibility for EWG status then we must, within 60 days of such material change, (a) file a written explanation of why the material change does not affect its EWG status, (b) file a new application for EWG status or (c) notify FERC that Louisiana Generating no longer wishes to maintain EWG status. If Louisiana Generating were to lose its EWG status, Louisiana Generating would be subject to regulation as a public utility company and certain of its affiliates would be subject to regulation under PUHCA as public utility holding companies. Absent a substantial restructuring of our business, it would be difficult for us to comply with PUHCA without a material adverse effect on our business. STATE LAW. With the exception of the provision of utility services by certain utilities in New Orleans and certain municipal utilities, the Louisiana Public Service Commission, or LPSC, regulates all public utilities within Louisiana. The jurisdiction of the LPSC over these public utilities generally includes authority to regulate the rates, services and securities of any entity furnishing electric service in the state. However, Louisiana law does not specifically address the status of entities providing electricity exclusively at wholesale. The LPSC generally has assumed that FERC has jurisdiction over wholesale rates. We do not believe that we are subject to regulation by the LPSC as a public utility or electric public utility as long as we continue to sell energy and capacity exclusively at wholesale. However, the 11 distribution cooperatives to which Louisiana Generating sells a majority of the energy and capacity generated by the Cajun facilities will continue to be regulated by the LPSC. In January 2000, the LPSC issued an order, which we refer to as the January 2000 order: - determining that allowing the Cajun facilities to be sold to us will benefit consumers, is in the public interest and does not violate Louisiana law (these approvals were necessary under the mandate of federal law, which required LPSC approval before the Cajun facilities may become "eligible facilities" of an exempt wholesale generator under PUHCA); - approving the decision of three of the distribution cooperatives, Southwest Louisiana Electric Membership Corporation, Pointe Coupee Electric Membership Corporation and Concordia Electric Cooperative, Inc. to enter into 25-year, all-requirements power supply agreements with Louisiana Generating in the form that we refer to as Form A; 44 48 - establishing a purchase power clause for these three distribution cooperatives to pass through automatically at retail all costs under the Form A power supply agreement; and - declaring that the LPSC will not regulate any securities issued by Louisiana Generating. The remaining eight distribution cooperatives also have contracted with us. In March 2000, the LPSC approved the decisions of the eight remaining distribution cooperatives to enter into power purchase agreements with Louisiana Generating. In accordance with the LPSC's directives, all eleven distribution cooperatives have submitted their plans for (1) recovering the cost of power purchased from Louisiana Generating through retail rates and (2) for insuring that their retail rates no longer reflect the cost of purchasing power from Cajun Electric. After review and hearings, the LPSC has approved each of these cost recovery plans. As a result, the purchased power costs of each of the distribution cooperatives are being recovered through retail rates and the LPSC has authorized the methodology that permits them to continue to recover such costs in the future. The LPSC has reserved the right to review the recovery mechanism in order to prevent over-recovery and to adjust the mechanism in light of changes in the market and electric industry. The LPSC declared in its January 2000 order that it will not attempt to regulate securities issued by Louisiana Generating. Although the LPSC has not addressed the regulation of securities issued by NRG South Central, we know of no authority that would allow the LPSC to regulate the securities of a holding company the subsidiary of which is not subject to general LPSC regulation. COMPETITION FEDERAL. The Energy Policy Act laid the ground work for a competitive wholesale market for electricity. Among other things, the Energy Policy Act expanded FERC's authority to order wholesale wheeling, thus allowing qualifying facilities under the Public Utility Regulatory Policies Act, power marketers and EWGs to compete more effectively in the wholesale market. In May 1996, FERC issued the first of the Open Access Rules, which requires utilities to offer eligible wholesale transmission customers non-discriminatory open access on utility transmission lines on a comparable basis to the utilities' own use of the lines. In addition, the Open Access Rules direct the regional power pools that control the major electric transmission networks to file uniform, non-discriminatory open access tariffs. The Open Access Rules has been the subject of rehearing at FERC and has been substantially affirmed by the Court of Appeals for the District of Columbia. Over the past few years, Congress and the administration of President Clinton have considered various pieces of legislation to restructure the electric industry that would require, among other things, customer choice and/or repeal of PUHCA. The debate is likely to continue, and perhaps intensify. The effect of enacting such legislation cannot be predicted with any degree of certainty. STATE. The Energy Policy Act did not preempt state authority to regulate retail electric service. Historically, in most states, competition for retail customers is limited by statutes or regulations granting existing electric utilities exclusive retail franchises and service territories. Since the passage of the Energy Policy Act, the advisability of retail competition has been the subject of intense debate in federal and state legislative and regulatory forums. Many states have taken steps to facilitate retail competition as a means of stimulating competitive generation rates and economic development. At the present time Louisiana does not allow retail competition. The LPSC has solicited public comment, assembled data and conducted evidentiary hearings on the issue of whether retail electric competition is in the public interest. The LPSC staff has recommended that the LPSC find that retail competition is not in the public interest unless it affords the opportunity for lower billings for electric service to all customers, that retail competition is not in the public interest at the present time and that the LPSC should engage in a comprehensive analysis of the economic and other effects of the restructuring of the electric industry. The staff has also proposed its own restructuring plan should the LPSC determine that retail competition is in the public interest notwithstanding the staff's recommendation. At present the LPSC has not 45 49 made any decisions regarding retail competition. It is uncertain when or if the LPSC will act on the staff's recommendation. POWER MARKETS Louisiana Generating sells energy and capacity generated by the Cajun facilities in the southeast power market, primarily in Louisiana. In addition, through NRG Power Marketing, Louisiana Generating sells excess energy and capacity into the Southeast Energy Reliability Council, or SERC, region or into other neighboring regions. THE SOUTHEAST POWER MARKET. The southeast power market, which consists of Louisiana, Mississippi, Tennessee, Alabama, Georgia, Arkansas, northwest Florida and east Texas, had electricity rates approximately 17% below the national average for 1999. State public utilities commissions and state assemblies within the southeast power market have been slower than other parts of the country to restructure the electricity industry. Most states in the southeast power market, including Louisiana, have decided not to pursue retail competition immediately, deciding instead to observe the impact of direct retail access on other states that have taken a more aggressive approach towards restructuring. Arkansas and Texas are the only states in the southeast power market which have approved comprehensive industry restructuring legislation and only Arkansas, Texas and Georgia have enacted legislation allowing implementation of any form of direct retail access. Public utility commissions in Georgia and Mississippi have presented recommendations regarding the restructuring of the electricity industry to their respective state assemblies so that the state government may begin drafting legislation. An industry group made a similar presentation in Louisiana. The southeast power market is currently a "bilateral market" functioning without an independent system operator, a power pool or a price exchange. Therefore, all scheduling, coordination, and market pricing are determined on a control area basis by each market entity rather than by a single pool market clearing house. SERC staff have indicated that the members of the council have informally discussed the formation of a regional transmission organization. THE SERC REGION. The SERC region is comprised of the southeast power market plus Virginia, North Carolina, South Carolina and part of Kentucky. As of January 1, 1999, this area consisted of more than 20.0 million retail customers. In 1998, total generating capacity within the SERC region was 150 GW and total peak summer demand was 143 GW. The SERC region imported 30,500 GWh and exported 62,200 GWh. LOUISIANA. As of year-end 1998, the total generating capacity in Louisiana was 16,123 MW with total demand of 14,884 MW. The Cajun facilities represent 11% of Louisiana's total generating capacity. In 1998, Louisiana imported 18,450 GWh and exported 10,170 GWh. OUR OPERATIONS STRATEGY. We intend to use the Cajun facilities, employees and customer base, as well as the assets that were distributed to NRG New Roads Holdings, as a platform for our growth. We plan to grow by expanding the customer base using incentive rate structures as necessary, developing and acquiring additional electric generation facilities and utilizing the expertise of NRG Power Marketing to maximize profitability. CONTRACT POWER SALES. Of our total revenues for the period of March 30, 2000 (Inception) through June 30, 2000, approximately 78% was derived from agreements with the distribution cooperatives and approximately 10.1% was derived from agreements with two municipal power authorities and one investor- owned utility. The remainder was primarily derived from market sales arranged under a power sales and agency agreement with our power marketing affiliate, NRG Power Marketing. Of our total revenues during this period, approximately 37.4% were derived from 25-year, all-requirements power supply agreements. OTHER POWER SALES. Under a 30-year power sales and agency agreement, NRG Power Marketing, acting as agent for Louisiana Generating, markets and sells any energy and capacity that Louisiana Generating has not committed under other contracts. NRG Power Marketing provides all power marketing services for Louisiana Generating including scheduling, contract management and bilateral sales of excess energy and capacity. NRG Power Marketing has the exclusive right to market all of our excess energy, capacity and 46 50 ancillary services and enters into forward sales of energy and capacity not sold to the distribution cooperatives or the other contract power purchasers. All net revenues due to Louisiana Generating from these activities flow to Louisiana Generating. NRG Power Marketing is directed to use the Cajun facilities to maximize net operating margins and uses the transmission and interconnection rights of Louisiana Generating to provide energy and capacity to and from other regions. See "Summary of Certain Principal Documents -- Power Sales and Agency Agreement." FUEL SUPPLY AND TRANSPORTATION. In March 2000, Louisiana Generating entered into a five-year coal supply agreement under which Triton Coal sells Louisiana Generating sufficient quantities of coal to satisfy the full coal requirements of Big Cajun II. In March 2000, Louisiana Generating entered into a five-year coal transportation agreement with Burlington Northern and Santa Fe Railway and American Commercial Terminal under which the railroad transports coal from the Triton Coal mines in the Powder River Basin in Wyoming to St. Louis, Missouri. The Cajun facilities have burned Powder River Basin coal from these and neighboring mines since Big Cajun II commenced operations. American Commercial Terminal transports the coal by barge down the Mississippi River from St. Louis to the Cajun facilities. The Cajun facilities include a 17.5 mile gas pipeline with interconnections to Bridgeline Gas Distribution LLC, Acadian Gas Pipeline System and Texas Eastern Transmission Corporation. Under the power sales and agency agreement, NRG Power Marketing may acquire natural gas and gas transportation rights for the benefit of Louisiana Generating. The following table presents our current estimate of the price of the coal to be delivered to the Cajun facilities for during the five-year term of the coal supply and transportation agreements. The actual prices, however, may be different than we predict. For example, the pricing terms under our coal supply and transportation agreements may be revised upon the occurrence of various events. See "Summary of Certain Principal Agreements -- Coal Supply Agreement" and "-- Coal Transportation Agreement."
ESTIMATED PRICE OF DELIVERED YEAR COAL - ---- ------------------ ($/mmBtu) 2000................................................. 1.170 2001................................................. 1.195 2002................................................. 1.221 2003................................................. 1.247 2004................................................. 1.274 2005................................................. 1.292
RISK MANAGEMENT. NRG Power Marketing utilizes certain risk management policies and procedures to assist us with our objectives of maximizing net operating margins while minimizing associated risks. Key risk management guidelines adopted by NRG Power Marketing include: - a general prohibition on speculative activities; - mitigation of operational risk by not allowing more than 50% of available energy and capacity not already contracted to be sold forward unless approved by the NRG Power Marketing board of directors; - approval of counter-parties and their trading limits by NRG Energy's treasury; and - fuel and emissions allowance requirements to be matched with future sales commitments. OPERATIONS AND MAINTENANCE. Louisiana Generating entered into an operation and management services agreement with NRG Operating Services under which, at the request of Louisiana Generating, NRG Operating Services manages, oversees and supplements the operation and maintenance of the Cajun facilities. NRG Operating Services is a direct, wholly-owned subsidiary of NRG Energy. Big Cajun II, Unit 3 is operated by Louisiana Generating and Entergy Gulf States pursuant to a joint operating agreement. Louisiana Generating has the authority to control, manage, operate and maintain this 47 51 unit as if it were the sole owner of the unit. The fixed costs associated with Big Cajun II, Unit 3 are recovered according to ownership level. Variable costs associated with Big Cajun II, Unit 3 are borne in proportion to the energy delivered to Louisiana Generating and Entergy Gulf States. For a summary of the agreement, see the section entitled "Summary of Certain Principal Agreements." CORPORATE SERVICES. Louisiana Generating and NRG South Central each entered into a corporate services agreement with NRG Energy pursuant to which NRG Energy, upon request, provides services relating to any corporate business function, including human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. NRG Sterington Power and Big Cajun I Peaking Power each entered into a similar corporate services agreement with NRG Energy. OUR CUSTOMERS Cajun Electric was a rural electric generation and transmission cooperative formed in 1962 and was wholly-owned by its members, the distribution cooperatives. The distribution cooperatives purchased their electric energy requirements from Cajun Electric for more than 20 years under long-term, all-requirements power supply agreements. These purchases accounted for approximately 79% of Cajun Electric's revenue in 1999. During the period of March 30, 2000 (Inception) through June 30, 2000, approximately 37.4% of our revenues were derived from long term all-requirements power supply agreements. As of December 1998, the distribution cooperatives sold electricity to over 319,000 metered customers. Of these metered customers, approximately 91% were residential customers, 8% were industrial or commercial customers and 1% were public or other customers. The distribution cooperatives had approximately 1,200 employees in the aggregate in 1998. Following our acquisition of the Cajun facilities, all 11 of the distribution cooperatives continued to purchase their electric energy requirements from Louisiana Generating. For the period of March 30, 2000 (Inception) through June 30, 2000, revenues derived from agreements with the distribution cooperatives accounted for approximately 78% of our revenues. Electric distribution cooperatives developed under the Rural Electrification Act of 1935 to promote the distribution of electricity to rural areas of the United States. There are two types of electric cooperatives: generation and transmission cooperatives, such as Cajun Electric, and distribution cooperatives, such as the 11 distribution cooperatives that were the former members of Cajun Electric. A generation and transmission cooperative is typically a non-profit entity whose primary function is to provide energy and capacity on a wholesale basis to its owners, who typically consist of a group of distribution cooperatives. This power is typically sold by the generation and transmission cooperative pursuant to long-term, all-requirements contracts with the distribution cooperatives. The distribution cooperatives, which are also typically non-profit entities, in turn sell electricity on a retail basis to their customers. By virtue of purchasing electricity from the distribution cooperatives, these customers are considered to be the owners of the distribution cooperatives. These customer/owners vote to elect a board of directors of the distribution cooperative, which in turn appoints the managers who oversee the distribution cooperative's day-to-day operations. The primary assets of the distribution cooperatives are distribution lines and substation equipment, as well as the equipment necessary to maintain these assets. The distribution cooperatives generate revenue through sales of power to retail customers. The primary cost of the distribution cooperatives is that of purchasing wholesale energy and capacity necessary to meet their customers' requirements. The retail rates charged by the distribution cooperatives are set by the LPSC and our wholesale rates to the distribution cooperatives is a component used to determine these rates. The power supply agreements that we entered into with the distribution cooperatives provide for a significant reduction in the cost of wholesale energy and capacity to these distribution cooperatives, when compared with their cost prior to Cajun Electric's Chapter 11 bankruptcy filing. These cost savings for the distribution cooperatives have resulted in reduced electricity rates to their retail customers. The Rural Utilities Service of the United States Department of Agriculture, or RUS, provides loans or guarantees to both generation and transmission cooperatives and to distribution cooperatives. The majority of 48 52 the electric cooperative industry continues to rely on RUS loans or guarantees and other electric cooperative financial institutions for the bulk of its capital needs. Pursuant to the plan of reorganization in Cajun Electric's Chapter 11 bankruptcy, the distribution cooperatives were granted the option to elect to enter into any of three forms of power supply agreements, which we refer to as forms A, B or C, with Louisiana Generating or to purchase their energy and capacity requirements elsewhere. All 11 of the distribution cooperatives elected to purchase their energy and capacity requirements from Louisiana Generating. The following table sets forth selected information with respect to those distribution cooperatives, including the form of power supply agreement initially elected by each. See "Summary of Certain Principal Agreements -- Power Supply Agreements with the Distribution Cooperatives."
TOTAL % CUSTOMERS CAJUN ANNUAL FORM OF (RESIDENTIAL FACILITIES' GROWTH POWER AND MILES OF 1999 MWh IN SUPPLY COMMERCIAL) LINE PURCHASES PURCHASED PURCHASES NAME AGREEMENT PARISHES SERVED 1998 1998 (MWh) 1999 1989-99 - ---- --------- --------------- ------------ -------- --------- ----------- --------- Beauregard Electric Form A Allen, Beauregard, 32,668 4,956 711,806 7.26% 5.84% Cooperative, Inc. (25-year) Calcasieu, Evangeline, Jefferson Davis, Rapides, Vernon Claiborne Electric Form C Bienville, Claiborne, 16,008 3,842 510,036 5.20% 6.47% Cooperative, Inc. (two- to Lincoln, Ouachita, four-year) Union, Webster Concordia Electric Form A Caldwell, Catahoula, 11,795 2,487 173,686 1.77% 0.73% Cooperative, Inc. (25-year) Concordia, Franklin, Grant, LaSalle, Tensas Dixie Electric Form C Ascension, East Baton 70,892 7,555 1,416,831 14.44% 4.38% Membership (two- to Rouge, East Feliciana, Corporation four-year) Livingston, St. Helena, Tangipahoa, West Feliciana Jefferson Davis Form A Allen, Calcasieu, 9,538 1,584 204,021 2.08% 1.07% Electric Cooperative, (25-year) Cameron, Jefferson Inc. Davis, Vermilion Northeast Louisiana Form B East Carroll, West 14,396 2,390 240,652 2.45% 3.61% Power Cooperative, (25-year) Carroll, Franklin, Inc. Madison, Morehouse, Richland, Tensas Pointe Coupee Form A Iberville, Pointe 9,157 960 239,142 2.44% 7.79% Electric Membership (25-year) Coupee, West Baton Corporation Rouge South Louisiana Form A Assumption, Lafourche, 16,999 1,263 451,664 4.60% 2.69% Electric Cooperative (25-year) St. Martin, St. Mary, Association Terrebonne Southwest Louisiana Form A Acadia, Avoyelles, 73,879 8,119 1,685,986 17.19% 1.86% Electric Membership (25-year) Evangeline, Iberia, Corporation Lafayette, St. Landry, St. Martin, Vermillion Valley Electric Form C Caddo, DeSoto, Grant, 28,191 6,602 539,081 5.50% 3.06% Membership (two- to Natchitoches, Red Corporation four-year) River, Sabine, Vernon, Winn Washington -- Form C St. Tammany, 35,601 5,017 733,358 7.48% 3.65% St. Tammany Electric (two- to Tangipahoa, Cooperative, Inc. four-year) Washington ------- ------ --------- ------- Totals: 319,124 44,775 6,906,263 70.41%
In addition to sales to the distribution cooperatives, Louisiana Generating sells energy and capacity to two municipal power authorities and one investor-owned utility under four power supply agreements for terms of from seven to 26 years. 49 53 OUR COAL SUPPLIER AND TRANSPORTERS Louisiana Generating has a coal supply agreement with Triton Coal for a term of five years, beginning March 2000. Triton Coal, headquartered in Gillette, Wyoming, operates two coal mines in the Powder River Basin in Wyoming. See "Summary of Certain Principal Agreements." Louisiana Generating has a coal transportation agreement with Burlington Northern and Santa Fe Railway and American Commercial Terminal for a term of five years, beginning in March 2000. Burlington Northern and Santa Fe Railway, headquartered in Fort Worth, Texas, transports a variety of manufacturing, agricultural and natural resource commodities, chemicals, consumer and food products, and motor vehicles and automotive parts. American Commercial Terminal, headquartered in Jeffersonville, Indiana, is a general cargo stevedore and warehousing logistics specialist which operates a terminal offering barge, rail and truck transloading for a variety of commodities including steel, paper, lumber and coal. See "Summary of Certain Principal Agreements." ENVIRONMENTAL MATTERS We, like most industrial enterprises, are subject to regulation with respect to the environmental impact of our operations, including air and water quality control, limitations on land use, disposal of wastes, aesthetics and other matters. Environmental laws generally require air emissions and water discharges to meet specified limits. They also impose potential joint and several liability, without regard to fault, on the generators of various hazardous substances to manage these materials properly and to clean up property affected by the production and discharge of such substances. The long-term, all-requirements power supply agreements under which we sell a majority of the energy and capacity generated by the Cajun facilities contain clauses allowing Louisiana Generating to pass through to the distribution cooperatives their share of increased costs resulting from any changes in environmental law. We estimate that we will expend approximately $20.0 million between 2000 and 2003 related to the environmental compliance of the Cajun facilities, including expenditures for construction of spill containment structures, installation of additional monitoring wells, removal of asbestos and installation of equipment at Big Cajun II which will allow for the use of gas as a start-up fuel. Air Pollution Control. SULFUR DIOXIDE. The Clean Air Act Amendments of 1990 provide for SO(2) emission reductions to be achieved through a total cap on SO(2) emissions from affected electrical generation units, and an allocation of SO(2) "allowances" (each allowance authorizes the emission of one ton of SO(2)). Big Cajun II's annual SO(2) emissions allocation is 44,153 tons commencing in 2000 regardless of the burn level. Electrical generation units needing to cover emissions above their allocations can buy allowances from sources that have excess allowances. Under Phase II of the Clean Air Act, Big Cajun I, Units 1 and 2 each have 27 SO(2) annual allowances. These allowances will increase to 37 and 34 per year, respectively, in 2010. Under Phase II of the Clean Air Act, Big Cajun II, Units 1, 2, and 3 have SO(2) annual allowances of 14,864, 14,636 and 14,653 respectively. These allowances will decrease to 14,322, 14,142 and 14,106 per year, respectively, in years 2010 and beyond. Currently, the Cajun facilities are in material compliance with existing laws. In the future, if necessary, we intend to comply with existing laws limiting SO(2) emissions by purchasing additional allowances and/or purchasing lower sulfur fuel. In addition to federal regulation by the Environmental Protection Agency, or the EPA, the Louisiana Department of Environmental Quality, or LDEQ, also regulates SO(2) emissions and Big Cajun II is subject to these regulations. Because the SO(2) emissions of Big Cajun I do not exceed 250 tons per year, both units are exempt from certain LDEQ SO(2) emission limitations. Louisiana Generating's coal supply agreement with Triton Coal guarantees compliance with Big Cajun II's SO(2) emissions allocation. Assuming the Cajun facilities' burn for the year is greater than 85 million mmBtu, then if actual SO(2) emissions are greater than 43,804 tons, Louisiana Generating will receive from Triton Coal that number of allowances in excess of 43,804 required to enable it to be in compliance with the applicable regulatory requirements for the previous calendar year or, if actual 50 54 SO(2) emissions are less than 43,804 tons, Louisiana Generating must provide Triton Coal with two-thirds the number of allowances less than the 43,804 required. The remaining one-third of excess SO(2) allowances are retained by Louisiana Generating. NITROGEN OXIDES. Each of the Cajun facilities' power generation units comply with the Clean Air Act's early election Phase I acid rain NO(x) limit of 0.5 lb/mmBtu. NO(x) data on the Cajun facilities is reported quarterly to LDEQ. No violation actions or responses with respect to the Cajun facilities have been initiated by LDEQ. Current NO(x) levels are generally less than 0.45 lb/mmBtu. PARTICULATE MATTER. A new ambient air quality standard was also adopted by the EPA in July 1997 to address emissions of fine particulate matter. It is widely understood that attainment of the fine particulate matter standard may require reductions in NO(x) and SO(2) emissions, although under the time schedule announced by the EPA when the new standard was adopted, non-attainment areas were not to have been designated until 2002 and control measures to meet the standard were not to have been identified until 2005. However, in a May 14, 1999 decision, the D.C. Circuit remanded the standard to the EPA for further justification. Accordingly, the impact, if any, of future revision to the fine particulate matter ambient air quality standard on the Cajun facilities is uncertain at this time. HAZARDOUS AIR POLLUTANTS. The EPA is also evaluating whether to regulate mercury emissions from coal-fired utility boilers. Because we do not know what the EPA may require with respect to this issue, we are not able to evaluate the impact of potential mercury regulations on the Cajun facilities. GREENHOUSE GASES. Since the adoption of the United Nations Framework on Climate Change in 1992, there has been a worldwide effort to reduce greenhouse gas, or GHG, emissions to 1990 levels or below. In December 1997, the administration of President Clinton participated in the Kyoto, Japan negotiations, where the basis of a climate change treaty was formulated. Under the treaty, known as the Kyoto Protocols, the United States would have an overall reduction target of 7% in GHG emissions from 1990 levels by 2008-2012. In 1997, the United States Senate passed a resolution indicating that it would not ratify a GHG emissions reduction treaty that did not involve commitments from developing nations to limit GHG emissions or one that would damage the United States economy. To date, the Senate has not ratified the Kyoto Protocols. Water Pollution Control. National Pollutant Discharge Elimination System sampling data for all of the Cajun facilities' discharge points indicate current compliance with wastewater discharge permit requirements. There are no outstanding water pollution control violations or consent orders for the Cajun facilities with LDEQ or the EPA. There are no reported or known compliance issues preventing reissuance of necessary wastewater discharge permits from the Louisiana National Pollutant Discharge Elimination System (the Louisiana arm of the National Pollutant Discharge Elimination System). With respect to existing cooling water intake structures, the EPA is currently required under a modification of a consent decree to propose draft regulations on or before May 2002 and promulgate final regulations by April 2004. These regulations will address, among other things, regulatory approaches for determining what constitutes adverse environmental impact and what constitutes the best technology available for minimizing adverse environmental impact. It is not possible to determine at this time how the EPA will resolve these issues. The EPA's regulations in general and these determinations in particular may have a material adverse effect on the adequacy of our capital budgets relating to water pollution control. Remediation. Under various federal, state and local environmental laws and regulations, a current or previous owner or operator of any facility, including an electric generating facility, may be required to investigate and remediate past releases or threatened releases of hazardous or toxic substances or petroleum products located at the facility, and may be held liable to a governmental entity or to third parties for property damage, personal injury and investigation and remediation costs incurred by the party in connection with any releases or threatened releases. These laws, including the Comprehensive Environmental Response, Compensation and Liability Act 51 55 of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, impose liability without regard to whether the owner knew of or caused the presence of the hazardous substances, and courts have interpreted liability under such laws to be strict and joint and several. The cost of investigation, remediation or removal of any hazardous or toxic substances or petroleum products could be substantial. We believe, however, that the risk of material remediation liability in connection with our ownership and operation of the Cajun facilities is low because both Big Cajun I and Big Cajun II were "greenfield" facilities when constructed and neither has a history of large off-site shipments of hazardous waste from the facilities. In connection with the sale of the Cajun facilities, the trustee in Cajun Electric's Chapter 11 bankruptcy proceedings commissioned an environmental consulting firm to conduct a "Phase I" environmental investigation to evaluate the potential existence of contamination at the Cajun facilities and whether remediation of such facilities would be required. A Phase I environmental investigation typically involves a review of documents maintained by the facility with respect to conditions at the facility; interviews with facility personnel; review of governmental agency files; research into historical operations at a facility; and a visual inspection of the facility. The Phase I environmental investigation of the Cajun facilities showed no material risks associated with the disposal of hazardous wastes and no material remedial concerns with past spills or leaks of hazardous materials. EMPLOYEES As of June 30, 2000, Louisiana Generating had 313 union and non-union employees with an average of approximately 15 years of work experience at the Cajun facilities. Cajun Electric had approximately 470 union and non-union employees as of February 1, 2000. With respect to union employees, all such employees are covered by current labor agreements with either the United Steelworkers of America or the International Brotherhood of Electrical Workers. These agreements will need to be renewed in March 2001. NRG South Central does not have any employees. INSURANCE We maintain insurance coverage that, in the opinion of an insurance consultant, is sufficiently comprehensive in scope and consistent with, or exceeds, that normally carried by companies engaged in the same or similar businesses and owning similar properties and operating in the same or similar locations. The insurance program includes all-risk property insurance that provides replacement value cover for all real and personal property, losses from boiler and machinery breakdowns, and business interruption. All of these policies are subject to certain sub-limits. We also carry general liability insurance covering liabilities to third parties for bodily injury or property damages resulting from operations, automobile liability insurance and excess liability insurance. Further, we have the benefit of title insurance and workers' compensation insurance. We are also required under the indenture to name the collateral agent and the bond trustee as loss payees and additional insureds under certain of our insurance policies. Limits and deductibles in respect of these insurance policies are comparable to those carried by other electric generating enterprises with similar capital structures and owning and operating facilities of like size and type as the Cajun facilities. LEGAL PROCEEDINGS We may become involved in or threatened with various legal proceedings from time to time arising in the ordinary course of business. We do not believe that any liability arising from any of these proceedings will have a material adverse effect on the operation of our business or our financial position. 52 56 MANAGEMENT MANAGEMENT COMMITTEE AND EXECUTIVE OFFICERS OF NRG SOUTH CENTRAL NRG South Central is a member-managed limited liability company, which means that its members are responsible for managing its affairs. NRG South Central's two members, NRG Central U.S. LLC and South Central Generation Holding LLC, act collectively through a committee known as the management committee, which has full authority to manage the business and affairs of NRG South Central. Each member selects three representatives to represent it at the management committee meetings. Members of NRG South Central's management committee (and their ages), as selected by each of our members, are David Peterson (59), Leonard Bluhm (54) and Craig Mataczynski (40). DAVID H. PETERSON has been a member of NRG South Central's Management Committee since January 2000. Mr. Peterson has been Chairman of the Board of NRG Energy since January 1994, Chief Executive Officer since November 1993, President since 1989 and a Director since 1989. Mr. Peterson was also Chief Operating Officer of NRG Energy from June 1992 to November 1993. Prior to joining NRG Energy, Mr. Peterson was Vice President, Non-Regulated Generation for Northern States Power, and he served in various other management positions with Northern States Power during the last 20 years. LEONARD A. BLUHM has been a member of NRG South Central's Management Committee since January 2000. Mr. Bluhm has been Executive Vice President and Chief Financial Officer of NRG Energy since January 1997. Immediately prior to that, he served as the first President and Chief Executive Officer, and subsequently Chairman, of Cogeneration Corporation of America (formerly NRG Generating (U.S.) Inc.) from May 1993. Mr. Bluhm has served in various management positions with NRG Energy since joining NRG Energy in 1991. Mr. Bluhm previously served for over 20 years in various financial positions with Northern States Power. CRAIG A. MATACZYNSKI has been a member of NRG South Central's Management Committee since January 2000. Mr. Mataczynski has served as President of NRG South Central since January 2000 and as Vice President of Louisiana Generating since June 1999. He has been Senior Vice President of NRG Energy, and President and Chief Executive Officer of NRG Energy, North America, since July 1998. From December 1994 until July 1998, Mr. Mataczynski served as Vice President, U.S. Business Development of NRG Energy. From May 1993 to January 1995, Mr. Mataczynski served as President of NEO Corporation, NRG Energy's wholly-owned subsidiary that develops small landfill gas electric generation projects within the United States. Prior to joining NRG Energy, Mr. Mataczynski worked for Northern States Power from 1982 in various positions, including Director, Strategy and Business Development and Director, Power Supply Finance. Set forth below are NRG South Central's executive officers, with their respective positions.
NAME AGE POSITION - ---- --- -------------- Craig A. Mataczynski................................... 40 President Alan D. Williams....................................... 53 Vice-President Brian B. Bird.......................................... 38 Treasurer Michael J. Young....................................... 43 Secretary
Set forth below are the principal occupations and business activities of NRG South Central's executive officers (other than Mr. Mataczynski, whose other principal occupations and business activities are set forth above) for the past five years in addition to their positions described above. ALAN D. WILLIAMS has served as Vice President of NRG South Central since January 2000 and as President of Louisiana Generating since June 1999. Mr. Williams is the Executive Director, Louisiana Assets, of NRG Energy and has been employed by NRG Energy in this role since October 1999. Mr. Williams was responsible for all aspects of the acquisition of the Cajun facilities and the transition from Cajun Electric to Louisiana Generating. Mr. Williams was Vice President of Marketing and Business Development at Zeigler Coal Holding Company, previously one of NRG Energy's partners in the bidding for the Cajun facilities. Prior 53 57 to his employment at Zeigler Coal, Mr. Williams worked for Shell Mining Company for 19 years. During that time Mr. Williams served, among other positions, as President of Triton Coal Company and President of Billiton Metals Company. BRIAN B. BIRD has served as Treasurer of NRG South Central since January 2000 and as Treasurer of Louisiana Generating since June 1999. Mr. Bird is the Vice President and Treasurer of NRG Energy, and has been employed by NRG Energy since 1997. Mr. Bird was Director of Corporate Finance and Treasury for Deluxe Corporation in Shoreview, Minnesota from September 1994 to May 1997. Prior to that Mr. Bird was Manager of Finance for the Minnesota Vikings professional football team from March 1993 to September 1994. Mr. Bird held several financial management positions with Northwest Airlines in Minneapolis, Minnesota from 1988 to March 1993. MICHAEL J. YOUNG has served as Secretary of NRG South Central since January 2000 and as Secretary of Louisiana Generating since June 1999. Mr. Young has been Assistant General Counsel of NRG Energy since February 1998. Mr. Young served as the NRG Energy attorney responsible for the acquisition of the Cajun facilities. Prior to joining NRG Energy in May 1995, Mr. Young was an attorney at Cargill Incorporated for five years and an associate with the law firm of Lindquist & Vennum in Minneapolis, Minnesota for three years. BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF LOUISIANA GENERATING Louisiana Generating has a board of directors whose members are the same as NRG South Central's management committee. Set forth below are Louisiana Generating's executive officers, with their respective positions.
NAME AGE POSITION - ---- --- -------------- Alan D. Williams....................................... 53 President Craig A. Mataczynski................................... 40 Vice-President Brian B. Bird.......................................... 38 Treasurer Michael J. Young....................................... 43 Secretary
The principal occupations and business activities of Louisiana Generating's executive officers are set forth above. 54 58 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OWNERSHIP OF OUR MEMBERSHIP INTERESTS NRG South Central's members are NRG Central U.S. LLC and South Central Generation Holding LLC, each of which owns a 50% interest in NRG South Central. NRG Energy owns 100% of NRG Central U.S. LLC and South Central Generation Holding LLC. NRG Energy, in turn, is indirectly majority owned by Xcel Energy. See "About Us." EQUITY CONTRIBUTION FROM NRG ENERGY We received, indirectly through NRG Central U.S. LLC and South Central Generation Holding LLC, equity from NRG Energy in the form of a cash equity contribution of approximately $268.6 million, which includes previously capitalized development costs of $28.0 million and acquisition costs of $14.0 million. The cash equity contribution was used, in addition to the amount raised by the offering of the outstanding bonds, to purchase the Cajun facilities. Approximately $30.0 million of the assets that we acquired in conjunction with the purchase of the Cajun facilities are not necessary for the operation of the Cajun facilities and, with respect to some of these assets, may not be held by Louisiana Generating under applicable federal regulations. These assets were distributed to NRG New Roads Holdings, a wholly-owned unrestricted subsidiary of NRG South Central. NRG New Roads Holdings may at any time dividend these assets or the proceeds of a sale of these assets to NRG Energy or one of its affiliates. With the exception of certain railcars, which have been sold, NRG New Roads Holdings continues to hold these assets as of the date of this prospectus. See "Business of NRG South Central and Louisiana Generating -- Acquisition of the Cajun Facilities." POWER SALES AND AGENCY AGREEMENT Louisiana Generating entered into a power sales and agency agreement with NRG Power Marketing pursuant to which NRG Power Marketing provides power marketing services, fuel procurement services and emissions credit management services to Louisiana Generating. See "Summary of Certain Principal Agreements." For the three months ended June 30, 2000, we recorded gross receipts less costs incurred from NRG Power Marketing totaling approximately $44.2 million. OPERATION AND MANAGEMENT SERVICES AGREEMENT Louisiana Generating entered into an operation and management services agreement with NRG Operating Services pursuant to which NRG Operating Services, upon the request of Louisiana Generating, manages, oversees and supplements the operations and maintenance work at the Cajun facilities. See "Summary of Certain Principal Agreements." For the three months ended June 30, 2000, we incurred operating and maintenance costs billed from NRG Operating Services totaling $11.1 million. CORPORATE SERVICES AGREEMENTS Louisiana Generating and NRG South Central each entered into a corporate services agreement with NRG Energy pursuant to which NRG Energy, upon request, provides services relating to any corporate business function, including human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. See "Summary of Certain Principal Agreements." NRG Sterlington Power and Big Cajun I Peaking Power each entered into a similar corporate services agreement with NRG Energy. For the three months ended June 30, 2000, we paid NRG Energy $0.2 million for corporate support and services. 55 59 GUARANTOR LOAN AGREEMENT NRG South Central loaned Louisiana Generating the net proceeds of the offering of the outstanding bonds and amounts used for working capital purposes under a guarantor loan agreement. This loan was evidenced by a promissory note given to NRG South Central by Louisiana Generating. See "Description of Principal Financing Documents -- Guarantor Loan Agreement." 56 60 SUMMARY OF CERTAIN PRINCIPAL AGREEMENTS The following is a summary of certain principal agreements related to the Cajun facilities and our business. It is not a full statement of the terms of such agreements. Accordingly, the following summaries of such agreements are qualified by reference to each agreement and are subject to the terms of the full text of each agreement. Unless otherwise stated, any reference in this prospectus to any agreement shall mean such agreement and all schedules, exhibits and attachments thereto as amended, supplemented or otherwise modified and in effect as of the date hereof. Copies of all of these agreements have been filed as exhibits to the registration statement of which this prospectus forms a part. POWER SUPPLY AGREEMENTS WITH THE DISTRIBUTION COOPERATIVES Form A Power Supply Agreement. This agreement is an all-requirements power supply agreement governed by Louisiana law. Six of the distribution cooperatives entered into this form of agreement. TERM. The initial term of the agreement is 25 years, commencing on March 31, 2000. After the initial term, the agreement will continue on a year-to-year basis unless either party gives the other five years' notice of its intent to terminate the agreement. ALL-REQUIREMENTS. Louisiana Generating is obligated to supply and the distribution cooperative is required to purchase all of the energy and capacity required by the distribution cooperative for service to its retail customers. The distribution cooperative has the following limited rights to purchase energy and capacity from third parties: - The distribution cooperative receives from the Southwestern Power Administration its pro rata share of 89 MW of firm hydroelectric peaking power and 2.4 MW of supplemental peaking power which, prior to the acquisition of the Cajun facilities, had been allocated to Cajun Electric. - Beginning in 2018, each distribution cooperative may purchase from a third party or self-generate power for the portion of the distribution cooperative's load in excess of its average load in the three prior years or, if greater, 137% of its 1997 load. - If required by law, the distribution cooperative may purchase energy from a qualifying facility. - The distribution cooperative may purchase energy and capacity from a third party to supply a new load of at least 5 MW, but Louisiana Generating has a right of first refusal to meet the terms offered by such supplier. - The distribution cooperative may purchase energy and capacity from a third party in conjunction with acquiring new distribution facilities for service to customers not previously served by the distribution cooperative, to the extent the cooperative is required to assume a power supply agreement to make such acquisition. - If a political subdivision annexes territory which includes customers of the distribution cooperative, the cooperative may have the right to purchase up to 50 MW of power from the political subdivision to serve these customers. TRANSMISSION. Louisiana Generating contracts for all transmission service required to serve the distribution cooperative and passes through the costs of transmission service to the cooperative. Louisiana Generating is required to supply at its cost, without pass through, control area services and ancillary services which transmission providers are not required to provide. SPECIFIC DELIVERY FACILITIES. Louisiana Generating owns and maintains the substations and other facilities used to deliver energy and capacity to the distribution cooperative and charges the cooperative a monthly specific delivery facility charge for such facilities and additions to or new delivery facilities. The initial monthly charge is 1% of the value of the distribution cooperative's specific delivery facilities (allocated on the assumption that the aggregate value of all of the distribution cooperative's specific delivery facilities is 57 61 $35.0 million), and the cost of additional investment during the term of the agreement will be added to the initial value of the delivery facilities to calculate the monthly specific delivery facility charge. PAYMENT. Louisiana Generating charges the distribution cooperative a demand charge, a fuel charge and a variable operation and maintenance charge. The demand charge consists of two components, each in $/kW-month: a capital rate, which is $2.1667 through 2004, $1.00 in 2005 and $0.7786 thereafter, and a fixed operation and maintenance rate, which is $4.6394 through 2004, thereafter escalating at approximately 3% per annum. The distribution cooperative may choose one of two fuel options. Under the first option, the fuel charge will be $0.013995/kWh through 2004, and thereafter will be determined by a formula based on gas prices and the cost of delivered coal. The second fuel option consists of a pass-through of fuel costs, with a guaranteed coal heat rate, and purchased energy costs, excluding the demand component in purchased power. All six of the distribution cooperatives selected the first fuel option. At the end of the fifteenth year of the contract, the cooperatives may switch to the second fuel option. Additionally, Louisiana Generating may offer fixed fuel rates from time to time which the cooperative may elect to utilize. The variable operation and maintenance charge is $0.00323/kWh through 2004, thereafter escalating at either approximately 3% per annum or in accordance with actual changes in specified indices as elected by the distribution cooperative. Five of the distribution cooperatives elected the fixed escalation provision and one elected the specified indices provision. INCENTIVE RATES. Louisiana Generating honors existing incentive rates established for specific customers of the distribution cooperative and offers new incentive rates for high load factor customers. The Form A agreement also has provisions for special rates for certain customers based on the economic development benefits the customer will provide and other rates to improve the distribution cooperative's ability to compete with service offered by political subdivisions. TAXES. Louisiana Generating has the right to pass through additional taxes that are imposed on it other than income taxes and ad valorem taxes. Liability for these taxes are allocated based on energy delivered to its customers. CHANGE OF ENVIRONMENTAL LAW. Louisiana Generating has the right to pass through increased costs resulting from changes in environmental law. The distribution cooperative's proportionate share of these increased costs are allocated in a reasonable manner based on either energy delivered by Louisiana Generating to all of its customers or the maximum coincident demand of all of Louisiana Generating's customers with firm contracts to purchase capacity from Louisiana Generating. CONTINUITY OF SERVICE. Louisiana Generating is required to use reasonable diligence in accordance with prudent utility practice to provide the distribution cooperative with a constant uninterrupted supply of energy and capacity. Louisiana Generating is not liable for interruptions due to force majeure, transmission outages other than those resulting from the failure to perform its obligations under the power supply agreement, or insufficient transmission capacity. If an outage of the Cajun facilities, a transmission outage or a force majeure event interrupts, prevents or reduces Louisiana Generating's ability to provide continuous service from its plants, Louisiana Generating must use reasonable diligence to arrange for substitute energy. The costs of this substitute energy are borne by Louisiana Generating and, except as provided in the second fuel option, may not be passed to the distribution cooperative. However, Louisiana Generating may charge the cooperative for its share of the incremental cost incurred to purchase substitute energy for outages of both of the transmission lines which connect Big Cajun II to Entergy's transmission system to the extent such outages exceed 24 consecutive hours. RIGHT OF FIRST REFUSAL REGARDING ELECTRICITY MEMBERSHIP COOPERATIVE'S ASSETS. In the event of a proposed merger, consolidation or sale of the assets of a distribution cooperative, Louisiana Generating has a right of first refusal to purchase the cooperative's assets, which may be exercised if the other distribution cooperatives do not elect to purchase the assets. 58 62 SECURITY INTEREST IN ELECTRICITY MEMBERSHIP COOPERATIVE'S ACCOUNTS RECEIVABLE. Each distribution cooperative is required to grant Louisiana Generating a security interest in the cooperative's accounts receivable, which is subordinate to any other security interest granted by the distribution cooperative to the RUS or third-party lenders. The grant of this security interest is subject to the consent of the RUS and other third party lenders with security interests in the distribution cooperative's accounts receivable and the distribution cooperative is obligated to use reasonable efforts to obtain such consents. ASSIGNMENT. Either party may assign the power supply agreement to its lenders. Louisiana Generating may assign the power supply agreement to a successor in connection with the sale of all or substantially all of its assets. FORCE MAJEURE. No party is liable to the other party for failure to perform an obligation under the power supply agreement if the failure is due to an event beyond the party's control or due to events that the party could not expect to overcome or avoid by acting diligently. Force majeure includes: failure or imminent threat of failure of facilities or equipment, flood, freeze, earthquake and similar natural disasters as well as war, riots, civil or industrial disturbances (e.g. strikes or lockouts), labor or material shortage, sabotage, restraint by court order or other public authority, and failure to obtain governmental approvals. A party is not required to settle any industrial disturbance or pursue a review of any administrative or judicial action. Lack of funds or a government authority disallowing or limiting recovery of charges imposed by the power supply agreement through rates is not a force majeure event. DEFAULT. The following are events of default under the agreement: - failure by the distribution cooperative to pay amounts due within five days after Louisiana Generating has notified it that payment has not been made on time; - a material representation or warranty made by either party is materially false or misleading and is not cured within 30 days from the date the other party notified the party in default; - failure by either party to perform a material obligation (other than the obligation of the distribution cooperative to make payments due under the agreement) and the failure to perform is not due to the occurrence of a force majeure event; - failure by either party to perform an obligation (other than Louisiana Generating failing to provide continuous service) if such failure is not cured within 30 days from the date notice of such default is given by the other party, or, if more time is needed, the party may have up to 180 days to cure such default; - failure by Louisiana Generating to provide continuous service if such failure is not cured within 30 days; and - the occurrence of a bankruptcy or similar event or preceding with respect to either party. REMEDIES UPON DEFAULT. If a party is in default, the other party has the right to enforce any remedies it is provided under the law or in equity including termination of service, specific enforcement and recovery of damages. However, the party may not collect incidental, punitive or consequential damages. If one party must resort to legal proceedings or retain a lawyer to collect an invoice, the other party must pay for interest, costs and expenses incurred by the collecting party. Form B Power Supply Agreement. This agreement is an all-requirements power supply agreement governed by Louisiana law. One of the distribution cooperatives entered into this form of power supply agreement. The material differences between this form and the Form A power supply agreement are described below. TERM. The term of the agreement commenced on March 31, 2000 and ends on December 31, 2024. OPTION FOR ALL-REQUIREMENTS OR PARTIAL REQUIREMENTS. When selecting the form of power supply agreement, the distribution cooperative that chose Form B had the right to elect to limit its purchase 59 63 obligations to "base supply" or also to purchase "supplemental supply." Base supply is the distribution cooperative's ratable share of the generating capacity purchased by Louisiana Generating from Cajun Electric, and supplemental supply is the cooperative's requirements in excess of the base supply amount. The distribution cooperative which entered into the Form B agreement elected to purchase base supply and supplemental supply. SPECIFIC AND COMMON DELIVERY FACILITIES. Louisiana Generating charges the cooperative a monthly specific delivery facility charge of approximately 1.75% of the depreciated net book value of the specific delivery facilities, including additional investment. The distribution cooperative may assume the right to maintain the specific delivery facilities and reduce the charge to 1.25% of the depreciated net book value of the specific delivery facilities. Louisiana Generating also charges the distribution cooperative its ratable share of 1.75% of the depreciated book value of common delivery facilities, which include communications, transmission and metering facilities owned by Louisiana Generating to provide supervisory control and data acquisition, and automatic control for its customers. DEMAND AND ENERGY RATES. For base supply, Louisiana Generating charges the cooperative a demand charge, an energy charge and a fuel charge. The demand charge for each contract year during the term of the power supply agreement is set forth in the agreement and is subject to increase for environmental legislation or occupational safety and health laws enacted after the effective date of the agreement. Louisiana Generating has the right to increase the demand charge to the extent its cost of providing supplemental supply exceeds $400/kW. The energy charge is $0.0038/kWh through 2004 and $0.0035/kWh thereafter. The fuel charge is a pass through of fuel and purchased energy costs, and the distribution cooperative may elect to be charged based on a guaranteed coal fired heat rate of 10,600 Btu/kWh, and it may also select fixed fuel factors as set forth in the agreement for each year through 2008. The one distribution cooperative which entered into this form of agreement elected to utilize the fixed fuel factors. For years after 2008, Louisiana Generating will offer additional fixed fuel factors for five-year periods that the distribution cooperative may elect to utilize. For years after 2008, the cooperative may also elect to have its charges computed under the pass through provisions with or without the guaranteed coal fired heat rate. At the beginning of year six, Louisiana Generating will establish a rate fund, in an interest bearing account, equal to the ratable share (based on the ratio that the aggregate 1998 demand of the distribution cooperatives who choose the Form B power supply agreement bears to the demand of all of the cooperatives) of $18.0 million. The amount of the fund will be approximately $720,000. This fund will be used to offset the energy costs of the Form B distribution cooperative which elected the fuel pass through provisions of the fuel charge, to the extent the cost of power exceeds $0.04/kWh. The fund will be utilized until it is depleted. Any funds remaining at the end of the term of the power supply agreement will be returned to Louisiana Generating. EXTENDED OUTAGE. Unless the distribution cooperative has elected the fixed fuel factors, Louisiana Generating can pass through the cost of replacement power for any outage of up to 60 days. After 60 days, Louisiana Generating may only pass through the increased capacity charges for replacement power to the extent it must do so to cover its debt service, calculated on the assumption that all cooperatives are taking power under the Form B power supply agreement. If the outage exceeds 60 days, Louisiana Generating also has the right to reduce its obligation to serve the distribution cooperative's base supply by approximately 118% of the cooperative's share of the capacity that was subject to the outage. TAXES. Louisiana Generating may pass through increases in taxes, including ad valorem taxes, other than income taxes and increases in ad valorem taxes resulting from the change in ownership from Cajun Electric to Louisiana Generating. 60 64 DEFAULT. A party is in default if it fails to make any payment or perform an obligation under the agreement or otherwise breaches a covenant or warranty, except where the failure to perform is due to a force majeure event. REMEDIES UPON DEFAULT. If a party is in default, the other party has the right to enforce any remedies it is provided under law or in equity, including initiation of a proceeding at the FERC to terminate service. If one party must resort to legal proceedings or retain a lawyer to collect an invoice, the other party must pay for interest, costs and expenses incurred by the collecting party. Form C Power Supply Agreement. This agreement is an all-requirements power supply agreement governed by Louisiana law. Four distribution cooperatives entered into this form of power supply agreement. Except for the following, the terms of the Form C power supply agreement are virtually identical to the Form A power supply agreement summarized above: TERM. The term of the power supply agreement is four years following the March 31, 2000 closing of the acquisition of the Cajun facilities, but the distribution cooperative may terminate the power supply agreement at any time on 12 months' prior written notice given at any time after March 31, 2001. RATES. The rates consist of a demand rate of $6.8061/kW-month, a variable operations and maintenance charge of $0.00439/kWh, and a fuel charge of $0.013995/kWh. Louisiana Generating will not offer new incentive rates to the distribution cooperatives which have elected the Form C power supply agreement, but will continue to honor existing incentive rates. SPECIFIC DELIVERY FACILITIES. At the end of the term of the agreement, the distribution cooperative is obligated to purchase the specific delivery facilities for a purchase price equal to their depreciated book value. OTHER POWER SUPPLY AGREEMENTS Louisiana Generating assumed Cajun Electric's rights and obligations under two consecutive long-term power supply agreements with SWEPCO, one agreement with South Mississippi Electric Power Association, or SMEPA, and one agreement with Municipal Energy Agency of Mississippi, or MEAM. The material terms of these agreements are summarized below. SWEPCO Operating Reserves and Off-Peak Power Sale Agreement. TERM. The agreement is effective through December 31, 2007. POWER COMMITMENT. 100 MW of off-peak energy during the hours of 10:01 PM and 6:00 AM to a maximum of 292,000 MWh per year and an additional 100 MW of operating reserve capacity and the associated energy within ten minutes of a phone request by SWEPCO during the hours of 6:01 AM and 10:00 PM to a maximum of 43,800 MWh of operating reserve energy per year. The obligation to purchase the 100 MW of off-peak energy is contingent on Louisiana Generating's ability to deliver operating reserve capacity and the energy associated with the operating reserve capacity. At Louisiana Generating's request it will supply up to 100 MW of non-firm, on-peak capacity and the associated energy. 61 65 PRICING. Pricing, including transmission costs to the delivery point, is set forth on following table:
OPERATING RESERVE OPERATING RESERVE NON-FIRM NON-FIRM YEAR OFF-PEAK ENERGY CAPACITY ENERGY ON-PEAK CAPACITY ON-PEAK ENERGY - ---- --------------- ----------------- ----------------- ---------------- -------------- 2000 Off-peak incremental $5.00/kW-month Average fuel cost $2.00/kW-month Average fuel cost 2001 fuel cost plus plus variable plus variable costs 2002 variable costs of costs of of $0.50/MWh, plus $0.50/MWh, plus $0.50/MWh, plus $2.75/MWh $2.75/MWh $5.75/MWh 2003 Off-peak incremental $6.00/kW-month Average fuel cost $2.00/kW-month Average fuel cost 2004 fuel cost plus plus variable plus variable costs 2005 variable costs of costs of of $0.50/MWh, plus 2006 $0.50/MWh, plus $0.50/MWh, plus $2.75/MWh 2007 $2.75/MWh $5.75/MWh 2008 Not applicable $7.00/kW-month Average fuel cost Not applicable Not applicable through plus variable 2026 costs of $0.50/MWh, plus $6.00/MWh
SWEPCO Operating Reserves Capacity and Energy Power Sale Agreement. TERM. The agreement will be effective from January 1, 2008 through December 31, 2026. POWER COMMITMENT. 50 MW of operating reserve capacity within 10 minutes of a phone request by SWEPCO. SWEPCO also is granted the right to purchase up to 21,900 MWh/year of operating reserve energy. PRICING. Pricing for operating reserve energy, including transmission costs to the delivery point, is set forth on the table above under the SWEPCO Operating Reserves and Off-Peak Power Sale Agreement. SMEPA Unit Power Sale Agreement. TERM. The agreement is effective through May 31, 2009, unless terminated earlier following certain regulatory changes, changes in fuel costs or the destruction of the Cajun facilities. POWER COMMITMENT. 75 MW of capacity and the associated energy from Big Cajun II, Unit 1 and a option for SMEPA to purchase additional capacity and associated energy, if Louisiana Generating determines that it is available, in 10 MW increments, up to a total of 200 MW. SMEPA is required to schedule a minimum of 25 MW plus 37% of any additional capacity that is purchased. PRICING. The capacity charge is $7.25/kW-month through May 31, 2004 and $8.00/kW-month from June 1, 2004 through May 31, 2009 including transmission costs to the delivery point and any escalation of expenses. The energy charge is 110% of the incremental fuel cost for Big Cajun II, Unit 1. MEAM Power Sale Agreement. TERM. The agreement is effective through May 31, 2010 with an option for MEAM to extend through September 30, 2015 upon five years advance notice. POWER COMMITMENT. 20 MW of firm capacity and associated energy with an option for MEAM to increase the capacity purchased to a total of 30 MW of firm capacity upon five years advance notice. PRICING. The capacity charge is $5.80/kW-month. The operation and maintenance charge is $1.97/kW-month plus a 3.5% increase per year from May 31, 1996. There is also a transmission charge which varies depending on the delivery point. The price for the energy associated with the firm capacity is 110% of the incremental generating cost to Louisiana Generating and is adjusted to include transmission losses to the delivery point. 62 66 COAL SUPPLY AGREEMENT Louisiana Generating has entered into a coal supply agreement with Triton Coal. The coal is primarily sourced from Triton Coal's Buckskin and North Rochelle mines located in Powder River Basin, Wyoming. The coal supply agreement provides as follows: TERM. The term is for five years, beginning March 31, 2000. VOLUME. The agreement is for the full coal requirements of Big Cajun II. PRICING. The agreement establishes a base price per ton for coal supplied by Triton Coal. The base prices are subject to adjustment for changes in: - the level of taxes or other government fees and charges; - variations from the governing actual "as received" calorific value of the coal shipped as compared to 8,450 Btu per pound; or - changes in the price of SO(2) emission allowances. QUALITY GUARANTEE. The base prices are based on certain annual weighted average quality specifications, subject to suspension and rejection limits. SO(2) EMISSIONS. Triton Coal's base price and quality of coal specifications guarantee compliance with Big Cajun II's annual SO(2) emissions allocation of 44,153 tons commencing in 2000 regardless of the burn level. Assuming Big Cajun II's consumption for the year is greater than 85 million mmBtu, then: - if actual SO(2) emissions are greater than 43,804 tons during any year, Triton Coal must provide Louisiana Generating by January 20th of the following calendar year with the number of allowances in excess of 43,804 required to enable it to be in compliance with the applicable regulatory requirements for the previous calendar year; or - if actual SO(2) emissions are less than 43,804 tons during any year, Louisiana Generating must provide Triton Coal by January 20th of the following calendar year with two-thirds the number of allowances less than 43,804 required. The remaining one-third of excess SO(2) allowances are retained by Louisiana Generating. CHANGES IN ENVIRONMENTAL RELATED REQUIREMENTS. The agreement may be reopened and renegotiated if Big Cajun II is required to comply with new environmental-related requirements that may be mandated during the term of the contract. If a change is imminent, then Louisiana Generating and Triton Coal have agreed to negotiate in good faith to develop a mutually reasonable plan of mitigation. If the new laws require a change in coal source, Triton Coal may find a substitute at no difference in cost to Louisiana Generating. If Triton Coal cannot locate a suitable substitute, Louisiana Generating may terminate the agreement. FORCE MAJEURE. Triton Coal and Louisiana Generating are allowed relief from events beyond their control that prevent either from carrying out normal day-to-day operations. ASSIGNMENT. The agreement is not assignable without the consent of Triton Coal. COAL TRANSPORTATION AGREEMENT Louisiana Generating has entered into a coal transportation agreement with Burlington Northern and Santa Fe Railway and American Commercial Terminal. The term of the agreement is five years, beginning March 31, 2000. This agreement provides for the transport of all of the coal requirements of Big Cajun II from the mines in Wyoming to Big Cajun II. Burlington Northern and Santa Fe Railway transports the coal from Triton Coal's Powder River Basin mines by railcar to the American Commercial Terminal dock in St. Louis, Missouri, where it is unloaded from the railcars and loaded into barges for delivery to Big Cajun II. Once at Big Cajun II, the barges are unloaded by employees of Louisiana Generating. Louisiana Generating is required to furnish all of the necessary railcars. 63 67 The agreement is not assignable without the consent of Burlington Northern and Santa Fe Railway and American Commercial Terminal. TRANSMISSION AND INTERCONNECTION AGREEMENTS Louisiana Generating assumed Cajun Electric's existing transmission agreements with Central Louisiana Electric Company; SWEPCO; and Entergy Services, Inc., acting as agent for Entergy Arkansas, Inc., Entergy Gulf States, Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New Orleans, Inc. The Cajun facilities are connected to the transmission system of Entergy Gulf States and power is delivered to the distribution cooperatives at various delivery points throughout Louisiana on the transmission systems of Entergy Gulf States, Entergy Louisiana, Central Louisiana Electric Company and SWEPCO. Louisiana Generating also assumed from Cajun Electric 20 interchange and sales agreements with utilities and cooperatives, providing access to a 12 state area as far north as Illinois and into North Carolina and Florida. POWER SALES AND AGENCY AGREEMENT NRG Power Marketing and Louisiana Generating entered into a power sales and agency agreement. SCOPE. NRG Power Marketing: - has the exclusive right to sell or trade in the capacity, energy and ancillary services not sold under the agreements with the distribution cooperatives, SWEPCO, SMEPA or MEAM; - has the exclusive right to buy or trade all capacity, energy and ancillary services purchased by it on behalf of Louisiana Generating; - has the exclusive right and obligation to set the level of the capacity and energy output of the Cajun facilities and is responsible for negotiating agreements for the provision of capacity, energy and ancillary services to the Cajun facilities for auxiliary load and start-up as required; - assists Louisiana Generating in performing all of its obligations under power supply agreements; - procures natural gas and fuel oil required for operation of Big Cajun I; - upon the request of Louisiana Generating, provides oversight and advice to Louisiana Generating regarding the coal supply agreement with Triton Coal and the coal transportation agreement with Burlington Northern and Santa Fe Railway and American Commercial Terminal; - upon the request of Louisiana Generating, assists Louisiana Generating in the procurement of new or additional coal supply or transportation agreements; - provides emissions management services to Louisiana Generating for the tracking, procurement, sales and allocation of emission allowances; - assists Louisiana Generating in fulfilling its load management obligations; and - implements appropriate risk management practices and develop a hedging strategy for the benefit of Louisiana Generating. TERM. The term of the agreement commenced on March 31, 2000 and continues until December 31, 2030. STRATEGIC INPUT. Louisiana Generating has the ability to influence the strategy of NRG Power Marketing with respect to the purchase and sales of energy, capacity and ancillary services and the level of risk undertaken by NRG Power Marketing on behalf of Louisiana Generating. PAYMENT. NRG Power Marketing pays to Louisiana Generating the gross receipts from sales of energy, capacity and ancillary services from the Cajun facilities by NRG Power Marketing less (a) the cost of any energy, capacity and ancillary services purchased by NRG Power Marketing on behalf of Louisiana Generating; (b) transmission and other delivery costs incurred by NRG Power Marketing in connection with the sale; (c) any taxes paid by NRG Power Marketing in connection with the sale or the performance of its 64 68 obligations under the agreement; and (d) any other costs incurred by NRG Power Marketing in connection with the sale, including an arms-length, commercially reasonable allocation of overhead and administrative costs. Louisiana Generating pays NRG Power Marketing the amount expended by NRG Power Marketing in providing energy, capacity and ancillary services from sources other than the Cajun facilities required to fulfill Louisiana Generating's contractual obligations increased by the following costs incurred by NRG Power Marketing in connection with providing the energy, capacity and ancillary services: (a) transmission or other similar costs; (b) any taxes incurred; and (c) any other costs paid, including an arms-length, commercially reasonable allocation of overhead and administrative costs. Louisiana Generating pays to NRG Power Marketing the cost of any fuel provided to Louisiana Generating by NRG Power Marketing which is not invoiced directly to Louisiana Generating. In addition, NRG Power Marketing pays to Louisiana Generating any amounts derived upon the sale by NRG Power Marketing of available Louisiana Generating emissions credits and Louisiana Generating pays directly to NRG Power Marketing any amounts due for the purchase of emissions credits, negotiated for the benefit of Louisiana Generating by NRG Power Marketing. Louisiana Generating pays NRG Power Marketing at agreed rates for the personnel time expended in performing the agreement. If either party fails to make a payment when due, such overdue payment shall accrue interest at the prime rate plus 2% from the due date until the date of payment. In addition, if NRG Power Marketing is in default on a payment for energy, capacity and ancillary services for 30 days after notice of such default, then Louisiana Generating may: (a) terminate the agreement or (b) exercise any other remedy it has available in law or equity with respect to such default. TITLE AND RISK OF LOSS. Title to and risk of loss related to the energy, capacity and ancillary services procured by NRG Power Marketing transfers from the third party seller to Louisiana Generating at the designated delivery point. Title to and risk of loss related to energy, capacity and ancillary services sold by NRG Power Marketing transfers from Louisiana Generating to the third party at the designated delivery point. ASSIGNMENT. The agreement may not be assigned without the prior written consent of the other party. However, either party may, without the consent of the other party: - transfer, sell, pledge, encumber or assign the agreement or the accounts, revenues or proceeds thereof in connection with any financing or other financial arrangements; - transfer or assign to an affiliate whose creditworthiness and technical ability to perform its obligations is not materially different from the transferring or assigning party; - transfer or assign to a person succeeding to all, or substantially all, the assets of a party; or - in the case of Louisiana Generating, transfer or assign to a person acquiring the Cajun facilities. In the case of each permitted assignment, except an assignment pursuant to a financing permitted as set forth in the first "bullet point" above, the assignee must agree in writing to be bound by the terms and conditions of the agreement and such assignee's creditworthiness and technical ability to perform its obligations must not be materially different than that of the assignor. OPERATION AND MANAGEMENT SERVICES AGREEMENT NRG Operating Services and Louisiana Generating entered into an operation and management services agreement. SCOPE. At the request of Louisiana Generating, NRG Operating Services performs operation and maintenance services, including: - providing operation and management budget tracking, analysis and recommendations, and effecting any approved adjustments; 65 69 - administering the coal supply, coal transportation and power supply agreements and such other contracts and agreements as Louisiana Generating may from time to time deem appropriate to be administered by NRG Operating Services; - providing annual, quarterly and monthly budget analysis with recommendations for improvements; - obtaining property and excess liability insurance for Louisiana Generating in the amounts and in the manner as directed by Louisiana Generating; - measuring employee training program performance for operations and maintenance personnel; - reviewing safety rules, including industrial hygiene practices, for the Cajun facilities to ensure that they are in compliance with all applicable laws, other regulatory requirements and prudent engineering and operating practices; - reviewing operating practices and rules to ensure compliance with all applicable environmental laws and permits; - ensuring that key component technical risk assessment is performed and, based on this assessment, making recommendations concerning the operational reliability, availability and maintainability of the Cajun facilities; - reviewing and making recommendations regarding the supply and stock of strategic spare parts; - providing special support services as requested; - providing technical support services as requested; - ensuring Louisiana Generating's compliance with prudent independent power industry standards; and - monitoring Louisiana Generating's compliance with the terms and conditions of the Joint Ownership Participation and Operating Agreement for Big Cajun II, Unit 3. TERM. The term of the agreement commenced on March 31, 2000 and continues until terminated in writing by Louisiana Generating or until earlier terminated upon an event of default under the agreement. PAYMENT. Louisiana Generating pays NRG Operating Services for the personnel time and other costs associated with performing the services, including the costs incurred in engaging third party consultants; transportation and relocation costs of personnel; miscellaneous expenses; the cost of any labor, patent or commercial litigation or claim that arises out of performance of the services; and the cost of any sales, use or similar taxes or fees imposed by federal, state or municipal law, regulation or agency. INDEMNIFICATION AND LIMITATION OF LIABILITY. NRG Operating Services indemnifies and holds harmless Louisiana Generating for any damages incurred as a result of its willful misconduct or gross negligence. Louisiana Generating indemnifies and holds harmless NRG Operating Services for any damages incurred as a result of the engagement of NRG Operating Services under, and performance by it of the services under, the agreement. If an indemnifiable loss is caused in part by the negligence of the indemnified party, the indemnification will be in proportion to the comparative degree of such party's negligence. The liability of NRG Operating Services under the indemnification provisions of the agreement is limited to the amount of compensation and reimbursed costs and expenses received by NRG Operating Services pursuant to the agreement. ASSIGNMENT. The agreement may not be assigned without the prior written consent of the other party, except that Louisiana Generating may assign its rights under the agreement as security for its obligations to an entity providing financing to the Cajun facilities, or an agent of such entity, and the agreement shall continue in full force and effect in favor of the assignee as a successor to Louisiana Generating. 66 70 CORPORATE SERVICES AGREEMENTS Louisiana Generating and NRG South Central each entered into a corporate services agreement with NRG Energy pursuant to which NRG Energy, upon request, provides services relating to any corporate business function. SCOPE. NRG Energy provides administrative services in support of the operations of the Cajun facilities or NRG South Central, as applicable. NRG Energy agrees to provide, on an as requested basis, any work, direction of work, technical or commercial information, data, consulting, staff augmentation or any other corporate business function performed for or on behalf of Louisiana Generating or NRG South Central, as applicable, by NRG Energy in functional areas such as, but not limited to: human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. The standard of performance for the services is reasonable diligence and dispatch, in a prudent, cost effective and efficient manner, in accordance with all applicable laws. NRG Energy may provide the personnel to perform such services, in its sole discretion, or may elect to have these services performed by a third party, but NRG Energy is primarily responsible for the services. TERM. The term of these agreements commenced on March 31, 2000 and continues until terminated in writing by Louisiana Generating or NRG South Central, as applicable, or until earlier terminated upon an event of default under the agreements. PAYMENT. NRG Energy is paid for the personnel time and other costs associated with performing the services, including transportation or relocation costs of personnel; miscellaneous expenses; reproduction costs; cost of any permits, fees, licenses or royalties; the cost of any labor, patent or other commercial litigation or claim that arises out of performance of the services; and premiums and brokerage fees on all bonds and insurance policies required. WARRANTY AND LIMITATION OF LIABILITY. NRG Energy warrants that the services performed under the agreement will be in accordance with accepted professional standards and practices. The sole and exclusive remedy for breach of warranty will be for NRG Energy to re-perform the defective portion of the service. All costs of any re-performance will be reimbursed by Louisiana Generating or NRG South Central, as applicable, to NRG Energy, but NRG Energy will receive no additional profit thereon. NRG Energy's legal liability under the agreement will not exceed the value of its services performed during the calendar year prior to the cause giving rise to or creating any such liability. ASSIGNMENT. Neither agreement may be assigned without the prior written consent of the other party to that agreement, except that Louisiana Generating or NRG South Central, as applicable, may assign its rights under the agreement to which it is a party as security for any loans or obligations of Louisiana Generating or NRG South Central and the agreement shall continue in full force and effect in favor of the assignee as a successor to Louisiana Generating or NRG South Central, as applicable. NRG Energy also may cause an affiliate or third-party provider to perform any of the services it is required to perform under either agreement. JOINT OWNERSHIP PARTICIPATION AND OPERATING AGREEMENT FOR BIG CAJUN II, UNIT 3 Big Cajun II, Unit 3 is jointly owned by Louisiana Generating (58%) and Entergy Gulf States (42%). Big Cajun II, Unit 3 is operated by Louisiana Generating pursuant to a Joint Ownership Participation and Operating Agreement. The material terms are as follows: OWNERSHIP OF OUTPUT. Louisiana Generating and Entergy Gulf States are each entitled to their ownership percentage of the hourly net electrical output of Big Cajun II, Unit 3. If Louisiana Generating or Entergy Gulf States takes output in excess of their respective entitlements, then this excess generation is treated as a purchase and sale of power between the co-owners. DIVISION OF COSTS. All fixed costs of operating Big Cajun II, Unit 3 are shared in proportion to the ownership interests of Louisiana Generating and Entergy Gulf States. Fixed costs include the cost of operating common facilities. All variable costs are borne in proportion to the energy delivered to Louisiana Generating and Entergy Gulf States from Big Cajun II, Unit 3. 67 71 CONTROL OF BIG CAJUN II, UNIT 3. Louisiana Generating has the authority to control, manage, operate and maintain Big Cajun II, Unit 3 as if it were the sole owner of the unit. Louisiana Generating is to operate Big Cajun II, Unit 3 as a separate economic unit and is not required to run the unit when energy and capacity is available from an alternate source. Louisiana Generating has the authority for hourly scheduling and dispatch of Big Cajun II, Unit 3 generation. If Entergy Gulf States requests generation from Big Cajun II, Unit 3 when it has not been scheduled by Louisiana Generating, Entergy Gulf States must give Louisiana Generating reasonable advance notice. If no generation is scheduled by Louisiana Generating and Entergy Gulf States requests generation, then Entergy Gulf States must pay the variable cost of the generation and the start-up and shutdown costs. TERM. The agreement is effective until the earliest of: - cancellation by mutual consent; - expiration of the operating licenses for Big Cajun II, Unit 3; or - retirement and decommissioning of Big Cajun II, Unit 3. TRANSFER/ASSIGNMENT. Neither owner may transfer or assign its interest in Big Cajun II, Unit 3 without first offering it to the other owner on the same terms as proposed to a third party unless the transfer is to an entity acquiring substantially all of the transferring owner's assets or to an entity into which it is merging. Each owner may assign for financing purposes its interest in Big Cajun II, Unit 3 without the prior consent of the other party. 68 72 DESCRIPTION OF THE BONDS The terms of the bonds NRG South Central is issuing in this exchange offer and the outstanding bonds are identical in all material respects, except: - the bonds issued in the exchange offer will have been registered under the Securities Act; - the bonds issued in the exchange offer will not contain transfer restrictions and registration rights that relate to the outstanding bonds; and - the bonds issued in the exchange offer will not contain provisions relating to the payment of liquidated damages to be made to the holders of the outstanding bonds under circumstances related to the timing of the exchange offer. Any outstanding bonds that remain outstanding after the exchange offer, together with bonds issued in the exchange offer, will be treated as a single class of securities under the indenture for voting purposes. The terms "bond' or "bonds", refer to both outstanding bonds and the bonds to be issued in the exchange offer. The term "holders" of the bonds, refers to those persons who are the registered holders of bonds on the books of the registrar appointed under the indenture. The following is a description of certain provisions of the bonds offered hereby. The following information does not purport to be a complete description of the bonds and is subject to, and qualified in its entirety by, reference to the bonds and the indenture. Unless otherwise specified, the following description applies to all of the bonds. GENERAL The outstanding bonds were issued and the bonds in this exchange offering will be issued pursuant to an indenture, dated as of March 30, 2000, between NRG South Central, Louisiana Generating (with respect to certain sections) and The Chase Manhattan Bank, as bond trustee, in the United States. The terms of the bonds include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act. The bonds are senior secured obligations and rank senior in right of payment to all of NRG South Central's existing and future indebtedness that is designated as subordinate or junior in right of payment to the bonds. PRINCIPAL, MATURITY AND INTEREST The Series A Senior Secured Bonds and the Series A-1 Senior Secured Bonds are limited in aggregate principal amount to $500.0 million and will mature on March 15, 2016. The Series B Senior Secured Bonds and the Series B-1 Senior Secured Bonds are limited in aggregate principal amount to $300.0 million and will mature on September 15, 2024. Interest on the bonds is payable in arrears on each March 15 and September 15, commencing on September 15, 2000 to holders of record on each March 1 or September 1, respectively, immediately preceding such scheduled payment date. Interest accrues on the basis of a 360-day year consisting of 12 months of 30 days each at a rate of 8.962% in the case of the Series A Senior Secured Bonds and the Series A-1 Senior Secured Bonds and 9.479% in the case of the Series B Senior Secured Bonds and the Series B-1 Senior Secured Bonds. Principal, premium, if any, and interest on the bonds will be payable at NRG South Central's office or agency maintained for such purpose within New York City. Until otherwise designated by NRG South Central, its office or agency in New York will be the office of the bond trustee maintained for that purpose. The bonds will be issued in denominations of $100,000 or any multiple of $1,000 in excess of that amount. AMORTIZATION The principal of the bonds is payable in installments on each March 15 and September 15 occurring on or after September 15, 2000 to the registered bondholder thereof on the immediately preceding regular record date, such that the initial average life is approximately 9.9 years for the Series A Senior Secured Bonds and the Series A-1 Senior Secured Bonds and approximately 20.2 years for the Series B Senior Secured Bonds and 69 73 the Series B-1 Senior Secured Bonds. The following table shows the principal of the bonds which is payable on each principal payment date.
SERIES A SENIOR SECURED SERIES B SENIOR SECURED BONDS OR A-1 SENIOR SECURED BONDS OR SERIES B-1 SENIOR PRINCIPAL PAYMENT DATE BONDS, AS APPLICABLE SECURED BONDS, AS APPLICABLE - ---------------------- --------------------------- ---------------------------- September 15, 2000................... $ 11,250,000 $ -- March 15, 2001....................... $ 12,500,000 $ -- September 15, 2001................... $ 12,750,000 $ -- March 15, 2002....................... $ 12,750,000 $ -- September 15, 2002................... $ 12,750,000 $ -- March 15, 2003....................... $ 12,750,000 $ -- September 15, 2003................... $ 12,750,000 $ -- March 15, 2004....................... $ 7,500,000 $ -- September 15, 2004................... $ 7,500,000 $ -- March 15, 2005....................... $ 7,500,000 $ -- September 15, 2005................... $ 7,500,000 $ -- March 15, 2006....................... $ 7,500,000 $ -- September 15, 2006................... $ 7,500,000 $ -- March 15, 2007....................... $ 7,500,000 $ -- September 15, 2007................... $ 7,500,000 $ -- March 15, 2008....................... $ 12,500,000 $ -- September 15, 2008................... $ 12,500,000 $ -- March 15, 2009....................... $ 13,750,000 $ -- September 15, 2009................... $ 13,750,000 $ -- March 15, 2010....................... $ 17,500,000 $ -- September 15, 2010................... $ 17,500,000 $ -- March 15, 2011....................... $ 21,250,000 $ -- September 15, 2011................... $ 21,250,000 $ -- March 15, 2012....................... $ 22,500,000 $ -- September 15, 2012................... $ 22,500,000 $ -- March 15, 2013....................... $ 22,500,000 $ -- September 15, 2013................... $ 23,750,000 $ -- March 15, 2014....................... $ 23,750,000 $ -- September 15, 2014................... $ 26,250,000 $ -- March 15, 2015....................... $ 26,250,000 $ -- September 15, 2015................... $ 27,500,000 $ -- March 15, 2016....................... $ 27,500,000 $ -- September 15, 2016................... $ -- $ 22,500,000 March 15, 2017....................... $ -- $ 22,500,000 September 15, 2017................... $ -- $ 21,000,000 March 15, 2018....................... $ -- $ 19,500,000 September 15, 2018................... $ -- $ 19,500,000 March 15, 2019....................... $ -- $ 18,000,000 September 15, 2019................... $ -- $ 18,000,000 March 15, 2020....................... $ -- $ 16,500,000 September 15, 2020................... $ -- $ 16,500,000 March 15, 2021....................... $ -- $ 16,500,000 September 15, 2021................... $ -- $ 16,500,000 March 15, 2022....................... $ -- $ 16,500,000
70 74
SERIES A SENIOR SECURED SERIES B SENIOR SECURED BONDS OR A-1 SENIOR SECURED BONDS OR SERIES B-1 SENIOR PRINCIPAL PAYMENT DATE BONDS, AS APPLICABLE SECURED BONDS, AS APPLICABLE - ---------------------- --------------------------- ---------------------------- September 15, 2022................... $ -- $ 16,500,000 March 15, 2023....................... $ -- $ 15,000,000 September 15, 2023................... $ -- $ 15,000,000 March 15, 2024....................... $ -- $ 15,000,000 September 15, 2024................... $ -- $ 15,000,000 ------------ ------------ $500,000,000 $300,000,000
NATURE OF RECOURSE Recourse for payment or performance of any of NRG South Central's obligations in respect of the bonds will be limited solely to NRG South Central, Louisiana Generating and any additional guarantors. None of NRG South Central's affiliates (other than Louisiana Generating or any additional guarantor) nor any of NRG South Central's or its affiliate's officers, directors and stockholders will be liable for the payment of the principal of, premium, if any, or interest on the bonds, and bondholder will have no claim against or recourse to (whether by operation of law or otherwise) those entities or persons or their affiliates (other than to the extent NRG Energy or an affiliate provides debt service reserve credit support). RANKING The bonds constitute NRG South Central's senior secured obligations and rank equally in right of payment to all of NRG South Central's future senior indebtedness and senior in right of payment to all of NRG South Central's future subordinated indebtedness. The bonds are fully and unconditionally guaranteed by Louisiana Generating and will be fully and unconditionally guaranteed by any subsidiary acquired by NRG South Central and designated an additional guarantor. NRG New Roads Holdings, NRG Sterlington Power and Big Cajun I Peaking Power are not additional guarantors of the bonds. The obligations of Louisiana Generating and any additional guarantors under the guarantee constitute senior secured debt of Louisiana Generating or such additional guarantors and rank equally in right of payment to all of Louisiana Generating's or such additional guarantor's existing and future senior indebtedness. COLLATERAL NRG South Central's obligations in respect of the bonds are secured by a security interest in the following: - NRG Central U.S. LLC's and South Central Generation Holding LLC's membership interests in NRG South Central and NRG South Central's membership interests in Louisiana Generating; - all of NRG South Central's assets related to the Cajun facilities, including NRG South Central's rights under all intercompany notes between NRG South Central and Louisiana Generating but excluding the assets specifically held for resale; and - the revenue account and the debt service reserve account. The obligations of Louisiana Generating and any additional guarantors in respect of the guarantee and the intercompany loan are secured by a mortgage with respect to Big Cajun I and Big Cajun II and a security interest in the following: - all of Louisiana Generating's interest in the Cajun facilities and substantially all personal property associated with the Cajun facilities except for fixtures not located on the Cajun facilities and the assets specifically held for resale; 71 75 - substantially all contracts, including the project documents, associated with the Cajun facilities to which Louisiana Generating is a party to the extent assignable and all consents to the assignment of these contracts that have been obtained; - all licenses, permits and governmental approvals associated with the Cajun facilities; - all insurance policies associated with the Cajun facilities and all monies paid to Louisiana Generating on these policies; - all revenues of the Cajun facilities, including revenues from power sales contracts entered into by NRG Power Marketing or any other entity which has entered into a power marketing agreement with Louisiana Generating associated with the Cajun facilities; and - the revenue account. RATINGS The bonds have received a rating of "Baa2" from Moody's and "BBB-" from S&P. The ratings reflect only the views of Moody's and S&P at the time the ratings were issued, and any explanation of the significance of such ratings may be obtained only from the respective rating agency. There is no assurance that these ratings will remain in effect for any given period of time or that these ratings will not be lowered, suspended or withdrawn entirely by Moody's or S&P if, in each rating agency's judgment, circumstances so warrant. Any lowering, suspension or withdrawal of ratings may have an adverse effect on the market price or marketability of the bonds. REDEMPTION AND REPURCHASE Mandatory Redemption The bonds will be subject to mandatory redemption in whole or in part, on a pro rata basis, in an aggregate amount equal to: - the loss proceeds received by NRG South Central or Louisiana Generating in respect of any loss or damage to or condemnation or other governmental taking of or title event regarding the Cajun facilities or any of NRG South Central's other assets, or any part thereof, in excess of $10.0 million. NRG South Central or Louisiana Generating are permitted to replace, repair or rebuild the Cajun facilities or such other assets, or the affected parts, if there are sufficient funds (including loss proceeds) to do so and if no material adverse effect would reasonably be expected to result. If NRG South Central or Louisiana Generating replace, repair or rebuild all or any part of the Cajun facilities or such other assets and the loss proceeds are greater than the cost of this replacement, repair or rebuilding and if the excess amount is greater than $5.0 million, then only the remaining loss proceeds over $5.0 million will be used for a mandatory redemption; and - the proceeds received by NRG South Central or Louisiana Generating resulting from an involuntary or voluntary buy-out of a power supply agreement in excess of $5.0 million. However, there will be no mandatory redemption if either (a) the rating agencies provide confirmation that no ratings downgrade of the bonds will occur following such involuntary or voluntary buy-out or (b) NRG South Central or Louisiana Generating enters into a replacement power supply agreement containing substantially similar terms to the terminated agreement, and NRG South Central or Louisiana Generating, as the case may be, certifies that no material adverse effect would reasonably be expected to result. Upon the occurrence of any event requiring a mandatory redemption of the bonds, NRG South Central will be required to redeem the bonds and repay other senior secured indebtedness on a pro rata basis in an aggregate amount equal to the proceeds to be applied as described above. In the event of a mandatory redemption, the redemption price for the bonds will be 100% of the principal amount of the outstanding bonds being redeemed plus interest accrued and unpaid to but excluding the date of redemption plus, in the event of a voluntary buy-out of a power supply agreement only, a make-whole premium equal to that paid in the case of any optional redemption of the bonds. 72 76 Optional Redemption The bonds will be subject to optional redemption, in whole or in part, on a pro rata basis from that series, at any time, at a redemption price equal to 100% of the principal amount of the bonds being redeemed plus interest on the outstanding bonds being redeemed through, but excluding, the redemption date plus a make-whole premium. The "make-whole premium" will be an amount equal to the excess, if any, of (a) the discounted present value of all interest and principal payments scheduled to become due after the date of the optional redemption by NRG South Central in respect of the bonds being redeemed (this discounted present value will be determined on the basis of a discount rate equal to the sum of (i) the Treasury Rate and (ii) 50 basis points) over (b) the outstanding principal amount of the bonds to be redeemed. "Treasury Rate" means the yield to maturity of the treasury security having an average life equal to the remaining average life of the bond being redeemed and trading in the secondary market at the price closest to par. If there is no United States treasury security having an average life within one month of the remaining average life of the bonds being redeemed, the Treasury Rate will be calculated using a yield to maturity interpolated on a straight-line basis from the yield to maturity for two United States treasury securities having average lives closest to the remaining average life of the bonds being redeemed and trading in the secondary market at the price closest to par. Selection and Notice If less than all of the bonds are to be redeemed at any time, selection of bonds for redemption will be made by the bond trustee on a pro rata basis. Notices of redemption will be mailed by first class mail at least 30 days but not more than 60 days before the redemption date (unless a shorter period is satisfactory to the bond trustee) to each bondholder at its registered address unless such redemption is due to the failure of the acquisition to close, or the inability of the acquisition to close due to material loss or damage to Big Cajun II, in which case the notice will be mailed at least five business days before the redemption date. If any bond is to be redeemed in part only, the notice of redemption that relates to that bond will state the portion of the principal amount of that bond to be redeemed; a new bond in principal amount equal to the unredeemed portion of the original bond will be issued in the name of the bondholder upon cancellation of the original bond. Bonds called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on bonds or portions of them called for redemption. CHANGE OF CONTROL Upon the occurrence of a change of control, NRG South Central will be required to offer to repurchase all or any part of the outstanding bonds held by any holder of bonds on the immediately following payment date at a cash price equal to 101% of the then outstanding principal amount of the bonds plus accrued and unpaid interest to but excluding the date of payment. A "change of control" means the acquisition of control, directly or indirectly, beneficially or of record or otherwise, by any person or group (within the meaning of the Exchange Act and the rules of the SEC thereunder as in effect on March 27, 2000) other than NRG Energy or its controlled subsidiaries, of NRG South Central. The term "control" means the power to direct or cause the direction of NRG South Central's management and policies through the ownership of voting securities, by contract or otherwise. However, there will be no change of control if either: (a) NRG South Central receives a confirmation from the rating agencies that no ratings downgrade of the bonds will occur after the change of control or (b) the change of control is approved by holders of the bonds holding at least 66 2/3% in aggregate principal amount of the outstanding bonds. BOOK-ENTRY, DELIVERY AND FORM The certificates representing the bonds will be issued in fully registered form. Except as described below, the bonds will initially be represented by one or more global bonds in fully registered form without interest coupons. The global bonds will be deposited with, or on behalf of, The Depository Trust Company, or DTC, 73 77 and registered in the name of Cede & Co., as nominee of DTC, or will remain in the custody of the trustee pursuant to the FAST Balance Certificate Agreement between DTC and the trustee. Certain Book-Entry Procedures for the Global Bonds The descriptions of the operations and procedures of DTC set forth below are provided solely as a matter of convenience. These operations and procedures are solely within the control of the respective settlement systems and are subject to change by them from time to time. Neither NRG South Central nor any of the initial purchasers takes any responsibility for these operations or procedures, and investors are urged to contact the relevant system or its participants directly to discuss these matters. DTC has advised us that it is (a) a limited-purpose trust company organized under the laws of the State of New York, (b) a "banking organization" within the meaning of the New York Banking Law, (c) a member of the Federal Reserve System, (d) a "clearing corporation" within the meaning of the New York Uniform Commercial Code and (e) a "clearing agency" registered pursuant to Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry changes to the accounts of its participants, thereby eliminating the need for physical transfer and delivery of certificates. DTC's participants include securities brokers and dealers (including the initial purchasers), banks and trust companies, clearing corporations and certain other organizations. Indirect access to DTC's system is also available to indirect participants, including banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. Investors who are not participants may beneficially own securities held by or on behalf of DTC only through participants or indirect participants. We expect that pursuant to procedures established by DTC (a) upon issuance of the global bonds, DTC will credit the respective principal amounts of the bonds represented by the global bonds to the accounts of persons who have accounts with DTC. Ownership of beneficial interest in the global bonds will be limited to persons who have accounts with DTC, who are referred to as participants, or persons who hold interests through participants. Ownership of the beneficial interests in the bonds will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interests of participants) and the records of participants and the indirect participants (with respect to the interests of persons other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of the securities in definitive form. Accordingly, the ability to transfer interests in the bonds represented by a global bond to these persons may be limited. In addition, because DTC can act only on behalf of its participants, who in turn act on behalf of persons who hold interests through participants, the ability of a person having an interest in bonds represented by a global bond to pledge or transfer its interest to persons or entities that do not participate in DTC's system, or to otherwise take actions in respect of this interest, may be affected by the lack of a physical definitive security in respect of this interest. So long as DTC or its nominee is the registered owner of a global bond, DTC or its nominee, as the case may be, will be considered the sole owner or bondholder represented by the global bond for all purposes under the indenture. Except as provided below, owners of beneficial interests in a global bond will not be entitled to have bonds represented by a global bond registered in their names, will not receive or be entitled to receive physical delivery of certificated bonds, and will not be considered the owners or holders of the bonds under the indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the bond trustee under the indenture. Accordingly, each bondholder owning a beneficial interest in a global bond must rely on the procedures of DTC and, if this bondholder is not a participant or an indirect participant, on the procedures of the participant through which this bondholder owns its interest, to exercise any rights of a bondholder under the indenture or the global bond. We understand that under existing industry practice, in the event that NRG South Central requests any action of holders of bonds, or a bondholder that is an owner of a beneficial interest in a global bond desires to take any action that DTC, as the holder of the global bond, is entitled to take, DTC would authorize the participants to take the action and the participants would authorize holders of the bonds owning through the participants to take the action or would otherwise act upon the 74 78 instruction of the holders of the bonds. Neither NRG South Central nor the bond trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of bonds by DTC, or for maintaining, supervising or reviewing any records of DTC relating to the bonds. Payments with respect to the principal of, and premium, if any, and interest on, any bonds represented by a global bond registered in the name of DTC or its nominee on the applicable record date will be payable by the bond trustee to or at the direction of DTC or its nominee in its capacity as the registered holder of the global bond representing the bonds under the indenture. Under the terms of the indenture, NRG South Central and the bond trustee may treat the persons in whose names the bonds, including the global bonds, are registered as the owners of the bonds for the purpose of receiving payment on the bonds and for any and all other purposes whatsoever. Accordingly, neither NRG South Central nor the bond trustee has or will have any responsibility or liability for the payment of these amounts to owners of beneficial interests in a global bond (including principal, premium, if any, and interest). Payments by the participants and the indirect participants to the owners of beneficial interests in a global bond will be governed by standing instructions and customary industry practice and will be the responsibility of the participants or the indirect participants and DTC. Transfers between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds. Certificated bonds If (a) NRG South Central notifies the bond trustee in writing that DTC is no longer willing or able to act as a depositary or DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days of the notice or cessation, (b) NRG South Central, at its option, notifies the bond trustee in writing that NRG South Central elects to cause the issuance of bonds in certificated form under the indenture or (c) upon the occurrence of certain other events as provided in the indenture, then, upon surrender by DTC of the global bonds, certificated bonds will be issued to each person that DTC identifies as the beneficial owner of the bonds represented by the global bonds. Upon any such issuance, the bond trustee is required to register the certificated bonds in the name of the person or persons (or the nominee of the person or persons) and cause the same to be delivered to that person or persons (or nominee). Neither NRG South Central nor the bond trustee will be liable for any delay by DTC or any participant or indirect participant in identifying the beneficial owners of the related bonds and each such person may conclusively rely on, and shall be protected in relying on, instructions from DTC for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the bonds to be issued). 75 79 DESCRIPTION OF PRINCIPAL FINANCING DOCUMENTS The following summaries of certain provisions of the financing documents do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions thereof, including definitions therein of certain terms. Copies of the financing documents will be provided for inspection upon written request of any potential investor to NRG South Central, subject to appropriate confidentiality restrictions. See "Where You Can Find More Information." Capitalized terms used herein and not otherwise defined in this prospectus have the meanings ascribed to such terms in the respective financing documents. WORKING CAPITAL FACILITY In April 2000, NRG South Central entered into a $40.0 million floating rate working capital facility. The lenders under this facility were granted a security interest in the same collateral (other than the debt service reserve account) that secures the bonds and rank equally with the bonds. The interest rate on this facility is at NRG South Central's choice of the lender's prime rate or LIBOR. The facility contains covenants that are customary for facilities of this type, including restrictions on the incurrence of indebtedness, mergers, sale of assets and investments. The facility terminates in March 2001. As of June 30, 2000, this facility was undrawn. INDENTURE The outstanding bonds were issued and the bonds in this exchange offering will be issued pursuant to an indenture, dated as of March 30, 2000, between NRG South Central, Louisiana Generating (with respect to certain sections) and The Chase Manhattan Bank, as bond trustee, in the United States. The terms of the bonds include those stated in the indenture and those made part of the indenture by reference to the Trust Indenture Act. The bonds are senior secured obligations and rank senior in right of payment to all of NRG South Central's existing and future indebtedness that is designated as subordinate or junior in right of payment to the bonds. Covenants of NRG South Central The following is a description of certain covenants with which NRG South Central is obligated to comply under the indenture so long as any bonds remain outstanding. Information Requirements NRG South Central will furnish or cause to be furnished to the bond trustee and the rating agencies: - within 60 days after the end of the first three quarters of each of NRG South Central's respective fiscal years (commencing with the quarter ended June 30, 2000), (a) consolidated balance sheets for NRG South Central and each of its subsidiaries and related statements of income and cash flows as of the end of, and for, that fiscal quarter and the then elapsed portion of the fiscal year and (b) consolidated balance sheets for NRG South Central, Louisiana Generating and any additional guarantor and related statements of income and cash flows as of the end of and for that fiscal quarter and the then elapsed portion of the fiscal year, in each case setting forth in comparative form the figures for (or, in the case of the balance sheet, as of the end of) the corresponding period or periods of the previous fiscal year, all certified by NRG South Central's authorized representative as presenting fairly NRG South Central's consolidated financial condition and results of operations on the dates and for the periods indicated, in accordance with GAAP consistently applied, other than with respect to the notes and normally recurring year-end adjustments, and setting forth management's discussion and analysis of the financial condition and results of operations described therein and the quarterly debt service coverage ratio for such fiscal quarter; - within 105 days after the end of each of NRG South Central's fiscal years (commencing with the fiscal year ended December 31, 2000), (a) consolidated annual audited financial statements for NRG South Central and each of its subsidiaries for that year and (b) consolidated annual audited financial statements for NRG South Central, Louisiana Generating and any additional guarantor for that year, 76 80 each accompanied by an audit opinion by a nationally recognized firm of independent certified public accountants to the effect that the financial statements present fairly NRG South Central's consolidated financial position, results of operations and cash flows at the end of, and for, the previous fiscal year, in accordance with GAAP consistently applied, that nothing has come to the auditor's attention that any default or event of default under the indenture related to restricted payments has occurred and is continuing, or if it has occurred and is continuing, a statement as to its nature, and the annual debt service coverage ratio for the fiscal year; - concurrently with any delivery of financial statements under the immediately preceding two "bullet points", an officer's certificate from one of NRG South Central's authorized representatives (a) certifying to the best knowledge of that representative as to the occurrence of any event or condition which constitutes a default, and if a default has occurred, specifying the details of the default and any action taken or proposed to be taken with respect to the default and (b) describing any change in GAAP or in the application of GAAP that has occurred since the date of the most recent prior annual audited financial statements delivered pursuant to the second "bullet point" above and, if any change has occurred, specifying the effect of the change on the financial statements accompanying the certificate; and - within 10 days of receiving notice of the occurrence of any litigation, claim, proceeding or controversy pending, or the receipt by NRG South Central or Louisiana Generating of a written threat of the same involving or affecting either NRG South Central, Louisiana Generating or the Cajun facilities that would reasonably be expected to result in a material adverse effect, notice of the same. The term "material adverse effect" means a material adverse effect on: - the financial condition, operations, business or prospects of NRG South Central, Louisiana Generating and any additional guarantors, taken as a whole; - the validity or priority of the liens on the collateral; - the ability of NRG South Central, Louisiana Generating or any additional guarantor to perform its material obligations under the finance documents; or - the ability of the collateral agent to enforce any of the payment obligations of NRG South Central, Louisiana Generating or any additional guarantor under the indenture, the guarantee or the bonds. Maintenance of Existence NRG South Central will at all times preserve and maintain in full force and effect its legal existence as a limited liability company in good standing under the laws of the State of Delaware and its qualification to do business in each other jurisdiction, as necessary, except where a failure to be so qualified would not reasonably be expected to result in a material adverse effect. The foregoing will not prohibit any merger, consolidation, liquidation or dissolution permitted under the indenture nor prohibit NRG South Central from changing its status as a limited liability company if the rating agencies confirm the change will not result in a downgrade of the then current rating of the bonds. NRG South Central will only amend its certificate of formation or any other organizational document to authorize the issuance of additional bonds, in connection with permitted changes described above or in connection with a name change. Compliance with Laws and Governmental Approvals NRG South Central will comply with all laws, rules, regulations and orders of any governmental authority (including environmental laws) and obtain all governmental approvals relating to the issuance of the bonds and performance of its obligations under the indenture, except where the failure to do so would not reasonably be expected to result in a material adverse effect. 77 81 Performance under Transaction Documents NRG South Central will perform all its material covenants and agreements contained in any transaction document to which it is a party, except where nonperformance would not reasonably be expected to result in a material adverse effect. Maintenance of Property/Title to Assets/Limitation on Sale of Assets NRG South Central will maintain and operate its assets (not including those of its subsidiaries) in accordance with prudent independent power industry practice. NRG South Central will preserve and maintain good, valid and marketable title or leasehold rights to its mortgaged properties and assets constituting part of the collateral, which will be subject only to the liens permitted in the indenture, except where the failure to do so would not reasonably be expected to result in a material adverse effect. NRG South Central will only sell, lease, transfer, assign or otherwise dispose of any of its assets in a transaction permitted under the indenture. Insurance NRG South Central will at all times maintain with financially sound, responsible and reputable insurance companies, and provide satisfactory evidence of, customary insurance in amounts (subject to reasonable and customary deductibles and sublimits) and with terms and conditions in accordance with prudent independent power industry practice. All policies (other than workers' compensation) will name the collateral agent and the bond trustee as loss payee or additional insured. Revenue Account NRG South Central established a revenue account with the depositary bank and will cause each of the following to be deposited into the revenue account: - all revenues related to the Cajun facilities; - all proceeds received from the sale of assets related to the Cajun facilities (other than proceeds of sales of the assets specifically held for resale and sales of assets owned by, or membership interests in, unrestricted subsidiaries); - all loss proceeds, proceeds received in connection with a title event and proceeds received in connection with the buy-out of a power supply agreement each as related to the Cajun facilities; and - any income from the investment of monies on deposit in or credited to the revenue account or the debt service reserve account. Debt Service Reserve Account NRG South Central established a debt service reserve account with the depositary bank for the benefit of the bondholders. The debt service reserve account will be funded in a sufficient amount at all times to pay the scheduled payment of principal and interest on the outstanding bonds due in the next six months. NRG South Central may fund this account with cash or debt service reserve credit support. NRG South Central has obtained debt service reserve credit support and therefore need not fund this account with cash. Credit support may be either an unconditional guarantee by NRG Energy or its affiliates (excluding NRG South Central, Louisiana Generating and any additional guarantor) (so long as NRG Energy or the affiliate maintains a long-term senior unsecured debt rating of at least "Baa3" from Moody's and at least "BBB-" with a stable outlook from S&P) or a letter of credit provided by a commercial bank or other financial institution with a long-term senior unsecured debt rating of at least "A2" from Moody's and at least "A" from S&P. Currently, the debt service reserve requirement is being satisfied by a guarantee given by NRG Energy. The depositary bank may transfer funds from the debt service reserve account to the revenue account to the extent that funds in the revenue account are insufficient to pay principal or interest on the bonds of any series that is due on the date of the withdrawal. 78 82 If, on any scheduled payment date, the bond trustee receives funds that are insufficient to pay the aggregate amount of principal and interest on the outstanding bonds in full, then the depositary bank will transfer from the debt service reserve account, to the extent funds are available therein, to the accounts of the bondholders an amount equal to the insufficiency. If, on any date on which the depositary bank is required to make withdrawals from the debt service reserve account, the funds on deposit are insufficient to make the withdrawals, the depositary bank will draw on a demand payment under any debt service reserve credit support. LIMITATION ON INCURRENCE OF INDEBTEDNESS NRG South Central will not create, incur, or suffer to exist any indebtedness, except permitted issuer indebtedness. The term "permitted issuer indebtedness" means any of the following items of indebtedness: - the bonds and any additional bonds NRG South Central may issue under the indenture; - any other indebtedness, provided, that (a) NRG South Central provides an officer's certificate certifying that no default or event of default has occurred and is continuing or will occur as a result; (b) NRG South Central provides an officer's certificate certifying that, after giving effect to the incurrence of the indebtedness and the application of the net proceeds thereof, the minimum projected debt service coverage ratio for each fiscal year through the final maturity date of the bonds (starting in the fiscal year in which the indebtedness is incurred) is no less than 1.50; and (c) each of the rating agencies confirms that the incurrence of the indebtedness will not result in a ratings downgrade from the then-current rating of the bonds; - indebtedness for working capital purposes not to exceed, at any one time outstanding, the sum of $40.0 million (escalated in accordance with the consumer price index) plus, upon NRG South Central's acquisition of an additional guarantor or additional non-nuclear electric generating or district energy assets, 5% of the indebtedness incurred by NRG South Central in connection with the acquisition; - indebtedness related to permitted liens (as described below); - indebtedness owed to Louisiana Generating or any additional guarantor; - indebtedness represented by interest rate protection agreements with respect to NRG South Central's indebtedness permitted by the indenture; and - subordinated indebtedness. The term "debt service coverage ratio" means for any period the ratio of (a)(i) revenues of NRG South Central, Louisiana Generating and each additional guarantor for that period and any payments received under hedging agreements (other than interest rate protection agreements) for that period minus (ii) operating, maintenance, general and administrative expenses for that period (other than nonrecurring expenses in connection with the issuance of permitted indebtedness), all capital expenditures (unless funded with permitted issuer indebtedness or permitted guarantor indebtedness (other than the working capital facility), equity contributions made explicitly for this purpose, or other amounts available for distribution under the indenture) and any payments made under hedging agreements (other than interest rate protection agreements), in each case for NRG South Central, Louisiana Generating and each additional guarantor on a consolidated basis to (b) the aggregate of principal, interest, premium (if any) and fees payable on the bonds and other permitted indebtedness due for such period (other than subordinated indebtedness, fees payable in connection with the issuance of permitted indebtedness and principal payments under the working capital facility, provided that such amounts remain available to be drawn under the working capital facility or are refinanced under a replacement working capital facility) plus payments required to be made under any interest rate protection agreement for such period less payments to be received under any interest rate protection agreement for such period. 79 83 The term "hedging agreement" means any interest rate protection agreement, foreign currency exchange agreement, power or fuel price protection agreement or other interest, currency exchange rate or commodity price hedging arrangement entered into in the ordinary course of business and not for speculative purposes. The term "projected debt service coverage ratio" means for any period a projection of the debt service coverage ratio over the period specified, prepared by NRG South Central in good faith based upon assumptions consistent in all material respects with the transaction documents, historical operating results, if any, and NRG South Central's good faith projections of future revenues and projections of operating and maintenance expenses for NRG South Central, Louisiana Generating and any additional guarantor in light of the then existing or reasonably expected regulatory and market environments in the markets in which the Cajun facilities or other assets owned by such person is or will be operated and upon the assumption that no early redemption or prepayment of the bonds of any series will be made prior to the stated maturity of such series of bonds. Limitation on Restricted Payments NRG South Central will not declare nor make any restricted payments unless the following conditions are met: - NRG South Central certifies that no default or event of default has occurred and is continuing; - the balance in the debt service reserve account, including any debt service reserve credit support, equals or exceeds the required amount; and - if, as of such date, 50% or more of NRG South Central's projected revenues for the next four fiscal quarters will be derived from power supply agreements which have a remaining term of at least two years, NRG South Central certifies that the debt service coverage ratio for the most recently completed historical four fiscal quarters (in the case of the first four fiscal quarters following the March 31, 2000 closing date of the acquisition of the Cajun facilities, projected debt service coverage ratios will be used as necessary)(taken as a whole) equals or exceeds 1.40 and the projected debt service coverage ratio for the next succeeding four fiscal quarters (commencing with the quarter in which the debt is incurred) (taken as a whole) equals or exceeds 1.40; - if, as of such date, 25% or more, but less than 50%, of NRG South Central's projected revenues for the next four fiscal quarters will be derived from power supply agreements which have a remaining term of at least two years, NRG South Central certifies that the debt service coverage ratio for the most recently completed historical four fiscal quarters (in the case of the first four fiscal quarters following the March 31, 2000 closing date of the acquisition of the Cajun facilities, projected debt service coverage ratios will be used as necessary)(taken as a whole) equals or exceeds 1.55 and the projected debt service coverage ratio for the next succeeding six fiscal quarters (commencing with the quarter in which the debt is incurred) (taken as a whole) each equals or exceeds 1.55; and - if, as of such date, less than 25% of NRG South Central's projected revenues for the next four fiscal quarters will be earned under power supply agreements which have a remaining term of at least two years, NRG South Central certifies that the debt service coverage ratio for the most recently completed historical four fiscal quarters (in the case of the first four fiscal quarters following the March 31, 2000 closing date of the acquisition of the Cajun facilities, projected debt service coverage ratios will be used as necessary)(taken as a whole) equals or exceeds 1.70 and the projected debt service coverage ratio for the next succeeding eight fiscal quarters (commencing with the quarter in which the debt is incurred) (taken as a whole) equals or exceeds 1.70. The term "NRG South Central's projected revenues" means, for the relevant period, the revenues of NRG South Central, Louisiana Generating and each additional guarantor for that period and any payments received under hedging agreements (other than interest rate protection agreements) for that period. If there are withdrawals from the debt service reserve account (or debt service reserve credit support available for this account) on any scheduled payment date and restricted payments were made during the six- 80 84 month period prior to such date, then, immediately following such scheduled payment date, an amount equal to the lesser of (a) any restricted payments made during the prior six-month period or (b) the amount withdrawn from the debt service reserve account (or debt service reserve credit support available for this account) on such date, will be refunded to the debt service reserve account by means of a cash deposit or increase in the debt service reserve credit support available under this account; provided, that the amount of such refund will not exceed the amount required to be deposited so that the balance in the debt service reserve account (taking into account any debt service reserve credit support) equals the debt service reserve required balance. The term "restricted payments" means (a) declarations and payments of distributions, dividends or any other similar payments made in cash, property, obligations or other securities, (b) payments of the principal of or interest on any subordinated indebtedness or (c) the making of any loans or advances to any affiliate (other than permitted indebtedness). However, distributions or other payments by Louisiana Generating or any additional guarantor to NRG South Central or by NRG South Central to Louisiana Generating or any additional guarantor do not constitute restricted payments. Distributions of proceeds from the sale of assets specifically held for resale also do not constitute restricted payments nor are payments by NRG South Central to NRG Energy of any proceeds from treasury locks entered into by NRG South Central or Louisiana Generating on or prior to March 30, 2000. In addition, refunds from NRG South Central to NRG Energy may have been made from the first draw under its working capital facility in an amount equal to the amount of equity contributions made solely to fund NRG South Central's working capital requirements or those of Louisiana Generating during the period following March 30, 2000 through the earlier of the date that is three months after March 30, 2000 or the date on which the first draw is made under the working capital facility. As of June 30, 2000, the working capital facility was undrawn. This amount, however, will only be equal to the amount of equity contributions made in excess of the equity contributions contemplated in the section entitled "Capitalization." Limitation on Liens NRG South Central will not create or suffer to exist any lien upon or with respect to any of its properties, other than permitted liens. A "permitted lien" is any of the following: - liens existing on March 31, 2000; - liens in favor of NRG South Central, Louisiana Generating or any additional guarantor; - liens imposed by law for taxes, assessments or governmental charges that are not yet delinquent or which are the subject of a good faith contest and for which adequate reserves have been established; - carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 45 days or are being contested in good faith by appropriate proceedings; - cash deposits or rights of set-off to secure the performance of bids, lenders, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds, government contracts and other obligations of a like nature (other than for payment obligations of borrowed money), in each case in the ordinary course of business; - certain encumbrances and other easements, zoning restrictions, rights-of-way and similar charges or encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with NRG South Central's ordinary conduct of business or the ordinary conduct of its business or the business of Louisiana Generating or any additional guarantor; - liens securing permitted indebtedness other than subordinated indebtedness and indebtedness constituting hedging agreements (other than hedging agreements which relate to indebtedness that is secured by liens otherwise permitted under the finance documents) and letters of credit (other than 81 85 commercial letters of credit), surety bonds or performance bonds, so long as the bonds are secured on an equal and ratable basis with the obligation so secured until such obligation is no longer secured; - liens that are incidental to NRG South Central's business or the business of Louisiana Generating or any additional guarantor, are not for borrowing money and are not material, taken as a whole to NRG South Central business and the business of Louisiana Generating and any additional guarantor; - liens arising by action of law; - liens related to workers' compensation, unemployment insurance and other social security laws or regulations or other statutory regulations; - judgment liens in respect of judgments that do not give rise to an event of default under the indenture or guarantor loan agreement; and - liens created by the security documents. Certain Obligations Respecting Subsidiaries In the event that NRG South Central acquires or creates any new subsidiary that constitutes a subsidiary under the indenture, NRG South Central must designate whether the new subsidiary is or is not an "unrestricted subsidiary." An "unrestricted subsidiary" is any of NRG South Central's subsidiaries designated by its management committee as an unrestricted subsidiary by resolution if the following conditions are met: - the subsidiary has no indebtedness or other liabilities or obligations other than non-recourse obligations; - the subsidiary is not party to any agreement, contract, arrangement or understanding with NRG South Central, Louisiana Generating or with any additional guarantor. Unless the terms are no less favorable to NRG South Central, Louisiana Generating or the additional guarantor than those that might be obtained at the time from persons who are not affiliates of NRG South Central; and - neither NRG South Central nor Louisiana Generating nor any additional guarantor has any direct or indirect obligation to subscribe for additional equity interests in the subsidiary, to maintain or preserve the subsidiary's financial condition or to cause the subsidiary to achieve any specified levels of operating results. The term "non-recourse obligations" means any indebtedness, obligations or liabilities as to which none of NRG South Central, Louisiana Generating or any additional guarantor: - provides credit support of any kind (including any undertaking, agreement or instrument that would constitute indebtedness); - are directly or indirectly liable (as a guarantor or otherwise) other than pursuant to pledge by NRG South Central of an equity interest in an unrestricted subsidiary; or - constitutes the lender. In addition, no default in such non-recourse obligation may give any holder of NRG South Central's indebtedness or indebtedness of Louisiana Generating or any additional guarantor a right to declare a default or accelerate the stated maturity of such indebtedness. If, at any time, any unrestricted subsidiary would fail to meet the requirements above, it will cease to be an unrestricted subsidiary, and for all other purposes, that subsidiary will be an additional guarantor and any indebtedness of the subsidiary will be deemed to be incurred by an additional guarantor as of such date. If that indebtedness is not permitted to be incurred as of such date under the loan agreement applicable to the additional guarantor, NRG South Central will be in default under the indenture. NRG South Central's management committee may at any time designate any unrestricted subsidiary to be an additional guarantor. This designation will be deemed to be an incurrence of indebtedness by an additional guarantor of any outstanding indebtedness of the unrestricted subsidiary, and the designation will only be permitted if the 82 86 indebtedness is permitted under the loan agreement applicable to the additional guarantor, the requirements of the indenture are complied with and no default or event of default would occur or be in existence following the designation. NRG South Central will, or will cause each new subsidiary which is not designated as an unrestricted subsidiary to do, the following: - prior to acquiring the subsidiary, NRG South Central will obtain confirmation from each rating agency that this acquisition will not result in a ratings downgrade of the bonds; - the subsidiary will enter into a loan agreement which will contain material covenants substantially similar to the covenants in the guarantor loan agreement which restrict the incurrence of indebtedness, liens, the entry into guarantees, fundamental changes and sales of assets, restricted payments, certain actions which may violate the investment company act and certain actions regarding taxation; and - the subsidiary will enter into a guarantee of payments due on the bonds that is substantially similar to the guarantee agreement to which Louisiana Generating is a party. The term "additional guarantor" means a subsidiary that owns, acquires, operates, maintains, develops or constructs non-nuclear electric generating or district energy assets located in the United States which has not been designated as an unrestricted subsidiary. Limitation on Fundamental Changes NRG South Central will not, nor will it permit Louisiana Generating or any additional guarantor to, enter into any transaction of merger or consolidation, change its form of organization or business, liquidate, wind-up or dissolve (or suffer any liquidation or dissolution). However, if at that time, no default exists or is caused by the transaction, the following is permitted: - Louisiana Generating, any additional guarantor or any unrestricted subsidiary may merge into NRG South Central in a transaction in which NRG South Central is the surviving corporation provided that any debt NRG South Central assumes in such transaction is permitted under the indenture; - Louisiana Generating, any additional guarantor or any unrestricted subsidiary may merge into Louisiana Generating or an additional guarantor in a transaction in which the surviving entity is Louisiana Generating or an additional guarantor and NRG South Central's economic interest in each merging subsidiary's assets will not be diminished as a result of the merger; and - Louisiana Generating or any additional guarantor may liquidate or dissolve if the assets of that entity are transferred to Louisiana Generating or an additional guarantor (but only if NRG South Central's economic interest in these assets would not be diminished as a result) and if NRG South Central determines in good faith that the liquidation or dissolution is in its best interests and would not reasonably be expected to result in a material adverse effect. Limitation on Sales of Assets NRG South Central will not sell or otherwise dispose of any assets other than pursuant to a permitted asset sale. The term "permitted asset sale" means any of the following transactions: - disposition of the assets specifically held for resale; - transfers of assets among NRG South Central, Louisiana Generating and any additional guarantor; - sales and dispositions in the ordinary course of business not in excess of $15.0 million (escalated in accordance with the consumer price index) in aggregate for NRG South Central, Louisiana Generating and any additional guarantor in any fiscal year; 83 87 - any sales or dispositions of surplus, obsolete or worn-out equipment or inventory in the ordinary course of business; - any sales or dispositions required for compliance with applicable law or necessary governmental approvals; - solely when referring to NRG South Central, sales or dispositions of non-controlling ownership interests in Louisiana Generating and any additional guarantor so long as the guarantee and the guarantor loan agreement or other loan agreement with regard to such guarantor stays in effect; - solely when referring to NRG South Central, sales or dispositions of ownership interests in unrestricted subsidiaries; - any sales or dispositions of assets permitted under the indenture or guarantor loan agreement as a permitted fundamental change; and - any other sale or other disposition so long as after giving effect to such events, the rating agencies confirm their respective ratings of the bonds in effect immediately prior to such sale or other disposition. Limitation on Business Activities NRG South Central will not engage in any activities other than (a) the acquisition and ownership of Louisiana Generating, any additional guarantor or any unrestricted subsidiary as permitted by the indenture, provided that prior to acquiring or creating any such additional guarantor, NRG South Central will obtain a confirmation from each rating agency that such acquisition will not result in a ratings downgrade of the bonds, and (b) the development, acquisition, construction, operation and maintenance of any non-nuclear electric generating or district energy assets in the United States provided that prior to acquiring or constructing any such additional assets, NRG South Central will obtain a confirmation from each rating agency that such acquisition or construction will not result in a ratings downgrade of the bonds and (c) activities contemplated by the indenture and the other finance documents and activities incidental thereto. Limitation on Transactions with Affiliates NRG South Central will not enter into any transaction or series of related transactions with any of its affiliates except: - transactions in the ordinary course of business at prices and on terms and conditions not less favorable than a comparable transaction entered into on an arm's length basis; - transactions between or among NRG South Central, Louisiana Generating and any additional guarantor not involving any other affiliate; - any restricted payment permitted under the indenture; and - entering into the transaction documents or any extension, renewal or replacement thereof that would not reasonably be expected to have a material adverse effect. Limitation on Investments NRG South Central will not, directly or indirectly, make investments, loans or advances or acquire the stock, obligations or securities of any person except that it may: - make operating deposits with banks; - invest in cash equivalents; - make loans to Louisiana Generating with the funds borrowed in accordance with the indenture or otherwise on deposit in the revenue account; 84 88 - make investments in unrestricted subsidiaries with funds that NRG South Central could otherwise distribute in accordance with the indenture or otherwise with the proceeds of additional equity contributions to NRG South Central made explicitly for this purpose; - make investments in Louisiana Generating or any additional guarantor; - make investments in another person, if as a result of such investment (a) such other person becomes an additional guarantor or (b) such other person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to NRG South Central, Louisiana Generating or any additional guarantor; - make investments representing capital stock or obligations issued to NRG South Central in settlement of claims against any other person by reason of a composition or readjustment of debt or a reorganization of any debtor of ours; - keep investments that were outstanding on March 31, 2000; - hold as investments cash proceeds acquired by NRG South Central in connection with any asset sale permitted under the indenture; - make any investment to the extent that the consideration therefore is NRG South Central's capital stock (other than redeemable capital stock); - use amounts constituting restricted payments which NRG South Central would otherwise be permitted to make under the indenture; and - make additional investments up to but not exceeding $10.0 million (escalated in accordance with the consumer price index) in the aggregate outstanding at any one time among NRG South Central, Louisiana Generating and any additional guarantor. For purposes of the immediately preceding "bullet-point" above, the aggregate amount of an investment at any time will be deemed to be equal to (a) the aggregate amount of cash, together with the aggregate fair market value of property, including any securities, loaned, advanced, contributed, transferred or otherwise invested that gives rise to such investment minus (b) the aggregate amount of dividends, distributions or other payments received in cash or other property in respect of such investment; the amount of an investment shall not in any event be reduced by reason of any write-off of such investment nor increased by any increase in the amount of earnings retained in the person in which such investment is made that have not been dividended, distributed or otherwise paid out. The term "cash equivalents" means investments in securities or other instruments that are: (a) direct obligations of the United States, or any agency thereof; (b) obligations fully guaranteed by the United States or any agency thereof; (c) certificates of deposit or bankers acceptances issued by commercial banks (including the bond trustee or any of its affiliates) organized under the laws of the United States or any political subdivision thereof or under the laws of Canada, Japan or Switzerland or any country that is a member of the European Economic Community having a combined capital and surplus of at least $250.0 million and having long-term unsecured debt securities rated "A" or better by S&P and "A2" or better by Moody's (but at the time of investment not more than $25.0 million may be invested in these certificates of deposit from any one bank); (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above, entered into with any financial institution meeting the qualifications specified in clause (c) above; (e) open market commercial paper of any corporation incorporated or doing business under the laws of the United States or of any political subdivision thereof having a rating of at least "A-1" from S&P and "P-1" from Moody's (but at the time of investment not more than $25.0 million may be invested in commercial paper from any one company); (f) auction rate securities or money market preferred stock having one of the two highest ratings obtainable from S&P and Moody's (or, if at any time neither S&P or Moody's may be rating such obligations, then from another nationally recognized rating service acceptable to the bond trustee); or (g) investments in money market funds or money market mutual funds sponsored by any securities broker dealer of recognized national standing (or an affiliate thereof), having an investment policy that requires substantially all the invested assets of the 85 89 fund to be invested in investments described in any one or more of the foregoing clauses and having a rating of "A" or better by S&P and "A2" or better by Moody's (including money market funds for which the depositary bank in its individual capacity or any of its affiliates is investment manager or adviser). Restrictions on Guarantees NRG South Central will not, contingently or otherwise, be or become liable, directly or indirectly, in connection with any obligation guaranteeing in any manner any indebtedness or similar obligation of any other person, except for: - endorsements and similar obligations in the ordinary course of business; - guarantees existing on March 31, 2000; and - guarantees to NRG Power Marketing, Louisiana Generating, any additional guarantor or any other entity which has entered into a power marketing agreement with NRG South Central, Louisiana Generating or any additional guarantor provided that, solely with respect to such other entity, both rating agencies confirm that such guarantee will not result in a downgrade of the then current rating of the bonds, entered into by NRG South Central in the ordinary course of business in connection with fuel procurement, sales or purchases of power and emissions credits directly related to the Cajun facilities, NRG South Central's generating assets or the generating assets of any additional guarantor, so long as these activities are not for speculative purposes. Limitations on the Modification of Certain Documents NRG South Central will not enter into or grant any amendment, waiver, consent or change or modification, or permit the cancellation or termination of, any project document, unless this action would not reasonably be expected to result in a material adverse effect or is otherwise permitted under the indenture. NRG South Central will not consent to, enter into or grant any amendment, waiver, consent, change or modification to the finance documents, or assign any of its obligations under the documents, except as permitted in the indenture. Limitations on Assignment of Obligations and Additional Agreements NRG South Central will not assign any of its rights or obligations under any material project document or enter into any material additional project document, other than assignments to the collateral agent, unless: - NRG South Central provides an officer's certificate certifying that the transactions contemplated by the assignment or additional project document would not reasonably be expected to result in a material adverse effect; or - each rating agency confirms in writing that the assignment of or entering into this additional project document would not result in a ratings downgrade of the bonds. Other Covenants The indenture also contains other covenants, including NRG South Central's obligations to: - pay all taxes and claims; - maintain books and records; - permit inspection of its properties and books of record and account; - cause Louisiana Generating to maintain its EWG status; and - comply with requests for information from the rating agencies and not request that the rating agencies stop rating the bonds. 86 90 Indenture Events of Default The indenture provides that each of the following constitutes an event of default, whatever the reason for the event, whether it is voluntary or involuntary or comes about by operation of law, or is pursuant to or in compliance with any applicable law: - NRG South Central defaults in the payment of any principal of, premium (if any) or interest on any bond when that amount becomes due and payable, whether by scheduled maturity or required repayment or redemption or by acceleration or otherwise, for 15 days or more; - an event of default has occurred and is continuing under the guarantor loan agreement or any other loan agreement between NRG South Central or Louisiana Generating and an additional guarantor; - NRG South Central defaults in the performance or observance of any of its covenants or agreements under the indenture with respect to maintenance of existence, payment of taxes, permitted indebtedness, permitted liens, guarantees, business activities, fundamental changes, sales of assets, changes to finance documents or project documents, restricted payments and compliance with the investment company act and such default shall continue uncured for at least 30 days from the earliest of: (a) the date that one of NRG South Central's executive officers obtains actual knowledge of the default and (b) the date on which the executive officer receives written notice from the bond trustee, the collateral agent or any bondholder of the default; - NRG South Central defaults in the performance or observance of any of its covenants or material obligations under the indenture, which default is not otherwise expressly defined as an event of default, and the default continues uncured for more than 30 days from the earliest of: (a) the date that one of NRG South Central's executive officers obtains actual knowledge of the default and (b) the date on which the officer receives written notice from the bond trustee, the collateral agent or any bondholder of the default. However, if NRG South Central commences and diligently pursues efforts to cure the default within the 30 day period and delivers written notice of the default, NRG South Central will be given 60 days following the end of the initial 30 day period to cure the default, so long as NRG South Central is diligently pursuing a cure; - NRG South Central (a) applies for, authorizes, approves or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of NRG South Central or all or a substantial part of its property, (b) admit in writing its inability or be generally unable to pay its debts as they become due, (c) make a general assignment for the benefit of its creditors, (d) commence a voluntary case under the federal bankruptcy code, (e) file a petition seeking to take advantage of any other debtor relief law, (f) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the federal bankruptcy code or any other debtor relief law or (g) take any action for the purpose of effecting any of the foregoing including, without limitation, commencing a shareholder vote in connection with any of the foregoing; - a proceeding or case is commenced without application or consent in a court of competent jurisdiction, seeking (a) NRG South Central's liquidation, reorganization, dissolution, winding-up or the composition or readjustment of debts or (b) the appointment of a trustee, receiver, custodian, liquidator or similar official for NRG South Central on all or a substantial part of its property under any debtor relief law, and such proceeding or case continues undismissed or an order, judgment or decree approving any of the foregoing is entered and continues unstayed and in effect for 60 or more consecutive days, or any order for relief against NRG South Central is entered in any involuntary case under the federal bankruptcy code or any other debtor relief law; - an event described in the preceding two "bullet points" occurs with respect to NRG Energy, NRG Power Marketing, NRG Operating Services, a material power purchaser or a material fuel supplier, in each case to the extent such person is a party to any material project document, and remains uncured for the grace periods provided in those clauses. However, such an event shall not be an event of default if within the following 60 day period, either NRG South Central or Louisiana Generating enters into a replacement agreement substantially similar to the original agreement. Further, such an event with 87 91 respect to any such entity will not constitute an event of default if each rating agency confirms that such event will not result in a downgrade of the then current rating of the bonds; - any security document to which NRG South Central is a party ceases to be in full force and effect or, except to the extent permitted by the terms of any security document, any lien purported to be granted by the document with respect to any collateral described in the document shall cease to be a valid and perfected lien in favor of the collateral agent with the priority purported to be created by the document, and such cessation has resulted in a material adverse effect. However, NRG South Central will have 30 days from the earliest to occur of: (a) the date that one of its authorized officers obtains actual knowledge of the cessation and (b) the officer receives written notice from the bond trustee, the collateral agent or any bondholder of such default, to cure the cessation or to furnish to the collateral agent all documents or instruments required to cure the cessation; - any of NRG South Central's indebtedness for borrowed money in an amount exceeding $15.0 million (escalated in accordance with the consumer price index) (other than any amount due under or pursuant to the finance documents) is required to be prepaid, or is declared to be due and payable, other than by scheduled required payment, prior to the stated maturity of the indebtedness, as the result of the acceleration of the stated maturity of the indebtedness following an event of default under the terms of the indebtedness. However, such default and acceleration shall only constitute an event of default under the indenture if it has not been annulled or rescinded within 30 days and remains in effect with respect to such indebtedness; - the entry of one or more final and non-appealable judgments for the payment of money in an aggregate amount in excess of $25.0 million (escalated in accordance with the consumer price index) (exclusive of amounts fully covered by insurance or indemnity) is rendered against NRG South Central and the same shall remain unstayed or unpaid for a period of 60 or more consecutive days; - any material finance document to which NRG South Central is a party is declared in a final non-appealable judgment to be unenforceable against NRG South Central, or NRG South Central shall have expressly repudiated its obligations under the document and ceased to perform the obligations, or defaulted in the performance or observance of any of its material obligations under the document and this default has continued unremedied for five business days or more; - any material project document to which NRG South Central is a party ceases to be valid and binding and in full force and effect (other than as permitted or contemplated under the indenture), any third party thereto denies that it has any liability or obligation under any such material project document and the third party ceases performance under the document, or any third party is in default under any such material project document, and in each case such cessation or default has resulted or would reasonably be expected to result in a material adverse effect. However, no such event will be an indenture event of default if (a) within 180 days from the occurrence of such event NRG South Central causes the third party to reaffirm the disaffirmed provisions or resume performance (as the case may be) or NRG South Central enters into a replacement document substantially similar to the original document or (b) each rating agency confirms that such event will not result in a downgrade of the then current rating of the bonds; - either Louisiana Generating shall voluntarily abandon all the Cajun facilities for 60 consecutive days or any event occurs that causes all of the Cajun facilities to be damaged, destroyed or rendered unfit for normal use, or any compulsory transfer or taking of all the Cajun facilities by any governmental authority for which neither NRG South Central nor Louisiana Generating receives loss proceeds and, in each case, such event has or would reasonably be expected to result in a material adverse effect. However, the occurrence of such an event (excluding abandonment by Louisiana Generating) will not be an event of default if, within 30 days of the event, there exists an approved restoration plan for the remediation of such damage, loss or taking; and - any governmental approval required for the operation of the Cajun facilities is revoked, terminated, withdrawn or ceases to be in full force and effect if such revocation, termination, withdrawal or 88 92 cessation would reasonably be expected to have a material adverse effect. However, no such event will be an event of default if within 60 days from its occurrence NRG South Central or Louisiana Generating diligently pursues in good faith and (a) obtains an additional governmental approval in substitution or replacement or (b) causes such governmental approval to be reissued. Such event also shall not be an event of default for an additional 30 days following the expiration of the initial 60 day period if within the original 60 day period the default has not been cured but NRG South Central or Louisiana Generating, as the case may be, continue to diligently pursue in good faith the items set forth in clauses (a) and (b) above during such additional 30 day period. Enforcement If any event of default under the indenture occurs and is continuing, upon written direction of bondholders holding not less than 33 1/3% (in the case of the event of default specified in the first "bullet-point" under "-- Indenture Events of Default" above) or greater than 50% (in the case of all other events of default under "-- Indenture Events of Default" above) of the aggregate principal amount of the bonds outstanding, will (a) declare, by written notice to NRG South Central, the entire outstanding principal amount of all premiums (if any) and accrued interest and all other amounts due on the bonds to be due and payable immediately and (b) proceed to enforce all remedies available to the bond trustee and collateral agent under the indenture and the other documents to which the bond trustee or collateral agent is a party or available under applicable law. The bondholders may not enforce the indenture or the bonds except as provided in the indenture. No bondholder shall have any right to institute any proceeding for a remedy under the indenture unless: - the bondholder has previously given to the bond trustee written notice of the occurrence and continuance of an event of default; - bondholders holding the percentage of the aggregate principal amount of outstanding bonds needed to initiate the exercise of remedies have a made written request to the bond trustee to institute the proceeding; - the bond trustee has failed to institute the proceeding within 60 days after the receipt of the notice; and - no direction inconsistent with the written request has been given to the bond trustee during the 60 day period by the bondholders holding a majority in aggregate principal amount of the outstanding bonds. The right of any bondholder, which is absolute and unconditional, to receive payment of the principal of, premium (if any) and interest on its bonds on or after the due date therein expressed, or to institute suit for the enforcement of the payment on or after the due date, or NRG South Central's obligation, which is also absolute and unconditional, to pay the principal of, premium (if any) and interest on each of the bonds to the bondholder at the time and place set forth in the bonds, will not be impaired or affected without the consent of the bondholder. Legal Defeasance and Covenant Defeasance Legal and covenant defeasance are permitted upon terms and conditions customary for transactions of this nature. Satisfaction and Discharge NRG South Central may terminate the indenture by delivering all outstanding bonds to the bond trustee for cancellation and by paying all other sums payable under the indenture. Amendment, Supplement and Waiver Except as provided in the next two succeeding paragraphs, with the consent of the bondholders holding greater than 50% in aggregate principal amount of the bonds of all series then outstanding, considered as one class, NRG South Central and the bond trustee may amend or supplement the indenture for the purpose of 89 93 adding any mutually agreeable provisions to, or changing in any manner or eliminating any of the provisions of, the indenture. However, if there are bonds of more than one series outstanding and if a proposed supplemental indenture directly affects the rights of the holders of one or more, but less than all, of such series, then the consent of only the holders of not less than a majority in aggregate principal amount of the outstanding bonds of any series so directly affected will be required. Without the consent of each bondholder affected, no supplemental indenture shall (with respect to any bonds held by a non-consenting bondholder): - reduce the principal amount of bonds whose holders must consent to a supplement or waiver; - change the principal of or change the fixed maturity of any bond or alter certain provisions with respect to the redemption of the bonds; - change the rate of or change the time for payment of interest on any bond; - waive a default or an event of default in the payment of principal of, premium, if any, or interest on the bonds; - permit the creation of any lien prior to or, except as permitted by the indenture, pari passu with the lien of the collateral documents with respect to any collateral or deprive any holder of the security afforded by the lien of the collateral documents; - waive a redemption payment with respect to any bond; or - make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without the consent of the bondholders, NRG South Central may enter into one or more supplemental indentures in form satisfactory to the bond trustee for the following purposes: - establishing the form and terms of bonds of any series permitted under the indenture; - evidencing the succession of another entity to NRG South Central and the assumption by any such successor to NRG South Central's covenants in the indenture; - evidencing the succession of a new bond trustee pursuant to the indenture; - adding further covenants, restrictions, conditions or provisions as the board of directors shall consider to be for the protection of the holders, and to make the occurrence, or the occurrence and continuance of a default in any such additional covenants, restrictions, conditions or provisions an event of default permitting the enforcement of all or any of the several remedies provided in the indenture; - conveying, transferring and assigning to the bond trustee properties or assets to secure the bonds, and to correct or amplify the description of any property at any time subject to the indenture or the security documents or to assure, convey and confirm unto the bond trustee any property subject or required to be subject to the indenture or the security documents; - modifying, eliminating or adding to the provisions of the indenture to such extent as shall be necessary to qualify, requalify or continue the qualification of the indenture (including any supplemental indenture) under the Trust Indenture Act, or under any similar United States federal statute hereafter enacted, and to add to the indenture such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar United States federal statute hereafter enacted; - permitting or facilitating the issuance of bonds in uncertificated form; - changing or eliminating any provision of the indenture or the security documents. However, if such change or elimination will adversely affect the interests of the holders of the bonds of any series, such change or elimination will not become effective with respect to such series; 90 94 - curing any ambiguity, correcting or supplementing any provision in the indenture or the security documents that may be defective or inconsistent with any other provision, or making any other provisions with respect to matters or questions arising under the indenture or the security documents. Such action must not adversely affect the interest of the bondholders of any series in any material respect; or - providing for the issuance of exchange securities, as contemplated by the registration rights agreement, and to make such other changes to the indenture or the security documents as NRG South Central's board of directors determines are necessary or appropriate in connection therewith. Such actions must not adversely affect the interests of the bondholder of any series in any material respect. Transfer and Exchange A bondholder may transfer or exchange bonds in accordance with the indenture. The registrar and the bond trustee may require a bondholder, among other things, to furnish appropriate endorsements and transfer documents and the registrar may require a bondholder to pay any taxes and fees required by law or permitted by the indenture. The registered bondholder will be treated as the owner of the bonds for all purposes. GUARANTEE Pursuant to a guarantee issued by Louisiana Generating in favor of the bondholders, Louisiana Generating unconditionally and irrevocably guarantees the payment of principal of, premium (if any) and interest on the bonds. The guarantee is a guarantee of payment and the bond trustee will be entitled to make demands for payment under the guarantee any time that amounts due and payable on the bonds have not been paid. The guarantee is secured by the collateral described under "Description of the Bonds -- Collateral." GUARANTOR LOAN AGREEMENT General Pursuant to the guarantor loan agreement, Louisiana Generating issued a promissory note payable to NRG South Central. Payment on this note will be made in amounts which are sufficient to enable NRG South Central to pay scheduled principal of, and interest on, the bonds. Mandatory Prepayment Louisiana Generating is required to prepay its note if it receives loss proceeds, proceeds from a title event or proceeds of power contract buy-outs to the extent that NRG South Central is required to redeem the bonds in connection with the receipt of such proceeds as required under the indenture. See "Description of the Bonds -- Redemption and Repurchase -- Mandatory Redemption." Covenants The guarantor loan agreement contains various covenants, including the following: Information Requirements Louisiana Generating will furnish or cause to be furnished to NRG South Central: - within 10 days of receiving notice of the occurrence of any litigation, claim, proceeding or controversy pending, or the receipt by Louisiana Generating of a written threat of the same involving or affecting Louisiana Generating or the Cajun facilities that would reasonably be expected to result in a material adverse effect, notice of the same; - copies of all material notices delivered in connection with any project document or otherwise in connection with the Cajun facilities; and 91 95 - all other information reasonably requested by NRG South Central to enable it to satisfy its obligations under the indenture. Maintenance of Existence Louisiana Generating will at all times preserve and maintain in full force and effect its legal existence as a limited liability company in good standing under the laws of the State of Delaware and its qualification to do business in each other jurisdiction, as necessary, except where a failure to be so qualified would not reasonably be expected to result in a material adverse effect. The foregoing will not prohibit any merger, consolidation, liquidation or dissolution permitted under the guarantor loan agreement, nor prohibit Louisiana Generating from changing its status as a limited liability company if the rating agencies confirm the change will not result in a downgrade of the then current rating of the bonds. Louisiana Generating will not amend its certificate of formation or any other organizational document unless the change is in connection with permitted changes described above or in connection with a name change. Compliance with Laws and Governmental Approvals Louisiana Generating will comply with all laws, rules, regulations and orders of any governmental authority (including environmental laws) and any governmental approvals and obtain all governmental approvals necessary for the transaction of its business, except where the failure to do so would not reasonably be expected to result in a material adverse effect. Performance under Transaction Documents Louisiana Generating will perform all its material covenants and agreements contained in any transaction document to which it is a party, except where nonperformance would not reasonably be expected to result in a material adverse effect. Maintenance of Project/Title to Assets/Limitation on Sale of Assets Louisiana Generating will maintain and operate the Cajun facilities in accordance with prudent independent power industry practice. Louisiana Generating will preserve and maintain good, valid and marketable title or leasehold rights to its mortgaged properties and assets constituting part of the collateral, which shall be subject only to the liens as permitted under the guarantor loan agreement, except where the failure to do so would not reasonably be expected to result in a material adverse effect. (See "-- Limitation on Liens" below.) Louisiana Generating will only sell, lease, transfer, assign or otherwise dispose of any of its assets in a permitted asset sale. Insurance Louisiana Generating will at all times maintain, with financially sound, responsible and reputable insurance companies, and provide satisfactory evidence of, insurance in such amounts (subject to reasonable and customary deductibles and sublimits) and with terms and conditions in accordance with prudent independent power industry practice. All policies (other than workers' compensation) will name the collateral agent and the bond trustee as loss payee or additional insured. Revenue Account Louisiana Generating will cause each of the following amounts to be deposited into the revenue account: - all revenues related to the Cajun facilities; - all proceeds received from the sale of assets related to the Cajun facilities (other than proceeds of sales of the assets specifically held for resale); and - all loss proceeds, proceeds received in connection with a title event or proceeds in connection with a buy-out of a power supply agreement in each case received by it. 92 96 Limitation on Incurrence of Indebtedness Louisiana Generating will not create, incur, or suffer to exist any indebtedness, except permitted guarantor indebtedness. The term "permitted guarantor indebtedness" means any of the following items of indebtedness: - any indebtedness that Louisiana Generating may incur under the guarantor loan agreement; - indebtedness outstanding on March 31, 2000; - indebtedness related to permitted liens; - indebtedness owed to NRG South Central pursuant to any intercompany notes that have been pledged to the collateral agent; - indebtedness to any additional guarantor; - indebtedness represented by hedging agreements permitted by the guarantor loan agreement which are entered into in the ordinary course of business and not for speculative purposes; - indebtedness in respect of letters of credit, surety bonds or performance bonds issued in the ordinary course of business; - trade or other similar indebtedness incurred in the ordinary course of business (but not in any case for borrowed money); - other senior indebtedness, not to exceed $15.0 million outstanding at any one time (escalated in accordance with the consumer price index); and - indebtedness related to Louisiana Generating's obligations to establish certain funds under power supply agreements with the distribution cooperatives. Limitation on Restricted Payments Louisiana Generating will not declare nor make any restricted payments unless the conditions for the declaration or payment of restricted payments under the indenture have been satisfied. Limitation on Liens Louisiana Generating will not create or suffer to exist any lien with respect to any of its properties, other than permitted liens. Limitation on Fundamental Changes Louisiana Generating will not enter into any transaction of merger or consolidation, change its form of business, liquidate, wind-up or dissolve (or suffer any liquidation or dissolution) except that, if, at that time, no default shall have occurred and be continuing or will be caused by the transaction, the following will be permitted: - Louisiana Generating may merge into NRG South Central in a transaction in which NRG South Central is the surviving entity; - Louisiana Generating may merge into an additional guarantor in a transaction in which the surviving entity is an additional guarantor and NRG South Central's economic interest in Louisiana Generating's assets will not be diminished as a result of such merger; and - Louisiana Generating may liquidate or dissolve if its assets are transferred to an additional guarantor (but only if NRG South Central's economic interest in these assets is not diminished as a result) and if Louisiana Generating determines in good faith that the liquidation or dissolution is in its best interests and is not materially disadvantageous to the bondholders. 93 97 Limitation on Sales of Assets Louisiana Generating will not sell or otherwise dispose of any assets other than pursuant to a permitted asset sale. Limitation on Business Activities Louisiana Generating will not engage in any activities other than (a) the acquisition, ownership, operation and maintenance of the Cajun facilities and the acquisition of the balance of the assets governed by the joint ownership and operating agreement for Big Cajun II, Unit 3 (and in each case activities incidental or related thereto), (b) the acquisition and ownership of any additional guarantors as permitted by the guarantor loan agreement provided that, prior to acquiring or creating any such additional guarantor, Louisiana Generating obtains a confirmation from each rating agency that such acquisition will not result in a ratings downgrade of the bonds and (c) those activities contemplated by the guarantor loan agreement and the other finance documents and activities incidental to these documents. Limitation on Transactions with Affiliates Louisiana Generating will not enter into any transaction or series of related transactions with any of its affiliates except: - transactions in the ordinary course of business on prices and on terms and conditions not less favorable than a comparable transaction entered into on an arms' length basis; - transactions between or among NRG South Central and any additional guarantor not involving any other affiliate; - any restricted payment permitted under the indenture; and - entering into the transaction documents or any extension, renewal or replacement thereof that would not reasonably be expected to result in a material adverse effect. Limitation on Investments Louisiana Generating will not, directly or indirectly, make investments, loans or advances or acquire the stock, obligations or securities of any person, except that Louisiana Generating may: - maintain investments outstanding on March 31, 2000; - make operating deposits with banks; - invest in permitted cash equivalents; - make loans to any additional guarantor with funds borrowed by NRG South Central in accordance with the indenture that NRG South Central loans to Louisiana Generating or otherwise on deposit in the revenue account; - make investments in any additional guarantor; - make investments in another person, if as a result of such investment (a) such other person becomes an additional guarantor or (b) such other person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to Louisiana Generating or an additional guarantor; - make investments representing capital stock or obligations issued to Louisiana Generating in settlement of claims against any other person by reason of a composition or readjustment of debt or a reorganization of any debtor of Louisiana Generating; - hold as investments any non-cash proceeds acquired by Louisiana Generating in connection with any asset sale permitted under the guarantor loan agreement; 94 98 - make any investment to the extent that the consideration therefor is capital stock (other than redeemable capital stock) of Louisiana Generating; - make investments consisting of security deposits with utilities and other persons made in the ordinary course of business; - enter into hedging agreements in the ordinary course of business and not for speculative purposes; - invest amounts constituting restricted payments which Louisiana Generating would otherwise be permitted to make under the indenture; and - make additional investments up to but not exceeding $10.0 million (escalated in accordance with the consumer price index) in the aggregate outstanding at any one time among NRG South Central, Louisiana Generating and any additional guarantor. For purposes of the immediately preceding "bullet-point" above, the aggregate amount of an investment at any time will be deemed to be equal to (a) the aggregate amount of cash, together with the aggregate fair market value of property, including any securities, loaned, advanced, contributed, transferred or otherwise invested that gives rise to such investment minus (b) the aggregate amount of dividends, distributions or other payments received in cash or other property in respect of such investment; the amount of an investment shall not in any event be reduced by reason of any write-off of such investment nor increased by any increase in the amount of earnings retained in the person in which such investment is made that have not been dividended, distributed or otherwise paid out. Restrictions on Guarantees Louisiana Generating will not, contingently or otherwise, be or become liable, directly or indirectly, in connection with any obligation guaranteeing in any manner any indebtedness or similar obligation of any other person, except for: - endorsements and similar obligations in the ordinary course of business; - the guarantee in favor of the bonds; and - guarantees or contingent obligations existing on March 31, 2000. Limitations on the Modification of Certain Documents Louisiana Generating will not consent to, enter into or grant any amendment, waiver, consent or change or modification, or permit the cancellation or termination of, any project document, unless such action would not reasonably be expected to result in a material adverse effect or is otherwise permitted under the guarantor loan agreement. Louisiana Generating will not consent to, enter into or grant any amendment, waiver, consent, change or modification to the finance documents, or assign any of its obligations under the finance documents, except as permitted in the guarantor loan agreement. Limitations on Assignment of Obligations and Additional Agreements Louisiana Generating will not assign any of its rights or obligations under any material project document, other than assignments to the collateral agent, or enter into any additional material project document unless: - Louisiana Generating certifies that the transactions contemplated by the assignment or additional project document would not reasonably be expected to result in a material adverse effect; or - each rating agency confirms in writing that the assignment or entering into the additional project document would not result in a ratings downgrade of the bonds. 95 99 Other Covenants The guarantor loan agreement also contains certain other covenants, including Louisiana Generating's obligations to: - pay all taxes and claims; - maintain books and records; - permit inspection of its properties and books of record and account; and - maintain its EWG status. Guarantor Events of Default Each of the following events, whatever the reason for the event and whether it is voluntary or involuntary or shall come about or be affected by operation of law, or be pursuant to or in compliance with any applicable law, is an event of default under the guarantor loan agreement: - Louisiana Generating defaults in the payment of any principal of, premium (if any) or interest on any intercompany loan when that amount becomes due and payable, whether by scheduled maturity or required redemption or by acceleration or otherwise, for 15 days or more; - an event of default under the indenture shall have occurred and be continuing; - Louisiana Generating defaults in the performance or observance of any covenant or agreement under the guarantor loan agreement with respect to maintenance of existence, payment of taxes, permitted indebtedness, permitted liens, guarantees, business activities, fundamental changes, sales of assets, changes to finance documents or project documents, restricted payments and compliance with the investment company act and such default shall continue uncured for at least 30 days from the earliest to occur of: (a) the date on which one of Louisiana Generating's executive officers obtains actual knowledge of the failure and (b) the date on which the officer receives written notice from the bond trustee, collateral agent or bondholder of the default; - Louisiana Generating defaults in the performance or observance of any of its covenants or material obligations under the guarantor loan agreement, which default is not otherwise expressly defined as an event of default, and the default continues uncured for at least 30 days from the earliest of: (a) the date on which one of Louisiana Generating's executive officers obtains actual knowledge of such failure and (b) the date on which the officer receives written notice from the bond trustee, collateral agent or bondholder of the default. However, if Louisiana Generating commences and diligently pursues efforts to cure the default within the 30 day period and delivers written notice of the default to the bond trustee, Louisiana Generating will be given 60 days following the end of the initial 30 day period to cure the default, so long as it is diligently pursuing a cure; - Louisiana Generating (a) applies for or authorizes or approves or consents to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or all or a substantial part of its property, (b) admits in writing its inability or is generally unable to pay its debts as such debts become due, (c) makes a general assignment for the benefit of its creditors, (d) commences a voluntary case under the federal bankruptcy code, (e) files a petition seeking to take advantage of any other debtor relief law, (f) fails to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the federal bankruptcy code or any other debtor relief law or (g) takes any action for the purpose of effecting any of the foregoing including, without limitation, commencing a shareholder vote in connection with any of the foregoing; - a proceeding or case is commenced without the application or consent of Louisiana Generating in any court of competent jurisdiction, seeking (a) its liquidation, reorganization, dissolution, winding-up or the composition or readjustment of its debts or (b) the appointment of a trustee, receiver, custodian, liquidator or similar official for Louisiana Generating or all or a substantial part of its property under any debtor relief law and such proceeding or case continues undismissed or any order, judgment or 96 100 decree approving any of the foregoing is entered and continues unstayed and in effect for 60 or more consecutive days, or any order for relief against Louisiana Generating is entered in any involuntary case under the federal bankruptcy code or any other debtor relief law; - any security document to which Louisiana Generating is a party ceases to be in full force and effect or, except to the extent permitted by the terms of any security document, any lien purported to be granted thereby with respect to any guarantor collateral described therein shall cease to be a valid and perfected lien in favor of the collateral agent with the priority purported to be created by the document and such cessation has resulted in a material adverse effect. However, Louisiana Generating will have 30 days from the earliest to occur of: (a) the date on which one of Louisiana Generating's executive officers obtains actual knowledge of the default and (b) the date on which the officer receives written notice from the bond trustee, collateral agent or bondholder of the default, to cure the cessation or to furnish to the collateral agent all documents or instruments required to cure the cessation; - indebtedness of Louisiana Generating for borrowed money in an amount exceeding $15.0 million (escalated in accordance with the consumer price index) (other than any amount due under or pursuant to the finance documents) is required to be prepaid, or shall be declared to be due and payable, other than by scheduled required payment, prior to the stated maturity of the indebtedness, as the result of the acceleration of the stated maturity of the indebtedness following an event of default under the terms of the indebtedness. However, such default and acceleration will only constitute an event of default under the guarantor loan agreement if it has not been annulled or rescinded within 30 days and remains in effect with respect to the indebtedness; - the entry of one or more final and non-appealable judgments for the payment of money in an aggregate amount in excess of $25.0 million (escalated in accordance with the consumer price index) (exclusive of amounts fully covered by insurance or indemnity) against Louisiana Generating and the same remains unstayed or unpaid for a period of 60 or more consecutive days; - any material finance document to which Louisiana Generating is a party is declared in a final non-appealable judgment to be unenforceable against Louisiana Generating, or Louisiana Generating has expressly repudiated its obligations thereunder and ceased to perform such obligations, or defaulted in the performance of any of its material obligations thereunder and this default has continued for at least five business days; - any material project document to which Louisiana Generating is a party ceases to be valid and binding (other than as permitted or contemplated under the guarantor loan agreement), any third party thereto denies that it has any liability or obligation under any such material project document, or any third party is in default under any such document and in each case such cessation or default has resulted or would reasonably be expected to result in a material adverse effect. However, no such event will be a guarantor event of default if (a) within 180 days from the occurrence of such event Louisiana Generating causes the third party to reaffirm the disaffirmed provisions or resume performance (as the case may be) or enters into a replacement document substantially similar to the original document or (b) each rating agency confirms that such event will not result in a downgrade of the then current rating of the bonds; - either Louisiana Generating voluntarily abandons all the Cajun facilities for 60 consecutive days or any event occurs that causes all the Cajun facilities to be damaged, destroyed or rendered unfit for normal use, or any compulsory transfer or taking of any material part of the Cajun facilities by any governmental authority occurs for which neither NRG South Central nor Louisiana Generating receive loss proceeds and, in each case, such event has or would reasonably be expected to result in a material adverse effect. However, the occurrence of such an event (excluding abandonment by Louisiana Generating) will not be a guarantor event of default if there exists an approved restoration plan for the remediation of such damage, loss or taking within 30 days of the event; - any governmental approval required for the operation of the Cajun facilities is revoked, terminated, withdrawn or ceases to be in full force and effect if such revocation, termination, withdrawal or 97 101 cessation would reasonably be expected to result in a material adverse effect. However, no such event will be a guarantor event of default if within 60 days Louisiana Generating diligently pursues in good faith and (a) obtains an additional governmental approval in substitution therefore or replacement thereof or (b) causes such governmental approval to be reissued. Such an event also will not be a guarantor event of default for an additional 30 days following the expiration of the initial 60 day period if within the original 60 day period the default has not been cured but Louisiana Generating continues to diligently pursue in good faith the items set forth in clauses (a) and (b) above during such additional 30 day period; and - Louisiana Generating fails to satisfy its payment obligations under the guarantee. Enforcement If any event of default under the guarantor loan agreement occurs and is continuing, upon (a) written direction of bondholders holding not less than 33 1/3% of the aggregate principal amount of the outstanding bonds or of the bond trustee, notwithstanding the absence of direction from such bondholders (each in the case of any event of default specified in the first, second or last "bullet points" under "-- Guarantor Events of Default" above) or (b) upon written direction of bondholders holding greater than 50% (in the case of an event of default specified in all other "bullet points" under "-- Guarantor Events of Default" above) of the aggregate principal amount of the outstanding bonds, Louisiana Generating must declare that portion of the outstanding principal amount of the guarantor notes, all interest accrued and unpaid thereon, all premium (if any), all other amounts payable in respect thereof and all other amounts payable under the guarantor loan agreement to be due and payable, whereupon the same shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which Louisiana Generating will waive in accordance with the guarantor loan agreement. SECURITY AGREEMENTS Pursuant to a security agreement and pledge agreements, NRG South Central's obligations are secured by a security interest in the following: - NRG Central U.S. LLC's and South Central Generation Holding LLC's membership interests in NRG South Central and NRG South Central's membership interests in Louisiana Generating; - all of NRG South Central's assets related to the Cajun facilities, including NRG South Central rights under all intercompany notes between it and Louisiana Generating but excluding the assets specifically held for resale; and - the revenue account and the debt service reserve account. Pursuant to a mortgage and a security agreement, the obligations of Louisiana Generating under the guarantee and the guarantor loan agreement are secured by a mortgage with respect to Big Cajun I and Big Cajun II and a security interest in the following: - all of Louisiana Generating's interest in the Cajun facilities and substantially all the personal property associated with the Cajun facilities except for fixtures not located on the Cajun facilities and the assets specifically held for resale; - substantially all contracts, including the project documents, associated with the Cajun facilities to which Louisiana Generating is a party to the extent assignable and all consents to the assignment of these contracts that have been obtained; - all licenses, permits and governmental approvals associated with the Cajun facilities; - all insurance policies associated with the Cajun facilities and all monies paid to Louisiana Generating on these policies; 98 102 - all revenues of the Cajun facilities, including revenues from power sales contracts entered into by NRG Power Marketing or any other entity which has entered into a power marketing agreement with Louisiana Generating associated with the Cajun facilities; and - the revenue account. COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT Pursuant to the collateral agency and intercreditor agreement, NRG South Central, Louisiana Generating, any additional guarantor, the bond trustee, the agent under the new working capital facility, and any trustee or agent under any other senior secured debt document agree to appoint The Chase Manhattan Bank as the collateral agent and depositary bank. Authority of Collateral Agent The collateral agent has the authority to administer the intercreditor collateral in accordance with the security documents, and upon the occurrence and continuance of an event where 66 2/3% of the combined exposure shall have been declared to be, or shall automatically have become, due and payable under the financing documents, as determined by the collateral agent based upon written notices provided to the collateral agent by the secured parties, which event is referred to as a trigger event, shall exercise upon written instruction of persons that at such time hold at least 33 1/3% of the combined exposure (in the case of a payment default) or greater than 50% of the combined exposure (in the case of other defaults), which persons are referred to as the required creditors, such rights and remedies with respect to the intercreditor collateral as are granted to it under the security documents and applicable law. The term "combined exposure" means, as of any date of calculation, the sum (calculated without duplication) of the following to the extent the same is held by or represented by a secured party (a) the aggregate principal amount of all bonds outstanding as of the calculation date, (b) the aggregate principal amount of all loans (if any) outstanding as of such calculation date under the working capital facility, (c) the aggregate amount of all undrawn financing commitments as of such calculation date under the working capital facility which, as of such calculation date, the lenders party to the working capital agreement have no right to terminate, (d) the aggregate principal amount of all other senior secured debt (if any) outstanding as of such calculation date and (e) the aggregate amount of all undrawn financing commitments under any senior secured debt documents as of such calculation date which, as of such calculation date, the creditors party to such other senior secured debt documents have no right to terminate. The term "intercreditor collateral" means any collateral in which there is a security interest purported to be granted to a secured party other than the debt service reserve account. Actions by Secured Parties No secured party had any right to (a) sell, exchange, release or otherwise deal with any property pledged, assigned or mortgaged to secure the financing liabilities, (b) exercise or refrain from exercising any rights to direct the collateral agent to take any action in respect of the intercreditor collateral or (c) take any other action with respect to the intercreditor collateral (i) independently of the collateral agent or (ii) other than to direct the collateral agent to take action in accordance with the collateral agency and intercreditor agreement. Priority of Payments Following the occurrence of a trigger event or upon the exercise of remedies by the secured parties after an event of default, the proceeds of any collection, sale or other realization of any part of the intercreditor collateral will be applied by the collateral agent in the following order of priority: - first, to the payment of all reasonable costs and expenses relating to the sale of the intercreditor collateral plus costs of the collateral agent in enforcing the indemnity payment due to the collateral agent; 99 103 - second, to the payment to the bond trustee, the working capital agent and each senior secured debt agent for all fees and expenses due and owing under the applicable finance document; - third, to the payment of accrued and unpaid interest on the bonds, the working capital facility and any other senior secured debt, pro rata; - fourth, to the payment of principal, make-whole premiums, if any, and breakage costs, if any, pro rata; - fifth, to the payment of other secured obligations owed to the bond trustee, the working capital agent and the senior secured debt agent, pro rata; and - finally, to the payment of the relevant obligor, or its successor or assignees, or as a court of competent jurisdiction may direct, of any surplus remaining. Event of Loss/Title Event If an event of loss or title event occurs and the determination is made that the affected property cannot be rebuilt, repaired or restored or NRG South Central elects not to rebuild, repair or restore, and loss proceeds exceed $10.0 million, then any loss proceeds over $10.0 million will be distributed pro rata among the secured parties. If an event of loss occurs and NRG South Central rebuilds, repairs or restores the affected property and the loss proceeds exceed the actual cost of such rebuilding, repair or restoration by more than $5.0 million, then any loss proceeds over $5.0 million will be distributed pro rata among the secured parties. The pro rata share of loss proceeds owing to the bond trustee for the benefit of the bondholders will be applied to the pro rata redemption of the bonds in accordance with the indenture. Notice Each secured party will give each other secured party and the collateral agent written notice of the occurrence of an event of default under such secured party's financing documents of which it has written notice and of the occurrence of an acceleration of the maturity of such secured party's financing liabilities. PLAN OF DISTRIBUTION Each broker-dealer that receives bonds for its own account in the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the bonds. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of bonds received in exchange for outstanding bonds where the outstanding bonds acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 90 days after the expiration date of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any resale. In addition, until [ ], 2000, all dealers effecting transactions in the bonds may be required to deliver a prospectus. We will not receive any proceeds from any sale of bonds by broker-dealers. Bonds received by broker-dealers for their own account in the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the bonds or a combination of these methods of resale, at market prices prevailing at the time of resale, at prices related to these prevailing market prices or at negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any broker-dealer or the purchasers of any of the bonds. Any broker-dealer that resells bonds that were received by it for its own account in the exchange offer and any broker or dealer that participates in a distribution of these bonds may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any resale of bonds and any commission or concessions received any these persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 100 104 Furthermore, any broker dealer that acquired any of its outstanding bonds directly from us: - may not rely on the applicable interpretation of the staff of the SEC's position contained in Exxon Capital Holdings Corp., SEC No-Action Letter (April 13, 1989), Morgan Stanley & Co., Inc., SEC No-Action Letter (June 5, 1991) and Shearman & Sterling, SEC No-Action Letter (July 2, 1983), and - must also be named a selling noteholder in connection with the registration and prospectus delivery requirements of the Securities Act relating to any resale transaction. For a period of 90 days after the expiration date of the exchange offer NRG South Central will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests these documents in the letter of transmittal. NRG South Central has agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the bonds) other than commissions or concessions of any broker-dealers and will indemnify the holders of the bonds (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS The following is a general discussion of certain U.S. federal income tax considerations relating to the exchange of the outstanding bonds for the bonds issued in this exchange offer. This discussion is based on laws, regulations, rulings and decisions now in effect, all of which are subject to change, possibly with retroactive effect. We have not obtained, nor do we intend to obtain, a ruling from the IRS as to any U.S. federal income tax consequences discussed below and there can be no assurances that the IRS will not take contrary positions. This discussion does not address all aspects of U.S. federal income tax that may be relevant to particular holders of outstanding bonds and bonds issued in this exchange offer. This discussion deals only with holders of bonds who hold the bonds as capital assets and exchange outstanding bonds for bonds issued in this exchange offer. This discussion does not address the tax consequences arising under the laws of any foreign, state or local jurisdiction. Prospective investors are urged to consult their tax advisors regarding the U.S. federal tax consequences of acquiring, holding and disposing of the bonds, as well as any tax consequences that may arise under the laws of any foreign, state, local or other taxing jurisdiction. An exchange of the outstanding bonds for the bonds pursuant to the exchange offer will not be treated as an "exchange" for U.S. federal income tax purposes because the terms of the bonds issued in the exchange offer are substantially identical to the terms of the outstanding bonds. Consequently, a holder of the outstanding bonds will not recognize taxable gain or loss as a result of exchanging bonds pursuant to the exchange offer. The holding period of the bonds issued in the exchange offer will be the same as the holding period of the outstanding bonds and the tax basis of the bonds will be the same as the basis in the outstanding bonds immediately before the exchange. LEGAL MATTERS Certain legal matters with respect to the bonds offered in this exchange offer will be passed upon for us by Gibson, Dunn & Crutcher LLP, New York, New York. EXPERTS The consolidated financial statements for NRG South Central at June 30, 2000 and for the period from March 30, 2000 (Inception) through June 30, 2000, the financial statements for Louisiana Generating at June 30, 2000 and for the period from March 30, 2000 (Inception) through June 30, 2000 and the carve-out financial statements for Cajun Electric (Cajun facilities) at December 31, 1999 and 1998 for each of the three years in the period ended December 31, 1999 have been so included in reliance on the reports of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 101 105 WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-4 under the Securities Act with respect to the bonds offered in this prospectus. This prospectus, which forms part of the registration statement, does not contain all of the information that is included in the registration statement. You will find additional information about our company and the bonds in the registration statement. Any statements made in this prospectus concerning the provisions of legal documents are not necessarily complete and you should read the documents that are filed as exhibits to the registration statement for a more complete understanding of the document or matter. After the registration statement becomes effective, we will be subject to the informational requirements of the Exchange Act of 1934, and will file periodic reports, registration statements and other information with the SEC. You may read and copy the registration statement and any of the other documents we file with the SEC at the public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices located at 7 World Trade Center, New York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for more information on the public reference rooms. In addition, reports and other filings are available to the public on the SEC's web site at http://www.sec.gov. If for any reason we are not subject to the reporting requirements of the Securities Exchange Act of 1934 in the future, we will still be required under the indenture governing the bonds to furnish the holders of the bonds with certain financial and reporting information. See "Description of Principal Financing Documents -- Indenture -- Covenants of NRG South Central -- Information Requirements" for a description of the information we are required to provide. NRG ENERGY NRG Energy files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document NRG Energy files at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. NRG Energy's SEC filings are also available to the public from the SEC's web site at http://www.sec.gov. You should rely only on the information provided in this prospectus or any supplement. NRG Energy has not authorized anyone else to provide you with different information. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this prospectus. NRG Energy's SEC filings are also available at the offices of the New York Stock Exchange. For further information on obtaining copies of NRG Energy's public filings at the New York Stock Exchange, you should call (212) 656-5060. XCEL ENERGY Xcel Energy, formerly Northern States Power Company, files annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document Xcel Energy files at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Xcel Energy's SEC filings are also available to the public from the SEC's web site at http://www.sec.gov. Xcel Energy's SEC filings are also available at the offices of the New York Stock Exchange. For further information on obtaining copies of Xcel Energy's public filings at the New York Stock Exchange, you should call (212) 656-5060. You should rely only on the information provided in this prospectus or any supplement. Xcel Energy has not authorized anyone else to provide you with different information. You should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this prospectus. 102 106 INDEX TO FINANCIAL STATEMENTS NRG SOUTH CENTRAL GENERATING LLC Report of Independent Accountants........................... F-3 Consolidated Balance Sheet.................................. F-4 Consolidated Statement of Operations........................ F-5 Consolidated Statement of Cash Flows........................ F-6 Consolidated Statement of Members' Equity................... F-7 Notes to Consolidated Financial Statements.................. F-8 LOUISIANA GENERATING LLC Report of Independent Accountants........................... F-21 Balance Sheet............................................... F-22 Statement of Operations..................................... F-23 Statement of Cash Flows..................................... F-24 Statement of Member's Equity................................ F-25 Notes to Financial Statements............................... F-26 CAJUN ELECTRIC (CAJUN FACILITIES) Report of Independent Accountants........................... F-38 Carve-Out Statement of Net Assets........................... F-39 Carve-Out Statement of Certain Revenue and Expenses......... F-40 Notes to Financial Statements............................... F-41
F-1 107 NRG SOUTH CENTRAL GENERATING LLC CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD FROM MARCH 30, 2000 (INCEPTION) TO JUNE 30, 2000 F-2 108 REPORT OF INDEPENDENT ACCOUNTANTS To the Management Committee of NRG South Central Generating LLC: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, of members' equity and of cash flows present fairly, in all material respects, the financial position of NRG South Central Generating LLC and its subsidiaries at June 30, 2000, and the results of their operations and their cash flows for the period March 30, 2000 (Inception) through June 30, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers LLP Minneapolis, Minnesota October 17, 2000 F-3 109 NRG SOUTH CENTRAL GENERATING LLC CONSOLIDATED BALANCE SHEET
JUNE 30, 2000 -------------- (IN THOUSANDS) ASSETS CURRENT ASSETS: Cash...................................................... $ 10,319 Accounts receivable....................................... 35,869 Inventory................................................. 37,425 Prepaid expenses.......................................... 860 ---------- Total current assets.............................. 84,473 NON CURRENT ASSETS: Property, plant & equipment, net.......................... 1,036,343 Decommissioning fund investments.......................... 3,591 Deferred financing costs, net of accumulated amortization of $103................................................ 9,757 Other assets.............................................. 7,994 ---------- Total assets...................................... $1,142,158 ========== LIABILITIES AND MEMBERS' EQUITY LIABILITIES: Current liabilities: Current portion of long-term debt......................... 23,750 Accounts payable.......................................... 758 Accounts payable -- affiliates............................ 28,702 Accrued fuel and purchased power expense.................. 11,131 Accrued interest.......................................... 18,704 Other current liabilities................................. 4,524 ---------- Total current liabilities......................... 87,569 Long-term debt.............................................. 776,250 Other non-current liabilities............................... 4,175 ---------- Total Liabilities................................. 867,994 MEMBERS' EQUITY............................................. 274,164 ---------- Total liabilities and members' equity............. $1,142,158 ==========
See accompanying notes to consolidated financial statements. F-4 110 NRG SOUTH CENTRAL GENERATING LLC CONSOLIDATED STATEMENT OF OPERATIONS FOR THE PERIOD MARCH 30, 2000 (INCEPTION) THROUGH JUNE 30, 2000
(SUCCESSOR) (PREDECESSOR) FOR THE PERIOD CARVE-OUT FOR THE THREE MARCH 30, 2000 MONTHS ENDED (INCEPTION) -------------------------------- THROUGH JUNE 30, MARCH 31, 1999 MARCH 31, 2000 2000 -------------- -------------- ----------------- (UNAUDITED) (UNAUDITED) NOTE 12 NOTE 12 (IN THOUSANDS) Revenues....................................... $78,603 $79,982 $88,536 Operating Costs................................ 56,417 58,628 55,637 ------- ------- ------- Operating margin............................. 22,186 21,354 32,899 Depreciation and Amortization(1)............... 9,466 9,647 6,827 General and Administrative Expenses............ 2,427 2,423 1,841 ------- ------- ------- Income from operations....................... 10,293 9,284 24,231 Other Expense (Income), net.................... 775 (521) (227) Interest Expense............................... -- -- 18,861 ------- ------- ------- Excess of revenues over costs and expenses... $ 9,518 $ 9,805 ======= ======= Net Income................................... $ 5,597 =======
- --------------- (1)Depreciation and amortization expense is considered to be a cost of operations. See accompanying notes to consolidated financial statements. F-5 111 NRG SOUTH CENTRAL GENERATING LLC CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 30, 2000 (INCEPTION) THROUGH JUNE 30, 2000 (IN THOUSANDS) ---------------- Cash Flow from operating activities: Net income.................................................. $ 5,597 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization............................. 6,827 Amortization of deferred financing costs.................. 103 Changes in assets and liabilities: Accounts receivable.................................... (35,869) Inventories............................................ (4,339) Prepaid expenses....................................... (661) Accounts payable....................................... 758 Accounts payable -- affiliates......................... 679 Accrued fuel and purchased power expense............... 11,131 Accrued interest....................................... 18,704 Other current liabilities.............................. 3,247 Cash used by changes in other assets and liabilities...... (4,801) ----------- Net cash provided by operating activities............ 1,376 Cash flows from investing activities: Business acquisition, net of liabilities assumed.......... (1,055,927) Proceeds from disposition of property and equipment....... 8,975 Capital expenditures...................................... (2,812) ----------- Net cash used in investing activities................ (1,049,764) ----------- Cash flows from financing activities: Proceeds from issuance of long-term debt.................. 800,000 Deferred financing costs.................................. (9,860) Contributions by members.................................. 268,567 ----------- Net cash flows provided by financing activities...... 1,058,707 ----------- Net increase in cash and cash equivalents................... 10,319 Cash and cash equivalents at beginning of period............ -- ----------- Cash and cash equivalents at end of period.................. $ 10,319 =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid............................................... $ --
See accompanying notes to consolidated financial statements. F-6 112 NRG SOUTH CENTRAL GENERATING LLC CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
FOR THE PERIOD MARCH 30, 2000 (INCEPTION) THROUGH JUNE 30, 2000 ---------------- (IN THOUSANDS) Balance, March 30, 2000 (Inception)......................... $ -- Contributions............................................. 268,567 Net Income................................................ 5,597 --------- Balance, June 30, 2000...................................... $ 274,164 =========
See accompanying notes to consolidated financial statements. F-7 113 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NRG South Central Generating LLC (NRG South Central or the Company) is an indirect wholly owned subsidiary of NRG Energy, Inc (NRG). NRG South Central owns 100% of both Louisiana Generating LLC (Louisiana Generating) and NRG New Roads Holding LLC (New Roads) an unrestricted subsidiary. NRG South Central's members are NRG Central U.S. LLC (NRG Central) and South Central Generation Holding LLC (South Central Generation). NRG Central and South Central Generation are wholly owned subsidiaries of NRG, each of which own a 50% interest in NRG South Central. NRG South Central was formed for the purpose of financing, acquiring, owning, operating and maintaining through its subsidiaries and affiliates the facilities owned by Louisiana Generating and any other facilities that it or its subsidiaries may acquire in the future. Pursuant to a competitive bidding process, following the Chapter 11 bankruptcy proceeding of Cajun Electric Power Cooperative, Inc. (Cajun Electric), Louisiana Generating acquired the non-nuclear electric power generating assets of Cajun Electric. New Roads was formed for the purpose of holding assets that Louisiana Generating acquired in conjunction with the purchase of the generating assets from Cajun Electric which are not necessary for the operation of the newly acquired generating facilities and, with respect to some of these assets, may not be held by Louisiana Generating under applicable federal regulations. NOTE 1 -- BUSINESS DEVELOPMENTS On March 31, 2000, for approximately $1,055.9 million, Louisiana Generating acquired 1,708 MW of electric power generation facilities located in New Roads, Louisiana (Cajun facilities). The acquisition was financed through a combination of project level non-recourse debt and equity from NRG South Central. The acquisition was accounted for by the purchase method. The aggregate purchase price was allocated among the assets acquired and liabilities assumed based on an appraisal prepared in April 2000. NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries, Louisiana Generating LLC and NRG New Roads Holding LLC. The consolidated financial statements of the Company consist primarily of the results of operations and assets and liabilities of Louisiana Generating. Louisiana Generating is a guarantor of the bonds issued on March 30, 2000 to acquire the Cajun facilities. NRG New Roads Holding is not a guarantor of the bonds and holds certain assets that were acquired by Louisiana Generating but not necessary for the operation of the Cajun facilities. As of June 30, 2000, the total assets of NRG New Roads Holding represent approximately 2% of the total consolidated assets of the Company. All significant intercompany transactions have been eliminated in consolidation. Accounting policies for all of the Company's operations are in accordance with accounting principles generally accepted in the United States. Use of Estimates in Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. In recording transactions and balances resulting from business operations, the Company uses estimates based on the best information available. Estimates are used for such items as plant depreciable lives, uncollectible accounts and actuarially determined benefit costs, among others. As better information becomes available (or actual amounts are determinable), the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates. F-8 114 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Cash and Cash Equivalents The Company considers cash and cash equivalents to include cash and short-term investments with original maturities of three months or less. Restricted Cash Restricted cash consists primarily of cash held in escrow to satisfy certain obligations assumed upon acquisition of the Cajun facilities. Inventory Inventory consists of coal, spare parts and fuel oil and is stated at the lower of weighted average cost or market (Note 6). Prepaid Expenses Prepaid expenses include insurance, taxes and other prepayments. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is computed on a straight-line basis over the following estimated useful lives: Facilities, machinery and equipment................... 25 to 40 years Office furnishings and equipment...................... 3 to 10 years
Deferred Financing Costs Deferred financing costs consist of legal and other costs incurred to obtain debt financing. These costs are being amortized over the terms of the related debt. Revenue Recognition Revenue and related costs are recorded as electricity is generated or services are provided. Power Marketing Activities The Company has entered into a contract with a marketing affiliate for the sale of energy, capacity and ancillary services produced, which enables the affiliate to engage in forward sales and hedging transactions to manage the Company's electricity price exposure. Net gains or losses on hedges by the marketing affiliate, which are physically settled, are recognized in the same manner as the hedged item. The Company receives the net transaction price on all contracts that are physically settled by its marketing affiliate. Income Taxes The net income or loss of the Company for income tax purposes, along with any associated tax credits, is included in the tax returns of NRG. Accordingly, no provision has been made for federal or state income taxes in the accompanying financial statements. As of June 30, 2000, the accompanying financial statements report a balance of $1,036,343 for net property, plant and equipment. The tax basis of this property is estimated to be $1,032,917. The primary difference is due to accelerated tax depreciation. F-9 115 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Summary of Cash Flows Summarized cash flows from operating and investing activities for Cajun Electric for the three months ended March 30, 2000 and 1999 were as follows:
1999 2000 (IN THOUSANDS) ------- ------- Cash flows from operating activities: Excess of revenues over costs and expenses............... $ 9,518 $ 9,805 Adjustments to reconcile net margins to net cash: Depreciation and amortization.......................... 9,466 9,647 Asset dispositions..................................... 991 15 Changes in accounts receivable......................... 2,735 2,133 Changes in fuel and prepayments........................ (1,194) (4,153) Changes in accounts payable and accrued expenses....... 3,947 6,058 ------- ------- Net cash provided by operating activities........... 25,463 23,505 Cash flows for investing activities Capital expenditures................................... (5,212) (1,142) ------- ------- $20,251 $22,363 ======= =======
New Accounting Pronouncements In June 1998, the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement, as amended by SFAS 138, requires that all derivatives be recognized at fair value in the balance sheet, and that changes in fair value be recognized either currently in earnings or deferred as a component of Other Comprehensive Income, depending on the intended use of the derivative, its resulting designation and its effectiveness. The Company plans to adopt this standard effective January 1, 2001, as required. The potential impact of implementing this statement has not yet been determined. NOTE 3 -- PRO FORMA RESULTS OF OPERATIONS (UNAUDITED) On March 31, 2000, the Company completed the acquisition of two fossil fueled generating plants from Cajun Electric Power Cooperative, Inc. for approximately $1,055.9 million. The following information summarizes the pro forma results of operations for the three and six months ending June 30, 2000 and 1999 as if the acquisition had occurred as of the beginning of the three and six months ending June 30, 2000 and 1999. The pro forma information presented is for informational purposes only and is not necessarily indicative of future earnings or financial position or of what the earnings and financial position would have been had the acquisition of the Cajun facilities been consummated at the beginning of the respective periods or as of the date for which pro forma financial information is presented. F-10 116 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ACTUAL PRO FORMA THREE MONTHS ENDED THREE MONTHS ENDED JUNE 30, 2000 JUNE 30, 1999 (IN THOUSANDS) ------------------ ------------------ Revenues................................ $88,536 $94,791 Operating Costs......................... 55,637 65,365 ------- ------- Operating margin...................... 32,899 29,426 Depreciation and Amortization........... 6,827 6,875 General and Administrative Expenses..... 1,841 2,438 ------- ------- Income from operations................ 24,231 20,113 Other Expense (Income), net............. (68) 771 Interest Expense........................ 18,461 18,312 ------- ------- Net Income.............................. $ 5,838 $ 1,030 ======= =======
PRO FORMA PRO FORMA SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2000 JUNE 30, 1999 (IN THOUSANDS) ------------------ ------------------ Revenues................................ $168,518 $173,394 Operating Costs......................... 114,265 121,783 -------- -------- Operating margin...................... 54,253 51,611 Depreciation and Amortization........... 13,884 13,751 General and Administrative Expenses..... 4,264 4,866 -------- -------- Income from operations................ 36,105 32,994 Other Expense (Income), net............. (748) 1,544 Interest Expense........................ 37,173 36,624 -------- -------- Net Loss................................ $ (320) $ (5,174) ======== ========
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:
JUNE 30, 2000 (IN THOUSANDS) -------------- Land................................................... $ 14,308 Facilities, machinery and equipment.................... 1,021,547 Construction in progress............................... 5,933 Office furnishings and equipment....................... 1,251 Accumulated depreciation............................... (6,696) ---------- Property, plant and equipment (net).................... $1,036,343 ==========
Property, plant and equipment consist primarily of the electric generating facilities acquired from Cajun Electric. The assets are comprised of Units 1 and 2 of Big Cajun I and 100% of Units 1 and 2 and 58% of Unit 3 of Big Cajun II; an energy control center and headquarters building; 4,175 acres of land near Coushatta, Louisiana; a 540 MW General Electric Steam turbine generator; a 17.5 mile gas pipeline system; and certain transmission assets and all other substations. F-11 117 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Certain of the acquired assets are not necessary for the operation of the electric generating facilities, and with respect to some of the assets, may not be held by Louisiana Generating under applicable federal regulations. These assets were transferred to and are being held by New Roads for resale. As of June 30, 2000, the assets are carried at $25.4 million which represents the lower of the assets cost or fair value less cost to sell. These assets consist primarily of: a 4,175 acre parcel of land near Coushatta, Louisiana currently used for timber production, wildlife conservation and farming; a 2,466 acre segment of the Big Cajun II property that was held by Cajun Electric as a future ash disposal site currently being leased for farming; mineral rights to a seven acre parcel of land in New Roads, Louisiana; and a 540 MW General Electric steam turbine generator. NOTE 5 -- LONG TERM DEBT On March 30, 2000, NRG South Central issued $800 million of senior secured bonds in two tranches. The first tranche was for $500 million with a coupon of 8.962% and a maturity of 2016. The second tranche was for $300 million with a coupon of 9.479% and a maturity of 2024. Interest on the bonds will be payable in arrears on each March 15 and September 15, commencing on September 15, 2000. Principal payments will be made semi-annually commencing on September 15, 2000 with $11,250,000 due, $25,250,000 due in 2001, $25,500,000 due in 2002 and 2003, $15,000,000 due in 2004 and 2005, with the remaining $682,500,000 due between March 15, 2006 and September 15, 2024. The proceeds of the bonds were used to finance the Company's acquisition of the Cajun generating facilities on March 31, 2000. The Company's obligations in respect to the bonds are secured by a security interest in NRG Central's and South Central's interests in the Company and the Company's membership interest in Louisiana Generating; all of the assets related to the Cajun facilities including the Company's rights under all intercompany notes between the Company and Louisiana Generating but excluding those assets specifically held for resale; the revenue account and the debt service reserve account. Louisiana Generating issued a guarantee in favor of the bondholders, which unconditionally and irrevocably guarantees the payment of principal, of premium (if any) and interest on the bonds. The guarantee is a guarantee of payment and the bond trustee is entitled to make demands for payment under the guarantee any time that amounts due and payable on the bonds have not been paid. The obligations of Louisiana Generating with respect to the guarantee and the intercompany loan are secured by a mortgage with respect to Big Cajun I and II and an interest in: - All of Louisiana Generating's interest in the Cajun facilities and substantially all personal property associated with the Cajun facilities except for fixtures not located on the Cajun facilities and the assets specifically held for resale; - Substantially all contracts, associated with the Cajun facilities to which Louisiana Generating is a party and all consents to the assignment of these contracts that have been obtained; - All licenses, permits and governmental approvals associated with the Cajun facilities; - All insurance policies associated with the Cajun facilities and all monies paid to Louisiana Generating on these policies; - All revenues of the Cajun facilities, including revenues from power sales contracts entered into by NRG Power Marketing or any other entity which has entered into a power marketing agreement with Louisiana Generating associated with the Cajun facilities; and the revenue account. Optional Redemption NRG South Central may redeem the bonds in whole or in part at any time at a redemption price equal to: - 100% of the principal amount of the bonds being redeemed, plus F-12 118 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) - interest on the bonds being redeemed, accrued and unpaid to, but excluding, the date of redemption, plus - a make whole premium based on an amount equal to the excess, if any, of (a) the discounted present value of all interest and principal payments scheduled to become due in respect to the bonds to be redeemed (such discounted present value to be determined on the basis of a discount rate equal to (i) the treasury rate and (ii) 50 basis points), over (b) the outstanding principal amount of the applicable bonds to be redeemed. Debt Service Reserve Account NRG South Central established a debt service reserve account for the benefit of the bondholders. This account must constitute at all times a sufficient fund to pay the scheduled principal and interest on the bonds due in the next six months. NRG South Central may fund this account with cash or credit support. NRG South Central has obtained credit support and therefore need not fund this account with cash. Currently the debt service reserve requirement is being satisfied by a guarantee given by NRG. NOTE 6 -- INVENTORY Inventory, which is stated at the lower of weighted average cost or market, consists of:
JUNE 30, 2000 (IN THOUSANDS) -------------- Coal................................................... $25,862 Spare Parts............................................ 11,013 Fuel oil............................................... 550 ------- Total.................................................. $37,425 =======
NOTE 7 -- RELATED PARTY TRANSACTIONS Louisiana Generating entered into a power sales and agency agreement with NRG Power Marketing Inc., a wholly-owned subsidiary of NRG. The agreement is effective until December 31, 2030. Under the agreement, NRG Power Marketing Inc. will (i) have the exclusive right to manage, market and sell all power not otherwise sold or committed to or by Louisiana Generating, (ii) procure and provide to Louisiana Generating all fuel required to operate its respective facilities and (iii) market, sell and purchase all emission credits owned, earned or acquired by Louisiana Generating. In addition, NRG Power Marketing Inc. will have the exclusive right and obligation to effect the direction of the power output from the facilities. Under the agreement, NRG Power Marketing, Inc. pays to Louisiana Generating gross receipts generated through sales, less costs incurred by NRG Power Marketing, Inc. relative to its providing services (e.g. transmission and delivery costs, fuel cost, taxes, employee labor, contract services, etc.). During the period March 30, 2000 (Inception) through June 30, 2000, Louisiana Generating recorded gross receipts less costs incurred from NRG Power Marketing Inc. totaling $44.2 million. Louisiana Generating entered into an operation and maintenance agreement with NRG Operating Services, Inc., (NRG Operating Services) a wholly-owned subsidiary of NRG. The agreement is perpetual in term until terminated in writing by Louisiana Generating or until earlier terminated upon an event of default. Under the agreement, at the request of Louisiana Generating NRG Operating Services manages, oversees and supplements the operation and maintenance of the Cajun facilities. During the period March 30, 2000 (Inception) through June 30, 2000, Louisiana Generating incurred operating and maintenance costs billed from NRG Operating Services totaling $11.1 million. F-13 119 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Louisiana Generating and the Company each entered into an agreement with NRG for corporate support and services. The agreement is perpetual in term until terminated in writing by Louisiana Generating or NRG South Central or until earlier terminated upon an event of default. Under the agreement, NRG will provide services, as requested, in areas such as human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. Under the agreement, NRG is paid for personnel time as well as out-of-pocket costs. During the period March 30, 2000 (Inception) through June 30, 2000, Louisiana Generating and the Company paid NRG approximately $0.2 million for corporate support and services. As of June 30, 2000, the Company has an accounts payable-affiliates balance of approximately $28.7 million which consisted primarily of a payable to NRG for capitalized development costs incurred prior to the acquisition of the Cajun facilities. NOTE 8 -- BENEFITS DISCLOSURES Louisiana Generating retained a number of the administrative and operating personnel of Cajun Electric upon acquisition of Cajun Electric's generating facilities. Prior to March 31, 2000 these employees were participants in the National Rural Electric Cooperative Association's Retirement and Security Program, a master multiple-employer defined benefit plan. Effective March 31, 2000, the Cooperative's defined benefit and 401-K plans were terminated, no pension obligation was assumed by Louisiana Generating or NRG. Louisiana Generating sponsors a cash balance pension plan arrangement whereby the employees are entitled to a pension benefit of approximately 7% of total payroll. The employees are also eligible to participate in a 401-K plan that provides for the matching of specified amounts of employee contributions to the plan. For the period March 30, 2000 (Inception) through June 30, 2000, the Company recorded approximately $333,000 of pension expense and approximately $9,000 of 401-K matching funds. NOTE 9 -- SALES TO SIGNIFICANT CUSTOMERS During the period March 30, 2000 (Inception) through June 30, 2000, sales to two customers accounted for 18.2% and 17.1%, respectively of the Company's total revenues. During March 2000, the Company entered into certain power sales agreements with eleven distribution cooperatives that were customers of Cajun Electric prior to the Company's acquisition of the Cajun facilities. The initial terms of these agreements provide for the sale of energy, capacity and ancillary services for the periods ranging from four to 25 years. In addition, the Company assumed Cajun Electric's obligations under four long-term power supply agreements. The terms of these agreements range from 10 to 26 years. These power sales agreements accounted for the majority (88.1%) of the Company's total revenues during the period March 30, 2000 (Inception) through June 30, 2000 (Note 10). NOTE 10 -- COMMITMENTS AND CONTINGENCIES Contractual Commitments Power Supply Agreements with the Distribution Cooperatives During March 2000, Louisiana Generating entered into certain power supply agreements with eleven distribution cooperatives to provide energy, capacity and transmission services. The agreements are standardized into three types, Form A, B and C. Form A Agreements Six of the distribution cooperatives entered into Form A power supply agreements. The Form A agreement is an all-requirements power supply agreement which has an initial term of 25 years, commencing F-14 120 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) on March 31, 2000. After the initial term, the agreement continues on a year-to-year basis, unless terminated by either party giving five years advanced notice. Under the Form A power supply agreement, Louisiana Generating is obligated to supply the distribution cooperative and is required to purchase all of the energy and capacity required by the distribution cooperative for service to its retail customers although the distribution cooperative has certain limited rights under which it can purchase energy and capacity from third parties. Louisiana Generating must contract for all transmission service required to serve the distribution cooperative and will pass through the costs of transmission service to the cooperative. Louisiana Generating is required to supply at its cost, without pass through, control area services and ancillary services which transmission providers are not required to provide. Louisiana Generating owns and maintains the substations and other facilities used to deliver energy and capacity to the distribution cooperative and charges the cooperative a monthly specific delivery facility charge for such facilities; any additions to, or new delivery facilities. The initial monthly charge is 1% of the value of all of the distribution cooperative's specific delivery facilities. The cost of additional investment during the term of the agreement will be added to the initial value of the delivery facilities to calculate the monthly specific delivery facility charge. Louisiana Generating charges the distribution cooperative a demand charge, a fuel charge and a variable operation and maintenance charge. The demand charge consists of two components, a capital rate and a fixed operation and maintenance rate. The distribution cooperatives have an option to choose one of two fuel options, all six have selected the first option which is a fixed fee through 2004 and determined using a formula which is based on gas prices and the cost of delivered coal for the period thereafter. At the end of the fifteenth year of the contract, the cooperatives may switch to the second fuel option. The second fuel option consists of a pass-through of fuel costs, with a guaranteed coal heat rate and purchased energy costs, excluding the demand component in purchased power. From time to time Louisiana Generating may offer fixed fuel rates which the cooperative may elect to utilize. The variable operation and maintenance charge is fixed through 2004 and escalates at either approximately 3% per annum or in accordance with actual changes in specified indices as selected by the distribution cooperative. Five of the distribution cooperatives elected the fixed escalation provision and one elected the specified indices provision. The Form A agreement also contains provisions for special rates for certain customers based on the economic development benefits the customer will provide and other rates to improve the distribution cooperative's ability to compete with service offered by political subdivisions. Form B Agreements One distribution cooperative selected the Form B Power Supply Agreement. The term of the Form B power supply agreement commences on March 31, 2000 and ends on December 31, 2024. The Form B power supply agreement allows the distribution cooperative the right to elect to limit its purchase obligations to "base supply" or also to purchase "supplemental supply." Base supply is the distribution cooperative's ratable share of the generating capacity purchased by Louisiana Generating from Cajun Electric. Supplemental supply is the cooperative's requirements in excess of the base supply amount. The distribution cooperative which selected the Form B agreement also elected to purchase supplemental supply. Louisiana Generating charges the distribution cooperative a monthly specific delivery facility charge of approximately 1.75% of the depreciated net book value of the specific delivery facilities, including additional investment. The distribution cooperative may assume the right to maintain the specific delivery facilities and reduce the charge to 1.25% of the depreciated net book value of the specific delivery facilities. Louisiana Generating also charges the distribution cooperative its ratable share of 1.75% of the depreciated book value of common delivery facilities, which include communications, transmission and metering facilities owned by F-15 121 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Louisiana Generating to provide supervisory control and data acquisition, and automatic control for its customers. For base supply, Louisiana Generating charges the distribution cooperative a demand charge, an energy charge and a fuel charge. The demand charge for each contract year is set forth in the agreement and is subject to increase for environmental legislation or occupational safety and health laws enacted after the effective date of the agreement. Louisiana Generating can increase the demand charge to the extent its cost of providing supplemental supply exceeds $400/kW. The energy charge is fixed through 2004, and deceased slightly for the remainder of the contract term. The fuel charge is a pass through of fuel and purchased energy costs, the distribution cooperative may elect to be charged based on a guaranteed coal fired heat rate of 10,600 Btu/kWh, and it may also select fixed fuel factors as set forth in the agreement for each year through 2008. The one distribution cooperative which selected this form of agreement elected to utilize the fixed fuel factors. For the years after 2008, Louisiana Generating will offer additional fixed fuel factors for five-year periods that may be elected to utilize. For the years after 2008, the distribution cooperative may also elect to have its charges computed under the pass through provisions with or without the guaranteed coal fired heat rate. At the beginning of year six, Louisiana Generating will establish a rate fund equal to the ratable share of $18 million. The amount of the fund will be approximately $720,000. This fund will be used to offset the energy costs of the Form B distribution cooperatives which elected the fuel pass through provision of the fuel charge, to the extent the cost of power exceeds $0.04/kWh. Any funds remaining at the end of the term of the power supply agreement will be returned to Louisiana Generating. Form C Agreements Four distribution cooperatives selected the Form C power supply agreement. The Form C power supply agreement is identical to the Form A power supply agreement, except for the following. The term of the Form C power supply agreement is for four years following the closing date of the acquisition of the Cajun facilities. The agreement can be terminated by the distribution cooperative at any time with 12 months prior notice given after the first anniversary of the acquisition closing date. Louisiana Generating will charge the distribution cooperative a demand rate, a variable operation and maintenance charge and a fuel charge. Louisiana Generating will not offer the distribution cooperatives which select the Form C agreement any new incentive rates, but will continue to honor existing incentive rates. At the end of the term of the agreement, the distribution cooperative is obligated to purchase the specific delivery facilities for a purchase price equal to the depreciated book value. Other Power Supply Agreements Louisiana Generating assumed Cajun Electric's rights and obligations under two consecutive long-term power supply agreements with South Western Electric Power Company (SWEPCO), one agreement with South Mississippi Electric Power Association (SMEPA) and one agreement with Municipal Energy Agency of Mississippi (MEAM). The SWEPCO Operating Reserves and Off-Peak Power Sale Agreement, terminates on December 31, 2007. The agreement requires Louisiana Generating to supply 100 MW of off-peak energy during certain hours of the day to a maximum of 292,000 MWh per year and an additional 100 MW of operating reserve capacity and the associated energy within ten minutes of a phone request during certain hours to a maximum of 43,800 MWh of operating reserve energy per year. The obligation to purchase the 100 MW of off-peak energy is contingent on Louisiana Generating's ability to deliver operating reserve capacity and energy associated with operating reserve capacity. At Louisiana Generating's request it will supply up to 100 MW of non-firm, on peak capacity and associated energy. F-16 122 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The SWEPCO Operating Reserves Capacity and Energy Power Sale Agreement, is effective January 1, 2008 through December 31, 2026. The agreement requires Louisiana Generating to provide 50 MW of operating reserve capacity within 10 minutes of a phone request. In addition, SWEPCO is granted the right to purchase up to 21,900 MWh/year of operating reserve energy. The SMEPA Unit Power Sale Agreement is effective through May 31, 2009, unless terminated following certain regulatory changes, changes in fuel costs or destruction of the Cajun facilities. The agreement requires Louisiana Generating to provide 75 MW of capacity and the associated energy from Big Cajun II, Unit 1 and an option for SMEPA to purchase additional capacity and associated energy if Louisiana Generating determines that it is available, in 10 MW increments, up to a total of 200 MW. SMEPA is required to schedule a minimum of 25 MW plus 37% of any additional capacity that is purchased. The capacity charge is fixed through May 31, 2004, and increases for the period June 1, 2004 through May 31, 2009 including transmission costs to the delivery point and any escalation of expenses. The energy charge is 110% of the incremental fuel cost for Big Cajun II, Unit 1. The MEAM Power Sale Agreement is effective through May 31, 2010 with an option for MEAM to extend through September 30, 2015 upon five years advance notice. The agreement requires Louisiana Generating to provide 20 MW of firm capacity and associated energy with an option for MEAM to increase the capacity purchased to a total of 30 MW upon five years advance notice. The capacity charge is fixed. The operation and maintenance charge is a fixed amount which escalates at 3.5% per year. There is a transmission charge which varies depending upon the delivery point. The price for energy associated with the firm capacity is 110% of the incremental generating cost to Louisiana Generating and is adjusted to include transmission losses to the delivery point. Coal Supply Agreement Louisiana Generating has entered into a coal supply agreement with Triton Coal. The coal is primarily sourced from Triton Coal's Buckskin and North Rochelle mines located in Powder River Basin, Wyoming. The Coal supply agreement has a term of five years from March 31, 2000. The agreement is for the full coal requirements of Big Cajun II. The agreement establishes a base price per ton for coal supplied by Triton Coal. The base price is subject to adjustment for changes in, the level of taxes or other government fees and charges, variations in the caloric value of the coal shipped and changes in the price of SO(2) emission allowances. The base price is based on certain annual weighted average quality specifications, subject to suspension and rejection limits. The base price and quality of coal specifications guarantee compliance with Big Cajun II's annual SO(2) emissions allocation of 44,153 tons commencing in 2000 regardless of the burn level. Coal Transportation Agreement Louisiana Generating entered into a coal transportation agreement with Burlington Northern and Santa Fe Railway and American Commercial Terminal. The term of the agreement is five years from March 31, 2000. This agreement provides for the transport of all of the coal requirements of Big Cajun II from the mines in Wyoming to Big Cajun II. Transmission and Interconnection Agreements Louisiana Generating assumed Cajun Electric's existing transmission agreements with Central Louisiana Electric Company, SWEPCO; and Entergy Services, Inc., acting as agent for Entergy Arkansas, Inc., Entergy Gulf States, Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New Orleans, Inc. The Cajun facilities are connected to the transmission system of Entergy Gulf States and power is delivered to the distribution cooperatives at various delivery points on the transmission systems of Entergy Gulf States, Entergy Louisiana, Central Louisiana Electric Company and SWEPCO. Louisiana Generating also assumed F-17 123 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) from Cajun Electric 20 interchange and sales agreements with utilities and cooperatives, providing access to a 12 state area. Joint Ownership Participation and Operating Agreement for Big Cajun II, Unit 3 On March 31, 2000, Louisiana Generating acquired a 58% interest in the Big Cajun II, Unit 3 generation plant, Entergy Gulf States owns the remaining 42%. Big Cajun II, Unit 3 is operated and maintained by Louisiana Generating pursuant to a joint ownership participation and operating agreement. Under this agreement, Louisiana Generating and Entergy Gulf States are each entitled to their ownership percentage of the hourly net electrical output of Big Cajun II, Unit 3. All fixed costs are shared in proportion to the ownership interests. Fixed costs include the cost of operating common facilities. All variable costs are borne in proportion to the energy delivered to the owners. NOTE 11 -- PREDECESSOR REVENUES AND EXPENSES The accompanying Statement of Operations contain a statement of certain revenues and expenses of Cajun Electric on a carve-out basis for the three months ended March 31, 2000 and 1999. These results have been separated by a "black line" due to the change in basis of the assets of Cajun Electric on the date of acquisition by the Company. These results represent certain revenues and expenses of Cajun Electric's non-nuclear electric generating business which the Company acquired on March 31, 2000. The carve-out revenues and expenses exclude Cajun Electric's investment earnings, interest expense, bankruptcy reorganization costs and income taxes. NOTE 12 -- JOINTLY OWNED PLANT On March 31, 2000 Louisiana Generating acquired a 58% interest in the Big Cajun II, Unit 3 generation plant. Entergy Gulf States owns the remaining 42%. Big Cajun II, Unit 3 is operated and maintained by Louisiana Generating pursuant to a joint ownership participation and operating agreement. Under this agreement, Louisiana Generating and Entergy Gulf States are each entitled to their ownership percentage of the hourly net electrical output of Big Cajun II, Unit 3. All fixed costs are shared in proportion to the ownership interests. Fixed costs include the cost of operating common facilities. All variable costs are borne in proportion to the energy delivered to the owners. The Company's income statement includes the Company's share of all fixed and variable costs of operating the unit. The Company's 58% share of the original cost included in Plant, Property and Equipment at June 30, 2000 was $214.3 million. The corresponding accumulated depreciation and amortization was $1.3 million. NOTE 13 -- SUBSEQUENT EVENTS Pursuant to a project development agreement between NRG Energy and Koch Power, Inc., NRG Energy agreed in April 1999 to participate in the development of an approximately 200 MW simple cycle gas peaking facility in Sterlington, Louisiana. Development of the facility had been commenced by a Koch Power affiliate, Koch Power Louisiana, LLC, a Delaware limited liability company. In August 2000, NRG Energy acquired 100% of Koch Power Louisiana from Koch Power, and renamed it NRG Sterlington Power LLC. In August 2000, NRG Sterlington Power was designated as an unrestricted subsidiary of NRG South Central. As such it is not a guarantor of the bonds and its operations are not restricted by the indenture. Big Cajun I Peaking Power LLC was formed in July 2000 for the purpose of developing, owning and operating an approximately 240 MW simple cycle gas peaking facility expansion project at the Big Cajun I site in New Roads, Louisiana. Big Cajun I Peaking Power has commenced the permitting process in respect of the expansion project. The energy and capacity generated by the expansion project may be used to help meet Louisiana Generating's obligations under the Cajun facilities' power purchase agreements, with any excess power and capacity being marketed by NRG Power Marketing. The expansion project is targeted to begin F-18 124 NRG SOUTH CENTRAL GENERATING LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) commercial operation in June 2001. Big Cajun I Peaking Power has been designated as an unrestricted subsidiary of NRG South Central, and as such it is not a guarantor of the bonds and its operations are not restricted by the indenture. NOTE 14 -- DECOMMISSION FUND Decommissioning The Company is required by the State of Louisiana Department of Environmental Quality ("DEQ") to rehabilitate its Big Cajun II ash and wastewater impoundment areas upon removal from service of the Big Cajun II facilities. On July 1, 1989, a guarantor trust fund (the "Solid Waste Disposal Trust Fund") was established to accumulate the estimated funds necessary for such purpose. The Company's predecessor deposited $1.06 million in the Solid Waste Disposal Trust Fund in 1989, and funded $116,000 annually thereafter, based upon an estimated future rehabilitation cost (in 1989 dollars) of approximately $3.5 million and the remaining estimated useful life of the Big Cajun II facilities. Cumulative contributions to the Solid Waste Disposal Trust Fund and earnings on the investments therein are accrued as a decommissioning liability. At June 30, 2000 the carrying value of the trust fund investments and the related accrued decommissioning liability was approximately $3.6 million. The trust fund investments are comprised of various debt securities of the United States and are carried at amortized cost, which approximates their fair value. F-19 125 LOUISIANA GENERATING LLC FINANCIAL STATEMENTS FOR THE PERIOD FROM MARCH 30, 2000 (INCEPTION) TO JUNE 30, 2000 F-20 126 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Louisiana Generating LLC: In our opinion, the accompanying balance sheet and the related statements of operations, of member's equity and of cash flows present fairly, in all material respects, the financial position of Louisiana Generating LLC at June 30, 2000, and the results of its operations and its cash flows for the period from March 30, 2000 (Inception) through June 30, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management, our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. /s/ PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers LLP Minneapolis, Minnesota October 17, 2000 F-21 127 LOUISIANA GENERATING LLC BALANCE SHEET
JUNE 30, 2000 -------------- (IN THOUSANDS) ASSETS: CURRENT ASSETS: Cash...................................................... $ 10,319 Accounts receivable....................................... 35,869 Inventory................................................. 37,425 Prepaid expenses.......................................... 860 ---------- Total current assets.............................. 84,473 NON CURRENT ASSETS: Property, plant & equipment, net.......................... 1,010,894 Deferred financing costs, net of accumulated amortization of $103................................................ 9,757 Decommissioning fund investments.......................... 3,591 Other assets.............................................. 2,618 ---------- Total assets...................................... $1,111,333 ========== LIABILITIES AND MEMBER'S EQUITY LIABILITIES: Current liabilities: Current portion of long-term debt......................... 23,750 Accounts payable.......................................... 758 Accounts payable -- affiliates............................ 35,922 Accrued fuel and purchased power expense.................. 11,131 Accrued interest.......................................... 18,704 Other current liabilities................................. 4,524 ---------- Total current liabilities................................. 94,789 Long-term debt............................................ 776,250 Other non-current liabilities............................. 4,175 ---------- Total Liabilities................................. 875,214 MEMBER'S EQUITY............................................. 236,119 ---------- Total liabilities and member's equity............. $1,111,333 ==========
See accompanying notes to financial statements. F-22 128 LOUISIANA GENERATING LLC STATEMENT OF OPERATIONS FOR THE PERIOD MARCH 30, 2000 (INCEPTION) THROUGH JUNE 30, 2000
FOR THE PERIOD MARCH 30, 2000 (INCEPTION) THROUGH JUNE 30, 2000 ---------------- (IN THOUSANDS) Revenues.................................................... $88,536 Operating Costs............................................. 55,637 ------- Operating margin.......................................... 32,899 Depreciation and Amortization(1)............................ 6,702 General and Administrative Expenses......................... 1,626 ------- Income from operations.................................... 24,571 Other Income................................................ (56) Interest Expense............................................ 18,861 ------- Net Income................................................ $ 5,766 =======
- ------------------------- (1)Depreciation and amortization expense is considered to be a cost of operations. See accompanying notes to financial statements. F-23 129 LOUISIANA GENERATING LLC STATEMENT OF CASH FLOWS
FOR THE PERIOD MARCH 30, 2000 (INCEPTION) THROUGH JUNE 30, 2000 ---------------- (IN THOUSANDS) Cash Flow from operating activities: Net income.................................................. $ 5,766 Adjustments to reconcile net income to net cash provided from operating activities: Depreciation and amortization............................. 6,702 Amortization of deferred financing costs.................. 103 Changes in assets and liabilities: Accounts receivable, net............................... (35,869) Inventories............................................ (4,339) Prepaid expenses....................................... (661) Accounts payable....................................... 758 Accounts payable -- affiliates......................... (1,961) Accrued fuel and purchased power expense............... 11,131 Accrued interest....................................... 18,704 Other current liabilities.............................. 3,247 Cash used by changes in other assets and liabilities...... 575 ----------- Net cash provided by operating activities............ 4,156 Cash flows from investing activities: Business acquisition, net of liabilities assumed.......... (1,030,353) Proceeds from disposition of property and equipment....... 8,975 Capital expenditures...................................... (2,812) ----------- Net cash used in investing activities................ (1,024,190) ----------- Cash flows from financing activities: Proceeds from issuance of long-term debt.................. 800,000 Contributions by members.................................. 230,353 ----------- Net cash flows provided by financing activities...... 1,030,353 ----------- Net increase in cash and cash equivalents................... 10,319 Cash and cash equivalents at beginning of period............ -- ----------- Cash and cash equivalents at end of period.................. $ 10,319 =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid (net of amount capitalized)................... $ --
See accompanying notes to financial statements. F-24 130 LOUISIANA GENERATING LLC STATEMENT OF MEMBER'S EQUITY
FOR THE PERIOD MARCH 30, 2000 (INCEPTION) THROUGH JUNE 30, 2000 (IN THOUSANDS) ---------------- Balance, March 30, 2000 (Inception)......................... $ -- Contributions............................................. 230,353 Net Income................................................ 5,766 -------- Balance, June 30, 2000...................................... $236,119 ========
See accompanying notes to financial statements. F-25 131 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS Louisiana Generating LLC (Louisiana Generating or the Company) is an indirect wholly owned subsidiary of NRG Energy, Inc (NRG). NRG South Central owns 100% of Louisiana Generating LLC. NRG South Central's members are NRG Central U.S. LLC (NRG Central) and South Central Generation Holding LLC (South Central Generation). NRG Central and South Central Generation are wholly owned subsidiaries of NRG, each of which own a 50% interest in NRG South Central. Louisiana Generating was formed for the purpose of acquiring, owning, operating and maintaining the electric generating facilities acquired from Cajun Electric Power Cooperative, Inc. (Cajun Electric). Pursuant to a competitive bidding process, following the Chapter 11 bankruptcy proceeding of Cajun Electric, Louisiana Generating acquired the non-nuclear electric power generating assets of Cajun Electric. NOTE 1 -- BUSINESS DEVELOPMENTS On March 31, 2000, for approximately $1,030.4 million, the Company acquired 1,708 MW of electric power generation facilities located in New Roads, Louisiana (Cajun facilities). The acquisition was financed through a combination of project level non-recourse debt and equity from NRG South Central. The acquisition was accounted for by the purchase method. The aggregate purchase price was allocated among the assets acquired and liabilities assumed based on an appraisal prepared in April 2000. NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates in Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. In recording transactions and balances resulting from business operations, the Company uses estimates based on the best information available. Estimates are used for such items as plant depreciable lives, uncollectible accounts and actuarially determined benefit costs, among others. As better information becomes available (or actual amounts are determinable), the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates. Cash and Cash Equivalents The Company considers cash and cash equivalents to include cash and short-term investments with original maturities of three months or less. Restricted Cash Restricted cash consists primarily of cash held in trust accounts to satisfy certain obligations assumed upon acquisition of the Cajun facilities. Inventory Inventory consists of coal, spare parts and fuel oil and is stated at the lower of weighted average cost or market (Note 6). Prepaid Expenses Prepaid expenses include insurance, taxes and other prepayments. F-26 132 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is computed on a straight-line basis over the following estimated useful lives: Facilities, machinery and equipment................... 25 to 40 years Office furnishings and equipment...................... 3 to 10 years
Deferred Financing Costs Deferred financing costs consist of legal and other costs incurred to obtain debt financing. These costs are being amortized over the terms of the related debt. Revenue Recognition Revenue and related costs are recorded as electricity is generated or services are provided. Power Marketing Activities The Company has entered into a contract with a marketing affiliate for the sale of energy, capacity and ancillary services produced, which enables the affiliate to engage in forward sales and hedging transactions to manage the Company's electricity price exposure. Net gains or losses on hedges by the marketing affiliate, which are physically settled, are recognized in the same manner as the hedged item. The Company receives the net transaction price on all contracts that are physically settled by its marketing affiliate. Income Taxes The net income or loss of the Company for income tax purposes, along with any associated tax credits, is included in the tax returns of NRG. Accordingly, no provision has been made for federal or state income taxes in the accompanying financial statements. As of June 30, 2000, the accompanying financial statements report a balance of $1,010,894 for net property, plant and equipment. The tax basis of this property is estimated to be $1,007,123. The primary difference is due to accelerated tax depreciation. New Accounting Pronouncements In June 1998, the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement, as amended by SFAS 138, requires that all derivatives be recognized at fair value in the balance sheet, and that changes in fair value be recognized either currently in earnings or deferred as a component of Other Comprehensive Income, depending on the intended use of the derivative, its resulting designation and its effectiveness. The Company plans to adopt this standard effective January 1, 2001, as required. The potential impact of implementing this statement has not yet been determined. NOTE 3 -- PRO FORMA RESULTS OF OPERATIONS (UNAUDITED) On March 31, 2000, the Company completed the acquisition of two fossil fueled generating plants from Cajun Electric Power Cooperative, Inc. for approximately $1,030.4 million. The following information summarizes the pro forma results of operations for the three and six months ending June 30, 2000 and 1999 as if the acquisition had occurred as of the beginning of the three and six months ending June 30, 2000 and 1999. The pro forma information presented is for informational purposes only and is not necessarily indicative of future earnings or financial position or of what the earnings and financial position would have been had the F-27 133 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) acquisition of the Cajun facilities been consummated at the beginning of the respective periods or as of the date for which pro forma financial information is presented.
ACTUAL THREE MONTHS PRO FORMA ENDED THREE MONTHS ENDED JUNE 30, 2000 JUNE 30, 1999 (IN THOUSANDS) ---------------- ------------------ Revenues.................................. $88,536 $94,791 Operating Costs........................... 55,637 65,365 -------- ------- Operating margin........................ 32,899 29,426 Depreciation and Amortization............. 6,702 6,875 General and Administrative Expenses....... 1,626 2,438 -------- ------- Income from operations.................. 24,571 20,113 Other Expense (Income), net............... (56) 771 Interest Expense.......................... 18,461 18,312 -------- ------- Net Income................................ $ 6,166 $ 1,030 ======== =======
PRO FORMA PRO FORMA SIX MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2000 JUNE 30, 1999 (IN THOUSANDS) ---------------- ---------------- Revenues.................................... $168,518 $173,394 Operating Costs............................. 114,265 121,783 -------- -------- Operating margin.......................... 54,253 51,611 Depreciation and Amortization............... 13,759 13,751 General and Administrative Expenses......... 4,049 4,866 -------- -------- Income from operations.................... 36,445 32,994 Other Expense (Income), net................. (577) 1,544 Interest Expense............................ 37,173 36,624 -------- -------- Net Loss.................................... $ (151) $ (5,174) ======== ========
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:
JUNE 30, 2000 (IN THOUSANDS) -------------- Land................................................... $ 3,734 Facilities, machinery and equipment.................... 1,006,547 Construction in progress............................... 5,933 Office furnishings and equipment....................... 1,251 Accumulated depreciation............................... (6,571) ---------- Property, plant and equipment (net).................... $1,010,894 ==========
Property, plant and equipment consist primarily of the electric generating facilities acquired from Cajun Electric. The assets are comprised of Units 1 and 2 of Big Cajun I and 100% of Units 1 and 2 and 58% of Unit 3 of Big Cajun II; an energy control center and headquarters building; a 17.5 mile gas pipeline system; and certain transmission assets and all other substations. F-28 134 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Certain of the acquired assets are not necessary for the operation of the electric generating facilities, and with respect to some of the assets, may not be held by the Company under applicable federal regulations. These assets were transferred to and are being held by New Roads Holding LLC, an affiliate of the Company, for resale. These assets consist primarily of: a 4,175 acre parcel of land near Coushatta, Louisiana currently used for timber production, wildlife conservation and farming; a 2,466 acre segment of the Big Cajun II property that was held by Cajun Electric as a future ash disposal site currently being leased for farming; mineral rights to a seven acre parcel of land in New Roads, Louisiana; and a 540 MW General Electric steam turbine generator. NOTE 5 -- LONG TERM DEBT On March 30, 2000, NRG South Central issued $800 million of senior secured bonds in two tranches. The first tranche was for $500 million with a coupon of 8.962% and a maturity of 2016. The second tranche was for $300 million with a coupon of 9.479% and a maturity of 2024. Interest on the bonds will be payable in arrears on each March 15 and September 15, commencing on September 15, 2000. Principal payments will be made semi-annually commencing on September 15, 2000 with $11,250,000 due, $25,250,000 due in 2001, $25,500,000 due in 2002 and 2003, $15,000,000 due in 2004 and 2005, with the remaining $682,500,000 due between March 15, 2006 and September 15, 2024. The proceeds of the bonds were used to finance the Company's acquisition of the Cajun generating facilities on March 31, 2000. NRG South Central's obligations in respect to the bonds are secured by a security interest in NRG Central's and South Central's interests in NRG South Central and NRG South Central's membership interest in the Company; all of the assets related to the Cajun facilities including NRG South Central's rights under all intercompany notes between NRG South Central and the Company but excluding those assets specifically held for resale; the revenue account and the debt service reserve account. The Company issued a guarantee in favor of the bondholders, which unconditionally and irrevocably guarantee the payment of principal, of premium (if any) and interest on the bonds. The guarantee is a guarantee of payment and the bond trustee is entitled to make demands for payment under the guarantee any time that amounts due and payable on the bonds have not been paid. The Company's obligations with respect to the guarantee and the intercompany loan are secured by a mortgage with respect to Big Cajun I and II and an interest in: - All of the Company's interest in the Cajun facilities and substantially all personal property associated with the Cajun facilities except for fixtures not located on the Cajun facilities and the assets specifically held for resale; - Substantially all contracts, associated with the Cajun facilities to which the Company is a party and all consents to the assignment of these contracts that have been obtained; - All licenses, permits and governmental approvals associated with the Cajun facilities; - All insurance policies associated with the Cajun facilities and all monies paid to the Company on these policies; - All revenues of the Cajun facilities, including revenues from power sales contracts entered into by NRG Power Marketing or any other entity which has entered into a power marketing agreement with the Company associated with the Cajun facilities; and the revenue account. Optional Redemption NRG South Central may redeem the bonds in whole or in part at any time at a redemption price equal to: - 100% of the principal amount of the bonds being redeemed, plus F-29 135 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) - interest on the bonds being redeemed, accrued and unpaid to, but excluding, the date of redemption, plus - a make whole premium based on an amount equal to the excess, if any, of (a) the discounted present value of all interest and principal payments scheduled to become due in respect to the bonds to be redeemed (such discounted present value to be determined on the basis of a discount rate equal to (i) the treasury rate and (ii) 50 basis points), over (b) the outstanding principal amount of the applicable bonds to be redeemed. Debt Service Reserve Account NRG South Central established a debt service reserve account for the benefit of the bondholders. This account must constitute at all times a sufficient fund to pay the scheduled principal and interest on the bonds due in the next six months. NRG South Central may fund this account with cash or credit support. NRG South Central has obtained credit support and therefore need not fund this account with cash. Currently the debt service reserve requirement is being satisfied by a guarantee given by NRG. NOTE 6 -- INVENTORY Inventory, which is stated at the lower of weighted average cost or market, consists of:
JUNE 30, 2000 (IN THOUSANDS) -------------- Coal................................................... $25,862 Spare Parts............................................ 11,013 Fuel oil............................................... 550 ------- Total.................................................. $37,425 =======
NOTE 7 -- RELATED PARTY TRANSACTIONS The Company entered into a power sales and agency agreement with NRG Power Marketing Inc., a wholly-owned subsidiary of NRG. The agreement is effective until December 31, 2030. Under the agreement, NRG Power Marketing Inc. will (i) have the exclusive right to manage, market and sell all power not otherwise sold or committed to or by the Company, (ii) procure and provide to the Company all fuel required to operate its respective facilities and (iii) market, sell and purchase all emission credits owned, earned or acquired by the Company. In addition, NRG Power Marketing Inc. will have the exclusive right and obligation to effect the direction of the power output from the facilities. Under the agreement, NRG Power Marketing, Inc. pays to the Company gross receipts generated through sales, less costs incurred by NRG Power Marketing, Inc. relative to its providing services (e.g. transmission and delivery costs, fuel cost, taxes, employee labor, contract services, etc.). During the period March 30, 2000 (Inception) through June 30, 2000, the Company recorded gross receipts less costs incurred from NRG Power Marketing Inc. totaling $44.2 million. The Company entered into an operation and maintenance agreement with NRG Operating Services, Inc., (NRG Operating Services) a wholly-owned subsidiary of NRG. The agreement is perpetual in term until terminated in writing by the Company or until earlier terminated upon an event of default. Under the agreement, at the Company's request NRG Operating Services manages, oversees and supplements the operation and maintenance of the Cajun facilities. During the period March 30, 2000 (Inception) through June 30, 2000, the Company incurred operating and maintenance costs billed from NRG Operating Services totaling $11.1 million. F-30 136 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) The Company and NRG South Central each entered into an agreement with NRG for corporate support and services. The agreement is perpetual in term until terminated in writing by the Company or NRG South Central or until earlier terminated upon an event of default. Under the agreement, NRG will provide services, as requested, in areas such as human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. Under the agreement, NRG is paid for personnel time as well as out-of-pocket costs. During the period March 30, 2000 (Inception) through June 30, 2000, the Company and NRG South Central paid NRG approximately $0.2 million for corporate support and services. As of June 30, 2000, the Company has an accounts payable-affiliate balance of approximately $35.9 million; approximately $28 million of this amount represents a payable to NRG for capitalized development costs transferred to the Company upon completion of the acquisition of the Cajun facilities and the remainder represent a payable to NRG South Central for financing costs incurred to issue the bonds. NOTE 8 -- BENEFITS DISCLOSURES The Company retained a number of the administrative and operating personnel of Cajun Electric upon acquisition of Cajun Electric's generating facilities. Prior to March 31, 2000 these employees were participants in the National Rural Electric Cooperative Association's Retirement and Security Program, a master multiple-employer defined benefit plan. Effective March 31, 2000, the Cooperative's defined benefit and 401-K plans were terminated, no on-going pension obligation was assumed by the Company or NRG. The Company sponsors a cash balance pension plan arrangement whereby the employees are entitled to a pension benefit of approximately 7% of total payroll. The employees are also eligible to participate in a 401-K plan that provides for the matching of specified amounts of employee contributions to the plan. For the period March 30, 2000 (Inception) through June 30, 2000, the Company recorded approximately $333,000 of pension expense and approximately $9,000 of 401-K matching funds. NOTE 9 -- SALES TO SIGNIFICANT CUSTOMERS During the period March 30, 2000 (Inception) through June 30, 2000, sales to two customers accounted for 18.2% and 17.1%, respectively of the Company's total revenues. During March 2000, the Company entered into certain power sales agreements with eleven distribution cooperatives that were customers of Cajun Electric prior to the Company's acquisition of the Cajun facilities. The initial terms of these agreements provide for the sale of energy, capacity and ancillary services for the periods ranging from four to 25 years. In addition, the Company assumed Cajun Electric's obligations under four long-term power supply agreements. The terms of these agreements range from 10 to 26 years. These power sales agreements accounted for the majority (88.1%) of the Company's total revenues during the period March 30, 2000 (Inception) through June 30, 2000 (Note 10). NOTE 10 -- COMMITMENTS AND CONTINGENCIES Contractual Commitments Power Supply Agreements with the Distribution Cooperatives During March 2000, the Company entered into certain power supply agreements with eleven distribution cooperatives to provide energy, capacity and transmission services. The agreements are standardized into three types, Form A, B and C. F-31 137 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) Form A Agreements Six of the distribution cooperatives entered into Form A power supply agreements. The Form A agreement is an all-requirements power supply agreement which has an initial term of 25 years, commencing on March 31, 2000. After the initial term, the agreement continues on a year-to-year basis, unless terminated by either party giving five years advanced notice. Under the Form A power supply agreement, the Company is obligated to supply the distribution cooperative and is required to purchase all of the energy and capacity required by the distribution cooperative for service to its retail customers although the distribution cooperative has certain limited rights under which it can purchase energy and capacity from third parties. The Company must contract for all transmission service required to serve the distribution cooperative and will pass through the costs of transmission service to the cooperative. The Company is required to supply at its cost, without pass through, control area services and ancillary services which transmission providers are not required to provide. The Company owns and maintains the substations and other facilities used to deliver energy and capacity to the distribution cooperative and charges the cooperative a monthly specific delivery facility charge for such facilities any additions to, or new delivery facilities. The initial monthly charge is 1% of the value of all of the distribution cooperative's specific delivery facilities. The cost of additional investment during the term of the agreement will be added to the initial value of the delivery facilities to calculate the monthly specific delivery facility charge. The Company charges the distribution cooperative a demand charge, a fuel charge and a variable operation and maintenance charge. The demand charge consists of two components, a capital rate and a fixed operation and maintenance rate. The distribution cooperatives have an option to choose one of two fuel options, all six have selected the first option which is a fixed fee through 2004 and determined using a formula which is based on gas prices and the cost of delivered coal for the period thereafter. At the end of the fifteenth year of the contract, the cooperatives may switch to the second fuel option. The second fuel option consists of a pass-through of fuel costs, with a guaranteed coal heat rate and purchased energy costs, excluding the demand component in purchased power. From time to time the Company may offer fixed fuel rates which the cooperative may elect to utilize. The variable operation and maintenance charge is fixed through 2004 and escalates at either approximately 3% per annum or in accordance with actual changes in specified indices as selected by the distribution cooperative. Five of the distribution cooperatives elected the fixed escalation provision and one elected the specified indices provision. The Form A agreement also contains provisions for special rates for certain customers based on the economic development benefits the customer will provide and other rates to improve the distribution cooperative's ability to compete with service offered by political subdivisions. Form B Agreements One distribution cooperative selected the Form B Power Supply Agreement. The term of the Form B power supply agreement commences on March 31, 2000 and ends on December 31, 2024. The Form B power supply agreement allows the distribution cooperative the right to elect to limit its purchase obligations to "base supply" or also to purchase "supplemental supply." Base supply is the distribution cooperative's ratable share of the generating capacity purchased by the company from Cajun Electric. Supplemental supply is the cooperative's requirements in excess of the base supply amount. The distribution cooperative which selected the Form B agreement also elected to purchase supplemental supply. The Company charges the distribution cooperative a monthly specific delivery facility charge of approximately 1.75% of the depreciated net book value of the specific delivery facilities, including additional F-32 138 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) investment. The distribution cooperative may assume the right to maintain the specific delivery facilities and reduce the charge to 1.25% of the depreciated net book value of the specific delivery facilities. The Company also charges the distribution cooperative its ratable share of 1.75% of the depreciated book value of common delivery facilities, which include communications, transmission and metering facilities owned by the Company to provide supervisory control and data acquisition, and automatic control for its customers. For base supply, the Company charges the distribution cooperative a demand charge, an energy charge and a fuel charge. The demand charge for each contract year is set forth in the agreement and is subject to increase for environmental legislation or occupational safety and health laws enacted after the effective date of the agreement. The Company can increase the demand charge to the extent its cost of providing supplemental supply exceeds $400/kW. The energy charge is fixed through 2004, and deceased slightly for the remainder of the contract term. The fuel charge is a pass through of fuel and purchased energy costs, the distribution cooperative may elect to be charged based on a guaranteed coal fired heat rate of 10,600 Btu/kWh, and it may also select fixed fuel factors as set forth in the agreement for each year through 2008. The one distribution cooperative which selected this form of agreement elected to utilize the fixed fuel factors. For the years after 2008, the Company will offer additional fixed fuel factors for five-year periods that may be elected to utilize. For the years after 2008, the distribution cooperative may also elect to have its charges computed under the pass through provisions with or without the guaranteed coal fired heat rate. At the beginning of year six, the Company will establish a rate fund equal to the ratable share of $18 million. The amount of the fund will be approximately $720,000. This fund will be used to offset the energy costs of the Form B distribution cooperatives which elected the fuel pass through provision of the fuel charge, to the extent the cost of power exceeds $0.04/kWh. Any funds remaining at the end of the term of the power supply agreement will be returned to the Company. Form C Agreements Four distribution cooperatives selected the Form C power supply agreement. The Form C power supply agreement is identical to the Form A power supply agreement, except for the following. The term of the Form C power supply agreement is for four years following the closing date of the acquisition of the Cajun facilities. The agreement can be terminated by the distribution cooperative at any time with 12 months prior notice given after the first anniversary of the acquisition closing date. The Company will charge the distribution cooperative a demand rate, a variable operation and maintenance charge and a fuel charge. The Company will not offer the distribution cooperatives which select the Form C agreement any new incentive rates, but will continue to honor existing incentive rates. At the end of the term of the agreement, the distribution cooperative is obligated to purchase the specific delivery facilities for a purchase price equal to the depreciated book value. Other Power Supply Agreements The Company assumed Cajun Electric's rights and obligations under two consecutive long-term power supply agreements with South Western Electric Power Company (SWEPCO), one agreement with South Mississippi Electric Power Association (SMEPA) and one agreement with Municipal Energy Agency of Mississippi (MEAM). The SWEPCO Operating Reserves and Off-Peak Power Sale Agreement, terminates on December 31, 2007. The agreement requires the Company to supply 100 MW of off-peak energy during certain hours of the day to a maximum of 292,000 MWh per year and an additional 100 MW of operating reserve capacity and the associated energy within ten minutes of a phone request during certain hours to a maximum of 43,800 MWh of operating reserve energy per year. The obligation to purchase the 100 MW of off-peak energy is contingent on the Company's ability to deliver operating reserve capacity and energy associated with operating reserve F-33 139 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) capacity. At the Company's request it will supply up to 100 MW of non-firm, on peak capacity and associated energy. The SWEPCO Operating Reserves Capacity and Energy Power Sale Agreement, is effective January 1, 2008 through December 31, 2026. The agreement requires the Company to provide 50 MW of operating reserve capacity within 10 minutes of a phone request. In addition, SWEPCO is granted the right to purchase up to 21,900 MWh/year of operating reserve energy. The SMEPA Unit Power Sale Agreement is effective through May 31, 2009, unless terminated following certain regulatory changes, changes in fuel costs or destruction of the Cajun facilities. The agreement requires the Company to provide 75 MW of capacity and the associated energy from Big Cajun II, Unit 1 and an option for SMEPA to purchase additional capacity and associated energy if the Company determines that it is available, in 10 MW increments, up to a total of 200 MW. SMEPA is required to schedule a minimum of 25 MW plus 37% of any additional capacity that is purchased. The capacity charge is fixed through May 31, 2004, and increases for the period June 1, 2004 through May 31, 2009 including transmission costs to the delivery point and any escalation of expenses. The energy charge is 110% of the incremental fuel cost for Big Cajun II, Unit 1. The MEAM Power Sale Agreement is effective through May 31, 2010 with an option for MEAM to extend through September 30, 2015 upon five years advance notice. The agreement requires the Company to provide 20 MW of firm capacity and associated energy with an option for MEAM to increase the capacity purchased to a total of 30 MW upon five years advance notice. The capacity charge is fixed. The operation and maintenance charge is a fixed amount which escalates at 3.5% per year. There is a transmission charge which varies depending upon the delivery point. The price for energy associated with the firm capacity is 110% of the incremental generating cost to the Company and is adjusted to include transmission losses to the delivery point. Coal Supply Agreement The Company has entered into a coal supply agreement with Triton Coal. The coal is primarily sourced from Triton Coal's Buckskin and North Rochelle mines located in Powder River Basin, Wyoming. The Coal supply agreement has a term of five years from March 31, 2000. The agreement is for the full coal requirements of Big Cajun II. The agreement establishes a base price per ton for coal supplied by Triton Coal. The base price is subject to adjustment for changes in, the level of taxes or other government fees and charges, variations in the caloric value of the coal shipped, changes in the price of SO(2) emission allowances. The base price is based on certain annual weighted average quality specifications, subject to suspension and rejection limits. The base price and quality of coal specifications guarantee compliance with Big Cajun II's annual SO(2) emissions allocation of 44,153 tons commencing in 2000 regardless of the burn level. Coal Transportation Agreement The Company entered into a coal transportation agreement with Burlington Northern and Santa Fe Railway and American Commercial Terminal. The term of the agreement is five years from March 31, 2000. This agreement provides for the transport of all of the coal requirements of Big Cajun II from the mines in Wyoming to Big Cajun II. Transmission and Interconnection Agreements The Company assumed Cajun Electric's existing transmission agreements with Central Louisiana Electric Company, SWEPCO; and Entergy Services, Inc., acting as agent for Entergy Arkansas, Inc., Entergy Gulf States, Entergy Louisiana, Inc., Entergy Mississippi, Inc., and Entergy New Orleans, Inc. The Cajun facilities are connected to the transmission system of Entergy Gulf States and power is delivered to the F-34 140 LOUISIANA GENERATING LLC NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) distribution cooperatives at various delivery points on the transmission systems of Entergy Gulf States, Entergy Louisiana, Central Louisiana Electric Company and SWEPCO. The Company also assumed from Cajun Electric 20 interchange and sales agreements with utilities and cooperatives, providing access to a 12 state area. Joint Ownership Participation and Operating Agreement for Big Cajun II, Unit 3 On March 31, 2000, the Company acquired a 58% interest in the Big Cajun II, Unit 3 generation plant, Entergy Gulf States owns the remaining 42%. Big Cajun II, Unit 3 is operated and maintained by the Company pursuant to a joint ownership participation and operating agreement. Under this agreement, the Company and Entergy Gulf States are each entitled to their ownership percentage of the hourly net electrical output of Big Cajun II, Unit 3. All fixed costs are shared in proportion to the ownership interests. Fixed costs include the cost of operating common facilities. All variable costs are borne in proportion to the energy delivered to the owners. NOTE 12 -- JOINTLY OWNED PLANT On March 31, 2000 Louisiana Generating acquired a 58% interest in the Big Cajun II, Unit 3 generation plant. Entergy Gulf States owns the remaining 42%. Big Cajun II, Unit 3 is operated and maintained by Louisiana Generating pursuant to a joint ownership participation and operating agreement. Under this agreement, Louisiana Generating and Entergy Gulf States are each entitled to their ownership percentage of the hourly net electrical output of Big Cajun II, Unit 3. All fixed costs are shared in proportion to the ownership interests. Fixed costs include the cost of operating common facilities. All variable costs are borne in proportion to the energy delivered to the owners. The Company's income statement includes the Company's share of all fixed and variable costs of operating the unit. The Company's 58% share of the original cost included in Plant, Property and Equipment at June 30, 2000 was $214.3 million. The corresponding accumulated depreciation and amortization was $1.3 million. NOTE 13 -- DECOMMISSIONING FUND Decommissioning The Company is required by the State of Louisiana Department of Environmental Quality ("DEQ") to rehabilitate its Big Cajun II ash and wastewater impoundment areas upon removal from service of the Big Cajun II facilities. On July 1, 1989, a guarantor trust fund (the "Solid Waste Disposal Trust Fund") was established to accumulate the estimated funds necessary for such purpose. The Company's predecessor deposited $1.06 million in the Solid Waste Disposal Trust Fund in 1989, and funded $116,000 annually thereafter, based upon an estimated future rehabilitation cost (in 1989 dollars) of approximately $3.5 million and the remaining estimated useful life of the Big Cajun II facilities. Cumulative contributions to the Solid Waste Disposal Trust Fund and earnings on the investments therein are accrued as a decommissioning liability. At June 30, 2000 the carrying value of the trust fund investments and the related accrued decommissioning liability was approximately $3.6 million. The trust fund investments are comprised of various debt securities of the United States and are carried at amortized cost, which approximates their fair value. F-35 141 CAJUN ELECTRIC (CAJUN FACILITIES) CARVE-OUT FINANCIAL STATEMENT FOR THE YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1999 F-36 142 CAJUN ELECTRIC (CAJUN FACILITIES) INDEX TO CARVE-OUT FINANCIAL STATEMENTS
Report of Independent Accountants........................... F-38 Carve-Out Statement of Net Assets........................... F-39 Carve-Out Statement of Certain Revenue and Expenses......... F-40 Notes to Financial Statements............................... F-41
F-37 143 REPORT OF INDEPENDENT ACCOUNTANTS To the Management of NRG South Central Generating LLC: In our opinion, the accompanying carve-out statement of net assets and the related carve-out statement of certain revenue and expenses present fairly, in all material respects, the net assets of the Cajun Electric (Cajun Facilities) business to be acquired by Louisiana Generating LLC at December 31, 1999 and 1998, and certain revenue and expenses of its operations for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of NRG South Central Generating LLC's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audit included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As described in Note 3, the accompanying carve-out financial statements were prepared to present the net assets of the Cajun Electric (Cajun Facilities) business to be acquired by Louisiana Generating LLC and the certain revenue and expenses related to such business and are not intended to be a complete presentation of the assets, liabilities, revenue, expenses and cash flows of Cajun Electric Power Cooperative, Inc. /s/ PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers LLP Minneapolis, Minnesota March 7, 2000 F-38 144 CAJUN ELECTRIC (CAJUN FACILITIES) CARVE-OUT STATEMENT OF NET ASSETS
DECEMBER 31, ------------------------ 1999 1998 (IN THOUSANDS) ---------- ---------- ASSETS Utility plant Electric plant in service................................. $1,198,928 $1,191,375 Less: Accumulated depreciation and amortization........... 632,899 594,539 ---------- ---------- 566,029 596,836 Construction work in progress............................. 3,996 1,455 Electric plant held for future use........................ 9,904 9,904 ---------- ---------- 579,929 608,195 ---------- ---------- Other property and investments Non-utility property...................................... 670 670 Decommissioning reserve fund.............................. 3,518 3,225 ---------- ---------- 4,188 3,895 ---------- ---------- Current assets Accounts receivable -- electric customers Members................................................ 25,944 23,504 Nonmembers............................................. 6,220 4,725 Accounts receivable -- other.............................. 1,678 2,043 Fuel and supplies inventories............................. 34,234 40,578 Prepaids.................................................. 1,600 1,316 ---------- ---------- 69,676 72,166 ---------- ---------- Total assets...................................... 653,793 684,256 ---------- ---------- LIABILITIES Current liabilities Accounts payable.......................................... 4,806 2,114 Taxes other than income tax............................... 150 215 Other accrued expenses.................................... 8,966 13,904 ---------- ---------- 13,922 16,233 ---------- ---------- Decommissioning............................................. 3,518 3,225 ---------- ---------- Total liabilities................................. 17,440 19,458 ---------- ---------- Net assets........................................ $ 636,353 $ 664,798 ========== ==========
See accompanying notes to financial statements. F-39 145 CAJUN ELECTRIC (CAJUN FACILITIES) CARVE-OUT STATEMENT OF CERTAIN REVENUE AND EXPENSES
YEAR ENDED DECEMBER 31, -------------------------------- 1999 1998 1997 -------- -------- -------- (IN THOUSANDS) Operating revenue Sales of electric energy Members............................................... $292,090 $289,856 $280,109 Nonmembers............................................ 75,258 66,341 65,715 Other.................................................... 1,214 1,379 958 -------- -------- -------- 368,562 357,576 346,782 -------- -------- -------- Operating expenses Power production Fuel.................................................. 165,597 154,964 154,257 Operations and maintenance............................ 36,673 37,405 37,236 Purchased power.......................................... 10,951 11,645 12,681 Other power supply expenses.............................. 577 592 578 Transmission............................................. 30,246 29,882 41,687 Administrative and general............................... 9,711 9,122 9,437 Depreciation and amortization............................ 37,930 38,117 39,537 Taxes, other than income................................. 7,093 7,629 8,575 -------- -------- -------- 298,778 289,356 303,988 -------- -------- -------- Operating income........................................... 69,784 68,220 42,794 -------- -------- -------- Other income and expenses Interest, rents and leases............................... 463 456 695 Other income............................................. 545 787 730 Loss on asset dispositions............................... (2,878) (5,900) (481) -------- -------- -------- (1,870) (4,657) 944 -------- -------- -------- Revenues in excess of expenses............................. $ 67,914 $ 63,563 $ 43,738 ======== ======== ========
See accompanying notes to financial statements. F-40 146 CAJUN ELECTRIC (CAJUN FACILITIES) NOTES TO CARVE-OUT FINANCIAL STATEMENTS 1. BUSINESS DESCRIPTION The accompanying "carve-out" financial statements present the net assets and certain revenue and expenses of the non-nuclear electric power generating business (herein named "Cajun Electric (Cajun Facilities)") of Cajun Electric Power Cooperative, Inc. (the "Cooperative"). The Cooperative is a rural electric generation and transmission cooperative wholly owned by 11 distribution cooperatives (the "Members"). Pursuant to a competitive bidding process following the Cooperative's Chapter 11 bankruptcy proceeding, Louisiana Generating LLC has agreed to acquire the Cooperative's non-nuclear electric power generating facilities (see Notes 2 and 3). Louisiana Generating LLC is a wholly owned subsidiary of NRG South Central Generating LLC, which in turn is an indirect wholly owned subsidiary of NRG Energy, Inc. NRG Energy, Inc. is a wholly owned subsidiary of Northern States Power Company. 2. BANKRUPTCY PROCEEDING Bankruptcy Filing On December 21, 1994 (the "Petition Date"), the Cooperative filed a Petition for Reorganization under Chapter 11 of the United States Bankruptcy Code and began operating as debtor-in-possession under the supervision of the United States Bankruptcy Court for the Middle District of Louisiana (the "Bankruptcy Court"). In August 1995, the United States District Court for the Middle District of Louisiana (the "Court") ordered the appointment of a trustee (the "Trustee") to oversee the Cooperative's operations for the benefit of claim holders and interest holders. All debts of the Cooperative as of the Petition Date were stayed by the bankruptcy petition and subject to compromise pursuant to such proceedings. The Cooperative operated its business and managed its assets in the ordinary course as debtor-in-possession, and was required to obtain Trustee approval for transactions outside the ordinary course of business. Plan of Reorganization and Acquisition On January 22, 1996, the Court approved the Trustee's motion to establish procedures for submission of proposals to purchase the Cooperative's assets. The Trustee ultimately selected a bid by NRG Energy, Inc. to create a new limited liability company (Louisiana Generating LLC) to purchase certain non-nuclear assets of the Cooperative. In September 1999, the Bankruptcy Court approved the Plan of Reorganization (the "Plan"), which incorporates the Acquisition Agreement (see Note 3). The purchase price of the assets to be acquired by Louisiana Generating LLC is $1,026 million, subject to adjustment for interest rate fluctuations beyond specific levels. In addition, Louisiana Generating LLC has agreed to reimburse the Members for up $14 million of the expenses that the Members incurred in connection with the bankruptcy of the Cooperative. The transaction is scheduled to close on March 31, 2000, subject to various conditions. The assets to be acquired by Louisiana Generating LLC include all non-nuclear assets owned by the Cooperative, other than enumerated excluded assets defined in the Acquisition Agreement. Generally, the assets to be acquired consist of: - Big Cajun I and Big Cajun II, Units 1 and 2; - the Cooperative's 58% interest in Big Cajun II, Unit 3; - an energy control center and headquarters building; - approximately 4,200 acres of agricultural land near Coushatta, Louisiana; - a 540 MW General Electric steam turbine generator; - a 17.5 mile gas pipeline system; - 848 steel rotary dump railcars; F-41 147 CAJUN ELECTRIC (CAJUN FACILITIES) NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED) - approximately 38,000 annual sulfur dioxide allowances; - all coal inventory, oil in storage, materials and supplies; - the Big Cajun II solid waste closure investment fund; and - certain transmission assets and all other substations. Louisiana Generating LLC will not assume any liabilities of the Cooperative, other than (i) obligations under any of the contracts that Louisiana Generating LLC assumes in connection with the acquisition and which arise on or after the closing date of the acquisition, (ii) contingent liabilities related to certain tax benefit transfer agreements to which the Cooperative was a party and (iii) environmental liabilities that may exist related to the transferred property, including the obligation to rehabilitate the Big Cajun II ash and wastewater impoundment areas (see Note 8). 3. BASIS OF PRESENTATION The accompanying carve-out financial statements have been presented in accordance with generally accepted accounting principles and were derived from the historical accounting records of the Cooperative. The statements are intended to present the net assets and certain revenue and expenses of the Cajun Electric (Cajun Facilities) business to be acquired by Louisiana Generating LLC pursuant to the Fifth Amended and Restated Asset Purchase and Reorganization Agreement among Louisiana Generating LLC, Ralph R. Mabey, as Chapter 11 Trustee of Cajun Electric Power Cooperative, Inc., and NRG Energy, Inc. (as to Sections 7.4, 9.13 and 9.14 of the agreement only) (the "Acquisition Agreement") and the Cooperative's bankruptcy proceedings (see Note 2). Louisiana Generating LLC has agreed to purchase substantially all of the Cooperative's non-nuclear electric power generating facilities and related transmission assets, inventory and other real and personal property. Louisiana Generating LLC will not acquire the "Excluded Assets", as defined in the Acquisition Agreement, which generally consist of the Cooperative's cash, receivables and investments, nor will it assume any liabilities of the Cooperative, except as described in Note 2. Accordingly, the carve-out financial statements do not include all assets, liabilities, revenue and costs and expenses of the Cooperative as of and for the periods presented. Generally, the statements of net assets exclude the Cooperative's cash, investments (except decommissioning trust fund investments), employee post-retirement benefit obligation, liabilities subject to compromise in the bankruptcy proceeding, income taxes and equity and margin accounts. The statements of certain revenue and expenses exclude the Cooperative's investment earnings (except earnings from the decommissioning trust fund investments), bankruptcy reorganization costs, income taxes, and revenue, expenses and losses related to the ownership, operation and disposal of its 30% interest in the River Bend Nuclear Station in 1997. All long-term debt of the Cooperative is subject to compromise in the bankruptcy proceeding and during the three years ended December 31, 1999 the Cooperative did not record any interest expense thereon in accordance with American Institute of Certified Public Accountants Statement of Position No. 90-7, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code." Therefore, the carve-out financial statements do not include any long-term debt of the Cooperative or interest expense thereon. Although Louisiana Generating LLC will not purchase any receivables or assume any liabilities of the Cooperative, except as described in Note 2, the statements of net assets include receivables, accounts payable and accrued expenses in order to present the historical net assets of the business operation that will be acquired. The carve-out financial statements do not include a statement of cash flows due to exclusion of cash from the statements of net assets. However, see Note 4 for a summary of cash provided by and used in Cajun Electric's (Cajun Facilities) operating and investing activities. F-42 148 CAJUN ELECTRIC (CAJUN FACILITIES) NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED) 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant Customers and Concentrations of Credit Risk During 1999 sales to two customers totaled 16.7% and 18.9%, respectively, of total operating revenue (1998: 16.7% and 19.2%, respectively; 1997: 16.2% and 19.0%, respectively). No other customer accounted for more than 10% of total operating revenue during the years ended December 31, 1999, 1998 and 1997. Electric Plant in Service and Construction Work in Progress Electric plant in service and construction work in progress are stated on the basis of cost. Depreciation is computed using the straight-line method over the expected useful lives of the related component assets. The net book value of units of property replaced or retired, including costs of removal net of any salvage value, is charged to operations. Fuel and Supplies Inventories Fuel and supplies inventories are stated on the basis of cost utilizing the weighted-average cost method of inventory valuation. Fair Values of Financial Instruments Investments held in the decommissioning reserve fund are comprised of U.S. government debt securities carried at amortized cost, which approximates fair value. Summary of Cash Flows Summarized cash flows from operating and investing activities were as follows:
1999 1998 1997 -------- -------- ------- (IN THOUSANDS) Cash flows from operating activities: Revenues in excess of expenses.................... $ 67,914 $ 63,563 $43,738 Adjustments to reconcile net margins to net cash: Depreciation and amortization.................. 37,930 38,117 39,537 Asset dispositions............................. 2,878 5,900 481 Changes in accounts receivable................. (4,939) 5,988 (2,838) Changes in fuel and prepayments................ 6,060 (8,184) 5,315 Changes in accounts payable and accrued expenses..................................... (2,313) (4,333) (254) -------- -------- ------- Net cash provided by operating activities.... 107,530 101,051 85,979 -------- -------- ------- Cash flows from (for) investing activities: Capital expenditures.............................. (11,631) (9,999) (7,074) -------- -------- ------- $ 95,899 $ 91,052 $78,905 ======== ======== =======
F-43 149 CAJUN ELECTRIC (CAJUN FACILITIES) NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED) 5. UTILITY PLANT Electric plant in service is comprised of the following generating facilities:
CAPABLE LOUISIANA GENERATING GENERATING ------------------------- GENERATING UNIT CAPACITY PERCENTAGE MEGAWATTS - --------------- ----------- ---------- ----------- (UNAUDITED) (UNAUDITED) Big Cajun II, Unit 1............................. 575 100% 575 Big Cajun II, Unit 2............................. 575 100% 575 Big Cajun II, Unit 3............................. 575 58% 334 Big Cajun I, Unit 1.............................. 110 100% 110 Big Cajun I, Unit 2.............................. 110 100% 110 ----- ----- 1,945 1,704 ===== =====
Big Cajun II, Unit 3 is jointly owned by the Cooperative (58%) and Gulf States Utilities (42%). The unit is operated by the Cooperative pursuant to a Joint Ownership Participation and Operating Agreement, which governs the rights and obligations to the ownership of the facility. Each owner is entitled to their ownership percentage of the hourly net electrical output of the unit. All fixed costs of operating the unit are shared in proportion to the respective ownership interests and all variable costs are borne in proportion to the energy delivered to either co-owner. The statements of certain revenue and expenses include the Cooperative's share of all fixed and variable costs of operating the unit. The Cooperative's 58% share of the original cost included in electric plant in service at December 31, 1999 was $291.1 million ($290.9 million at December 31, 1998). The corresponding accumulated depreciation and amortization was $151.1 million ($141.9 million at December 31, 1998). The Cooperative will assign the Joint Ownership Participation and Operating Agreement to Louisiana Generating LLC upon closing of the acquisition. Electric plant in service balances at December 31 consisted of the following:
1999 1998 ---------- ---------- (IN THOUSANDS) Production: Coal.............................................. $1,048,012 $1,041,741 Gas............................................... 35,368 34,749 Transmission........................................ 94,393 94,320 General............................................. 21,155 20,565 ---------- ---------- $1,198,928 $1,191,375 ========== ==========
Construction work in progress consists of improvements and additions to existing plants. The estimated cost to complete these projects at December 31, 1999 was approximately $10.8 million. Electric plant held for future use of approximately $9.9 million at December 31, 1999 and 1998 consists primarily of land, carried at its original cost of $9.5 million, related to an abandoned lignite project that has been retained as a possible site for a future generating facility. F-44 150 CAJUN ELECTRIC (CAJUN FACILITIES) NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED) The net change in accumulated depreciation and amortization for the years ended December 31 was:
1999 1998 ------- ------- (IN THOUSANDS) Charged to operating expenses............................ $37,930 $38,117 Charged to fuel inventories and other assets............. 1,192 1,197 ------- ------- $39,122 $39,314 Less: Disposals and other adjustments.................... 762 1,435 ------- ------- $38,360 $37,879 ======= =======
Substantially all of the assets included in the carve-out statements of net assets are pledged as collateral to the Cooperative's long-term debt payable to the Rural Utilities Service. In addition, certain office facilities have been separately pledged as collateral to the Cooperative's industrial revenue bonds. These obligations are included in the Cooperative's pre-petition liabilities subject to compromise, which have been excluded from the carve-out statement of net assets. Upon execution of the Plan and closing of the acquisition, Louisiana Generating LLC will acquire the assets free of such encumbrances. 6. EMPLOYEE BENEFIT PLANS All of the Cooperative's employees participate in the National Rural Electric Cooperatives Association (NRECA) Retirement and Security Program once they have met minimum service requirements. The Cooperative makes annual contributions to the plan equal to the amounts accrued for pension expense. In this master multiple-employer defined benefit plan, which is available to all member cooperatives of the NRECA, the accumulated benefits and plan assets are not determined or allocated separately by individual employer. The Cooperative's contributions to the plan and amounts included in the accompanying statements of certain revenue and expenses of Cajun Electric (Cajun Facilities) totaled approximately $1.7 million, $1.7 million and $1.3 million in 1999, 1998 and 1997, respectively. The Cooperative also maintains a defined contribution pension plan, which constitutes a cash or deferred arrangement under section 401(k) of the Internal Revenue Code of 1986 (as amended). Once minimum service requirements are met, all of the employees of the Cooperative are eligible to participate in the plan. Under the terms of the plan, which is administered by the NRECA, the Cooperative matches 50% of employee contributions up to a maximum of 4% of each participating employee's base compensation. The Cooperative's contributions to the plan and amounts included in the accompanying statement of certain revenue and expenses of Cajun Electric (Cajun Facilities) totaled approximately $0.4 million, $0.3 million and $0.4 million in 1999, 1998 and 1997, respectively. The Cooperative also makes medical benefits available to all retirees. For those nonbargaining employees who retire at age 62 or thereafter and who have at least 10 years of service, the Cooperative will pay a portion of the cost. All other retirees are required to pay the full cost of benefits. Net periodic postretirement benefit expense of approximately $0.8 million, $0.8 million and $0.8 million in 1999, 1998 and 1997, respectively, is included in the accompanying statement of certain revenue and expenses. Upon the closing of the acquisition, all of the Cooperative's employee benefit plans will be terminated, including the defined benefit pension plan, the defined contribution (401(k)) pension plan and the post-retirement healthcare plan and no liabilities related thereto will be assumed by Louisiana Generating LLC. F-45 151 CAJUN ELECTRIC (CAJUN FACILITIES) NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED) 7. RATES AND REGULATION The electric rates charged by the Cooperative to its Members have been subject to the jurisdiction of the Louisiana Public Service Commission ("LPSC"). For the three years ended December 31, 1999, the Cooperative provided capacity and energy to its 11 Members pursuant to "all requirements" power supply agreements. Generally, the all requirements power supply agreements obligated the Cooperative to supply and required the Members to purchase all of the energy and capacity required by the Members for service to its retail customers, with limited exceptions. The Cooperative also provided capacity and energy to three other customers under long-term power agreements and sold excess capacity and energy on a merchant basis to other power suppliers and marketers. Pursuant to the Acquisition Agreement and the Plan, all 11 Members have elected to terminate, effective on the closing date, their existing all requirements supply agreements with the Cooperative. Each of the 11 Members has selected one of three alternative supply options offered by Louisiana Generating LLC, to be effective immediately after the acquisition closes. Seven of the Members have agreed to purchase power from Louisiana Generating LLC under long-term "all requirements" power supply agreements with terms of 25 years commencing on the acquisition closing. After the initial term, each agreement will continue on a year to year basis unless either party gives the other five years' notice of its intent to terminate the agreement. The remaining four Members have agreed to purchase power from Louisiana Generating LLC under short-term four-year transition power supply agreements. A Member may terminate a short-term agreement upon two years advance notice. The underlying terms and provisions of the long- and short-term power supply agreements offered by Louisiana Generating LLC and selected by the Members have been approved by the LPSC, which has regulatory authority over the Members. Although the form of the agreements have been approved by the LPSC, each Member must obtain approval from the LPSC of the supply alternative selected. Such approval has been obtained by three of the Members that have elected the long-term agreement. The remaining eight Members are expected to request and receive LPSC approval of their decisions prior to the closing of the acquisition. Electric Utility Deregulation On December 17, 1997, the LPSC accepted a staff report finding that deregulation, or retail wheeling, may be in the public interest contingent upon numerous issues being individually and adequately researched. During January 1998, the LPSC investigated the issues of tax implications; unbundling; market structure; market power, reliability, Independent System Operators; stranded costs and benefits; consumer protection, public policy programs and environmental issues; and future regulatory structure and affiliate relationships. In February of 1999, LPSC staff issued a report finding that restructuring is not in the public interest and recommending that the LPSC defer making a final determination. At its March 1999 Open Session, the LPSC adopted a new procedural schedule to continue its investigation of competitive implications through August of 2000. The effect of deregulation upon Cajun Electric (Cajun Facilities) cannot be determined at this time. 8. OTHER COMMITMENTS AND CONTINGENCIES Coal Supply and Transportation Agreements Purchases under the terms of contracts for the acquisition and related transportation of coal during 1999, 1998 and 1997 were approximately $129 million, $136 million and $127 million, respectively. Louisiana Generating LLC will not assume any liabilities incurred by the Cooperative prior to the closing of the acquisition related to the existing coal supply and transportation agreements. F-46 152 CAJUN ELECTRIC (CAJUN FACILITIES) NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED) Louisiana Generating LLC has entered into a five-year coal supply agreement under which Triton Coal Company will sell to Louisiana Generating LLC sufficient quantities of coal to satisfy the full coal requirements of the Cajun facilities. Louisiana Generating LLC has entered into a five-year coal transportation agreement with Burlington Northern and Santa Fe Railway Company and American Commercial Terminal LLC which agreement will be effective on the closing date of the acquisition. Pursuant to the agreement, the railroad will transport the coal from the Triton mines in Wyoming to St. Louis, Missouri, and American Commercial Terminal will transport the coal down the Mississippi River from St. Louis to the Cajun facilities. Decommissioning The Cooperative is required by the State of Louisiana Department of Environmental Quality ("DEQ") to rehabilitate its Big Cajun II ash and wastewater impoundment areas upon removal from service of the Big Cajun II facilities. On July 1, 1989, the Cooperative established a guarantor trust (the "Solid Waste Disposal Trust Fund") to accumulate the estimated funds necessary for such purpose. The Cooperative deposited $1.06 million in the Solid Waste Disposal Trust Fund in 1989, and has funded $116,000 annually thereafter, based upon the Cooperative's estimated future rehabilitation cost (in 1989 dollars) of approximately $3.5 million and the remaining estimated useful life of the Big Cajun II facilities. Cumulative contributions to the Solid Waste Disposal Trust Fund and earnings on the investments therein are accrued as a decommissioning liability. At December 31, 1999 the carrying value of the trust fund investments and the related accrued decommissioning liability was approximately $3.5 million. The trust fund investments are comprised of various debt securities of the United States and are carried at amortized cost, which approximates their fair value. The Solid Waste Trust Fund is included in assets to be acquired by Louisiana Generating LLC, which will also assume the obligation to rehabilitate the Big Cajun II ash and wastewater impoundment areas. Letters of Credit The Cooperative has outstanding two letters of credit in the aggregate amount of approximately $15 million as of December 31, 1999 supporting potential indemnity payments related to certain tax benefit transfer agreements to which the Cooperative was a party. The letters of credit will be terminated upon the closing of the acquisition. However, as of the closing date, Louisiana Generating LLC will assume the contingent liability related to the potential indemnity payments. Member Class Action Rate Litigation On September 20, 1989, a class action petition was filed in the Tenth Judicial District State Court in Natchitoches Parish, Louisiana, naming the Cooperative's Members as defendants. The plaintiffs in this action seek a refund of all rate increases enacted by the Cooperative's Members from 1978 until the respective Member voted to be subject to the jurisdiction of the LPSC or was placed under the jurisdiction of the LPSC by action of the State Supreme Court. On October 17, 1989, the case was moved to the federal courts. On August 28, 1992, the District Court abstained from this matter in favor of proceedings at the LPSC. The LPSC currently has an open docket associated with this matter. On August 19, 1994, the LPSC adopted the standards recommended by its Special Counsel. Based on those standards, Special Counsel issued a report in August 1996 recommending that 23 of the 29 rate increases implemented during the period of nonregulation be found presumptively not unreasonable and be eliminated from further review. Special Counsel recommended that the remaining six rate increases be further reviewed for reasonableness. On November 18, 1997, the LPSC issued Order U-19943-B dismissing two more rate increases, finding all but the four remaining increases presumptively not unreasonable. On August 19, 1998, the LPSC dismissed two rate increases for Southwest Louisiana Electric Membership Corporation leaving the final two rate increases to be F-47 153 CAJUN ELECTRIC (CAJUN FACILITIES) NOTES TO CARVE-OUT FINANCIAL STATEMENTS -- (CONTINUED) reviewed for reasonableness. A hearing was held on October 12, 1999, on the last two rate increases. The LPSC staff is expected to issue a final report in time for the LPSC to vote on the matter at its March 2000 Open Session. The timing or outcome of this matter is uncertain and no provision for any liability that may result has been made in the financial statements. However, each Member has entered into a stipulation with the Trustee which releases the Bankruptcy Estate from claims by the Members that might arise as a result of any refunds which the LPSC may order. Further, Louisiana Generating LLC will not assume any liability that may result from the outcome of this matter. F-48 154 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS DOES NOT OFFER TO SELL OR ASK FOR OFFERS TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH THIS PROSPECTUS RELATES AND IT DOES NOT CONSTITUTE AN OFFER TO SELL OR ASK FOR OFFERS TO BUY ANY OF THE SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL, WHERE THE PERSON MAKING THE OFFER IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON WHO CANNOT LEGALLY BE OFFERED THE SECURITIES. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE. UNTIL [ ], 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. EACH BROKER-DEALER THAT RECEIVES BONDS FOR ITS OWN ACCOUNT PURSUANT TO THE EXCHANGE OFFER MUST ACKNOWLEDGE THAT IT WILL DELIVER A PROSPECTUS IN CONNECTION WITH ANY RESALE OF SUCH BONDS. FOR A PERIOD OF 90 DAYS AFTER THE EXPIRATION DATE OF THE EXCHANGE OFFER THIS PROSPECTUS WILL BE MADE AVAILABLE TO ANY BROKER-DEALER FOR USE IN CONNECTION WITH ANY SUCH RESALE. ------------------------ PROSPECTUS ------------------------ NRG SOUTH CENTRAL GENERATING LLC EXCHANGE OFFER FOR OUTSTANDING $500,000,000 8.962% SERIES A SENIOR SECURED BONDS DUE 2016 $300,000,000 9.479% SERIES B SENIOR SECURED BONDS DUE 2024 IN EXCHANGE FOR $500,000,000 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016 $300,000,000 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024 ------------------------ [NRG LOGO] ------------------------ October , 2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 155 PART II ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS NRG South Central Generating LLC and the Louisiana Generating LLC are empowered by Section 18-108 of the Delaware Limited Liability Company Act, subject to the procedures and limitations therein, to indemnify and hold harmless any member or manger or other person of each of the companies or other person from and against any and all claims and demands whatsoever, subject to such standards and restrictions, if any, as are set forth in each of their limited liability company agreements. Section 4.4(a) of the limited liability company agreement of Louisiana Generating LLC provides that no member, officer, director, employee or agent of the Company and no employee, representative, agent or affiliate of the member shall be liable to the Company or any other person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such person by the limited liability company agreement, except that a such person shall be liable for any such loss, damage or claim incurred by reason of such person's gross negligence or willful misconduct. Section 4.4(b) of the limited liability company agreement of Louisiana Generating LLC provides that members, officers, directors, employees and agents of the Company and employees, representatives, agents, and affiliates of the members shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such person by reason of any act or omission performed or omitted by such person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such person by the limited liability company agreement, except that no such person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such person by reason of such person's gross negligence or willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under Section 4.4 shall be provided out of and to the extent of Company assets only, and no member shall have personal liability on account thereof. Section 4.4(c) of the limited liability company agreement of Louisiana Generating LLC provides that expenses (including legal fees) incurred by members, officers, directors, employees and agents of the Company and employees, representatives, agents and affiliates of the members defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action suit or proceeding upon receipt by the Company of an undertaking by or on behalf of such person to repay such amount if it shall be determined that such person is not entitled to be indemnified as authorized in Section 4.4. Section 4.4(d) of the limited liability company agreement of Louisiana Generating LLC provides that members, officers, directors, employees and agents of the Company and employees, representatives, agents and affiliates of the members shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company as to matters such person reasonably believes are within the presenter's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, or any other facts pertinent to the existence and amount of assets from which distributions to the member might properly be paid. Section 4.4(e) of the limited liability company agreement of Louisiana Generating LLC provides that, to the extent that, at law or in equity, members, officers, directors, employees and agents of the Company and employees, representatives, agents and affiliates of the members have duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other such person, a member, officer, director, employee or agent of the Company or an employee, representative, agent or affiliate of a member acting under the Limited Liability Company Agreement shall not be liable to the Company or to any other such person for its good faith reliance on the provisions of the limited liability company agreement or any approval or authorization granted by the Company or any other member, officer, director, employee or agent of the Company or an employee, representative, agent or affiliate of a member. II-1 156 Section 6.08 of the limited liability company agreement of NRG South Central Generating LLC provides that each member of the company shall indemnify, protect, defend, release and hold harmless each other member, and such other member's representatives, affiliates and their respective directors, officers, employees and agents from and against any claims asserted by or on behalf of any person (including another member), that arise out of, relate to or are otherwise attributable to, directly or indirectly, a breach by the indemnifying member of the agreement, or the negligence, gross negligence or willful misconduct of the indemnifying member in connection with the agreement; provided however, that the foregoing indemnification provision shall not apply to any claim or other matter for which a member (or its representative) has no liability or duty pursuant to Section 6.07 of the agreement or is indemnified or released pursuant to Section 6.02(a)(iii) of the agreement. Section 6.02(a)(iii) of the limited liability company agreement of NRG South Central Generating LLC provides that the company shall indemnify, protect, defend, release and hold harmless each representative of a member of the company on the Management Committee from and against any claims asserted by or on behalf of any person (including another member), other than the member that designated such Representative, that arise out of, relate to or are otherwise attributable to, directly or indirectly, such representative's service on the Management Committee, other than such claims arising out of the fraud or willful misconduct of such representative. Section 6.07 of the limited liability company agreement of NRG South Central Generating LLC includes the following disclaimers of duties and liabilities of the company's members. (1) No member owes any duty (including any fiduciary duty ) to the other members or to the company, other than the duties expressly set forth in the agreement. (2) No member shall be liable (whether in contract, tort or otherwise) for special, indirect, incidental or consequential damages). (3) The obligations of the member under the agreement are obligations of the members only, and no recourse shall be available against any officer, director or affiliate of any member, except as permitted under applicable law. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT NO. DESCRIPTION - ------- ----------- 1.1 Purchase Agreement, dated as of March 30, 2000, among NRG South Central Generating LLC, and Chase Securities, Inc., Lehman Brothers Inc., Credit Suisse First Boston Corporation and Salomon Smith Barney Inc. as representatives of the Initial Purchasers 3.1 Certificate of Formation of NRG South Central Generating LLC 3.2 Limited Liability Company Agreement of NRG South Central Generating LLC 3.3 Certificate of Formation of Louisiana Generating LLC 3.4 Limited Liability Company Agreement of Louisiana Generating LLC 3.5 Certificate of Formation of NRG New Roads Holdings LLC 3.6 Limited Liability Company Agreement of NRG New Roads Holdings LLC 3.7 Certificate of Formation of NRG Sterlington Power LLC 3.8 Limited Liability Company Agreement of NRG Sterlington Power LLC 3.9 Certificate of Formation of Big Cajun I Peaking Power LLC 3.10 Limited Liability Company Agreement of Big Cajun I Peaking Power LLC 4.1 Trust Indenture, dated as of March 30, 2000, among NRG South Central Generating LLC, Louisiana Generating LLC and The Chase Manhattan Bank, as bond trustee, The Chase Manhattan Bank, as depository bank, relating to the Senior Secured Bonds
II-2 157
EXHIBIT NO. DESCRIPTION - ------- ----------- 4.2 Form of certificate of 8.962% Series A Senior Secured Bonds due 2016 (included in Exhibit 4.1) 4.3 Form of certificate of 9.479% Series B Senior Secured Bonds due 2024 (included in Exhibit 4.1) 4.4 Form of certificate of 8.962% Series A-1 Senior Secured Bonds due 2016 4.5 Form of certificate of 9.479% Series B-1 Senior Secured Bonds due 2024 4.6 Exchange and Registration Rights Agreement, dated as of March 30, 2000, by and among NRG South Central Generating LLC, Louisiana Generating LLC, Chase Securities Inc. and Lehman Brothers Inc., on behalf of the Initial Purchasers 4.7 Collateral Agency and Intercreditor Agreement, dated as of March 30, 2000, among NRG South Central Generating LLC, Louisiana Generating LLC, The Chase Manhattan Bank, as bond trustee, The Chase Manhattan Bank, as depositary bank and The Chase Manhattan Bank, as collateral agent 4.8 Assignment and Security Agreement, dated as of March 30, 2000, between NRG South Central Generating LLC and The Chase Manhattan Bank, as collateral agent 4.9 Guarantor Note, dated as of March 30, 2000, by Louisiana Generating LLC in favor of NRG South Central Generating LLC 4.10 Guarantor Loan Agreement, dated as of March 30, 2000 among Louisiana Generating LLC and NRG South Central Generating LLC 4.11 Guarantee, dated as of March 30, 2000, by Louisiana Generating LLC in favor of The Chase Manhattan Bank 4.12 Debt Reserve Guarantee Agreement, dated as of March 30, 2000, between NRG Energy, Inc. and The Chase Manhattan Bank, as trustee, on behalf of the Holders of the Bonds 4.13 Assignment and Security Agreement, dated as of March 30, 2000, between Louisiana Generating LLC and The Chase Manhattan Bank, as collateral agent 4.14 Assignment and Security Agreement, dated as of March 30, 2000, among NRG Power Marketing Inc. and The Chase Manhattan Bank, as collateral agent 4.15 Pledge and Security Agreement, dated as of March 30, 2000, among NRG South Central Generating LLC and The Chase Manhattan Bank, as collateral agent 5.1 Form of opinion and consent of Gibson, Dunn & Crutcher LLP as to the legality of the securities to be issued in this exchange offer 10.1 Working Capital Agreement, dated as of April 30, 2000, by NRG South Central Generating LLC, the Guarantors, the Lenders and The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, as administrative agent 10.2 NRG South Central Generating LLC Secured Revolving Note, dated as of April 30, 2000, by NRG South Central Generating LLC to The Bank of Tokyo-Mitsubishi, Ltd., New York Branch 10.3 Power Sales and Agency Agreement, dated March 24, 2000 among NRG Power Marketing Inc. and Louisiana Generating LLC 10.4 Operation and Management Services Agreement, dated March 24, 2000, among NRG Operating Services, Inc. and Louisiana Generating LLC 10.5 Corporate Services Agreement, dated March 24, 2000, among NRG Energy, Inc. and NRG South Central Generating 10.6 Corporate Services Agreement, dated March 24, 2000, among NRG Energy, Inc. and Agreement Louisiana Generating 10.7 Corporate Services Agreement, dated August 17, 2000, among NRG Energy, Inc. and NRG Sterlington Power LLC
II-3 158
EXHIBIT NO. DESCRIPTION - ------- ----------- 10.8 Corporate Services Agreement, dated August 4, 2000, among NRG Energy, Inc. and Big Cajun I Peaking Power LLC 10.9 Coal Transportation Agreement between Louisiana Generating, LLC and The Burlington Northern and Santa Fe Railway Company and American Commercial Marine Service Company+ 10.10 Agreement between Louisiana Generating, LLC and Triton Coal Company for the Sale and Purchase of Coal+ 12.1 Consolidated Ratio of Earnings to Fixed Charges for NRG South Central Generating LLC 21.1 Subsidiaries of NRG South Central Generating LLC 23.1 Consent of PricewaterhouseCoopers LLP 23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1) 24.1 Powers of Attorney (included as part of signature page to this registration statement) 25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as Trustee under the indenture 27.1 Financial Data Schedule for NRG South Central Generating LLC (for SEC use only) 27.2 Financial Data Schedule for Louisiana Generating LLC (for SEC use only) 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4 Letter to Clients
- --------------- + Confidential treatment is being requested for portions of these exhibits. Omitted material is being filed separately with the Commission. ITEM 22. UNDERTAKINGS The undersigned registrants hereby undertake: (1) To file during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liabilities under the Securities Act of 1933, each post-effective amendment will be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time will be deemed to be the initial bona fide offering thereof. II-4 159 (3) To remove from the registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrants hereby undertake that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of the receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrants hereby undertake to supply by means of post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions described in Item 20 above, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-5 160 SIGNATURES Pursuant to the requirements of the Securities Act, NRG South Central Generating LLC has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 25th day of October, 2000. NRG South Central Generating LLC By: /s/ BRIAN B. BIRD ------------------------------------ Name: Brian B. Bird Title: Treasurer POWER OF ATTORNEY We the undersigned representatives of the members and the undersigned officers of NRG South Central Generating LLC do hereby constitute and appoint Leonard A Bluhm and Brian B. Bird and each of them, our true and lawful attorneys-in-fact and agents, to do any and all acts and things in our names and on our behalf in our capacities as representatives of the members and as officers and to execute any and all instruments for us and in our name in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said company to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement, or any registration statement for this exchange offer that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, including specifically, but without limitation, the power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or any of them, will do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 25th day of October, 2000:
SIGNATURE TITLE DATE --------- ----- ---- /s/ DAVID H. PETERSEN Representative of NRG Central October 25, 2000 - --------------------------------------------------- U.S. LLC and South Central David H. Petersen Generation Holding /s/ LEONARD A. BLUHM Representative of NRG Central October 25, 2000 - --------------------------------------------------- U.S. LLC and South Central Leonard A. Bluhm Generation Holding /s/ CRAIG A. MATACZYNSKI Representative of NRG Central October 25, 2000 - --------------------------------------------------- U.S. LLC and South Central Craig A. Mataczynski Generation Holding and President /s/ CRAIG A. MATACZYNSKI President October 25, 2000 - --------------------------------------------------- Craig A. Mataczynski /s/ ALAN D. WILLIAMS Vice President October 25, 2000 - --------------------------------------------------- Alan D. Williams
II-6 161
SIGNATURE TITLE DATE --------- ----- ---- /s/ BRIAN B. BIRD Treasurer October 25, 2000 - --------------------------------------------------- Brian B. Bird /s/ MICHAEL J. YOUNG Secretary October 25, 2000 - --------------------------------------------------- Michael J. Young
II-7 162 SIGNATURES Pursuant to the requirements of the Securities Act, Louisiana Generating LLC has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota, on the 25th day of October, 2000. Louisiana Generating LLC By: /s/ BRIAN B. BIRD ------------------------------------ Name: Brian B. Bird Title: Treasurer POWER OF ATTORNEY We the undersigned members and officers of Louisiana Generating LLC do hereby constitute and appoint Leonard A Bluhm and Brian B. Bird and each of them, our true and lawful attorneys-in-fact and agents, to do any and all acts and things in our names and on our behalf in our capacities as representatives of the members and as officers and to execute any and all instruments for us and in our name in the capacities indicated below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable said company to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement, or any registration statement for this exchange offer that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, including specifically, but without limitation, the power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorneys and agents, or any of them, will do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated on the 25th day of October, 2000:
SIGNATURE TITLE DATE --------- ----- ---- NRG South Central LLC By: /s/ CRAIG A. MATACZYNSKI Sole Member of Louisiana October 25, 2000 ---------------------------------------------- Generating LLC Name: Craig A. Mataczynski Title: President /s/ ALAN D. WILLIAMS President October 25, 2000 - --------------------------------------------------- Alan D. Williams /s/ CRAIG A. MATACZYNSKI Vice President October 25, 2000 - --------------------------------------------------- Craig A. Mataczynski /s/ BRIAN B. BIRD Treasurer October 25, 2000 - --------------------------------------------------- Brian B. Bird /s/ MICHAEL J. YOUNG Secretary October 25, 2000 - --------------------------------------------------- Michael J. Young
II-8 163 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ------- ----------- 1.1 Purchase Agreement, dated as of March 30, 2000, among NRG South Central Generating LLC, and Chase Securities, Inc., Lehman Brothers Inc., Credit Suisse First Boston Corporation and Salomon Smith Barney Inc. as representatives of the Initial Purchasers 3.1 Certificate of Formation of NRG South Central Generating LLC 3.2 Limited Liability Company Agreement of NRG South Central Generating LLC 3.3 Certificate of Formation of Louisiana Generating LLC 3.4 Limited Liability Company Agreement of Louisiana Generating LLC 3.5 Certificate of Formation of NRG New Roads Holdings LLC 3.6 Limited Liability Company Agreement of NRG New Roads Holdings LLC 3.7 Certificate of Formation of NRG Sterlington Power LLC 3.8 Limited Liability Company Agreement of NRG Sterlington Power LLC 3.9 Certificate of Formation of Big Cajun I Peaking Power LLC 3.10 Limited Liability Company Agreement of Big Cajun I Peaking Power LLC 4.1 Trust Indenture, dated as of March 30, 2000, among NRG South Central Generating LLC, Louisiana Generating LLC and The Chase Manhattan Bank, as bond trustee, The Chase Manhattan Bank, as depository bank, relating to the Senior Secured Bonds 4.2 Form of certificate of 8.962% Series A Senior Secured Bonds due 2016 (included in Exhibit 4.1) 4.3 Form of certificate of 9.479% Series B Senior Secured Bonds due 2024 (included in Exhibit 4.1) 4.4 Form of certificate of 8.962% Series A-1 Senior Secured Bonds due 2016 4.5 Form of certificate of 9.479% Series B-1 Senior Secured Bonds due 2024 4.6 Exchange and Registration Rights Agreement, dated as of March 30, 2000, by and among NRG South Central Generating LLC, Louisiana Generating LLC, Chase Securities Inc. and Lehman Brothers Inc., on behalf of the Initial Purchasers 4.7 Collateral Agency and Intercreditor Agreement, dated as of March 30, 2000, among NRG South Central Generating LLC, Louisiana Generating LLC, The Chase Manhattan Bank, as bond trustee, The Chase Manhattan Bank, as depositary bank and The Chase Manhattan Bank, as collateral agent 4.8 Assignment and Security Agreement, dated as of March 30, 2000, between NRG South Central Generating LLC and The Chase Manhattan Bank, as collateral agent 4.9 Guarantor Note, dated as of March 30, 2000, by Louisiana Generating LLC in favor of NRG South Central Generating LLC 4.10 Guarantor Loan Agreement, dated as of March 30, 2000 among Louisiana Generating LLC and NRG South Central Generating LLC 4.11 Guarantee, dated as of March 30, 2000, by Louisiana Generating LLC in favor of The Chase Manhattan Bank 4.12 Debt Reserve Guarantee Agreement, dated as of March 30, 2000, between NRG Energy, Inc. and The Chase Manhattan Bank, as trustee, on behalf of the Holders of the Bonds 4.13 Assignment and Security Agreement, dated as of March 30, 2000, between Louisiana Generating LLC and The Chase Manhattan Bank, as collateral agent 4.14 Assignment and Security Agreement, dated as of March 30, 2000, among NRG Power Marketing Inc. and The Chase Manhattan Bank, as collateral agent 4.15 Pledge and Security Agreement, dated as of March 30, 2000, among NRG South Central Generating LLC and The Chase Manhattan Bank, as collateral agent
164
EXHIBIT NO. DESCRIPTION - ------- ----------- 5.1 Form of opinion and consent of Gibson, Dunn & Crutcher LLP as to the legality of the securities to be issued in this exchange offer 10.1 Working Capital Agreement, dated as of April 30, 2000, by NRG South Central Generating LLC, the Guarantors, the Lenders and The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, as administrative agent 10.2 NRG South Central Generating LLC Secured Revolving Note, dated as of April 30, 2000, by NRG South Central Generating LLC to The Bank of Tokyo-Mitsubishi, Ltd., New York Branch 10.3 Power Sales and Agency Agreement, dated March 24, 2000 among NRG Power Marketing Inc. and Louisiana Generating LLC 10.4 Operation and Management Services Agreement, dated March 24, 2000, among NRG Operating Services, Inc. and Louisiana Generating LLC 10.5 Corporate Services Agreement, dated March 24, 2000, among NRG Energy, Inc. and NRG South Central Generating 10.6 Corporate Services Agreement, dated March 24, 2000, among NRG Energy, Inc. and Agreement Louisiana Generating 10.7 Corporate Services Agreement, dated August 17, 2000, among NRG Energy, Inc. and NRG Sterlington Power LLC 10.8 Corporate Services Agreement, dated August 4, 2000, among NRG Energy, Inc. and Big Cajun I Peaking Power LLC 10.9 Coal Transportation Agreement between Louisiana Generating, LLC and The Burlington Northern and Santa Fe Railway Company and American Commercial Marine Service Company+ 10.10 Agreement between Louisiana Generating, LLC and Triton Coal Company for the Sale and Purchase of Coal+ 12.1 Consolidated Ratio of Earnings to Fixed Charges for NRG South Central Generating LLC 21.1 Subsidiaries of NRG South Central Generating LLC 23.1 Consent of PricewaterhouseCoopers LLP 23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1) 24.1 Powers of Attorney (included as part of signature page to this registration statement) 25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as Trustee under the indenture 27.1 Financial Data Schedule for NRG South Central Generating LLC (for SEC use only) 27.2 Financial Data Schedule for Louisiana Generating LLC (for SEC use only) 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4 Letter to Clients
- --------------- + Confidential treatment is being requested for portions of these exhibits. Omitted material is being filed separately with the Commission. EX-1.1 2 y57012ex1-1.txt PURCHASE AGREEMENT 1 Exhibit 1.1 NRG SOUTH CENTRAL GENERATING LLC $800,000,000 8.962% Series A Senior Secured Bonds Due 2016 9.479% Series B Senior Secured Bonds Due 2024 PURCHASE AGREEMENT March 24, 2000 CHASE SECURITIES INC. LEHMAN BROTHERS INC. CREDIT SUISSE FIRST BOSTON CORPORATION SALOMON SMITH BARNEY INC. c/o Chase Securities Inc. 270 Park Avenue, 4th floor New York, New York 10017 Ladies and Gentlemen: NRG South Central Generating LLC, a Delaware limited liability company (the "Issuer"), proposes to issue and sell $500,000,000 aggregate principal amount of its 8.962% Series A Senior Secured Bonds Due 2016, and $300,000,000 aggregate principal amount of its 9.479% Series B Senior Secured Bonds Due 2024 (together, the "Bonds"). The Bonds will be issued pursuant to an Indenture to be dated as of March 30, 2000 (the "Indenture") between the Issuer and The Chase Manhattan Bank, as bond trustee (the "Bond Trustee"). Payment on the Bonds will be guaranteed by Louisiana Generating LLC, a Delaware limited liability company (the "Subsidiary Guarantor" and, together with the Issuer, the "Obligors") pursuant to the Guarantee to be dated as of March 30, 2000 (the "Guarantee") between the Subsidiary Guarantor and the Bond Trustee. The Issuer hereby enters into this agreement with Chase Securities Inc. ("CSI"), Lehman Brothers Inc. ("LB" and together with CSI, the "Representatives," acting severally on behalf of themselves and the several Initial Purchasers), Credit Suisse First Boston Corporation ("CSFB") and Salomon Smith Barney Inc. (together with CSI, LB and CSFB, the "Initial Purchasers") concerning the purchase of the Bonds from the Issuer by the several Initial Purchasers. 2 The Bonds will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon an exemption therefrom. The Issuer has prepared a preliminary offering memorandum dated March 14, 2000 (the "Preliminary Offering Memorandum") and will prepare an offering memorandum dated the date hereof (the "Offering Memorandum") setting forth information concerning the Obligors and the Bonds. Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum will be, delivered by the Issuer to the Initial Purchasers pursuant to the terms of this Agreement. Any references herein to the Preliminary Offering Memorandum and the Offering Memorandum shall be deemed to include all amendments and supplements thereto, unless otherwise noted. The Issuer hereby confirms that it has authorized the use of the Preliminary Offering Memorandum and the Offering Memorandum in connection with the offering and resale of the Bonds by the Initial Purchasers in accordance with Section 2. Holders of the Bonds (including the Initial Purchasers and their direct and indirect transferees) will be entitled to the benefits of an Exchange and Registration Rights Agreement, substantially in the form attached hereto as Annex A (the "Registration Rights Agreement"), pursuant to which the Issuer will agree to file with the Securities and Exchange Commission (the "Commission") (i) a registration statement under the Securities Act (the "Exchange Offer Registration Statement") registering an issue of senior bonds of the Issuer (the "Exchange Bonds") which are identical in all material respects to the Bonds (except that the Exchange Bonds will not contain terms with respect to transfer restrictions) and (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Indenture. 1. Representations, Warranties and Agreements of the Obligors. Each Obligor (unless explicitly set forth as relevant to one Obligor only) represents and warrants to, and agrees with, the several Initial Purchasers on and as of the date hereof and the Closing Date (as defined in Section 3) that: (a) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, did not, and on the Closing Date the Offering Memorandum will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements 2 3 therein, in the light of the circumstances under which they were made, not misleading; provided that neither Obligor makes any representation or warranty as to (i) information contained in or omitted from the Preliminary Offering Memorandum or the Offering Memorandum in reliance upon and in conformity with written information relating to the Initial Purchasers furnished to the Obligors by or on behalf of any Initial Purchaser specifically for use therein (the "Initial Purchasers' Information") or (ii) the Independent Engineer's Report or the Independent Market Consultant's Report and information in the Preliminary Offering Memorandum or the Offering Memorandum relating to matters referred to in the Independent Engineer's Report or the Independent Market Consultant's Report. (b) Each of the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date, contains all of the information that, if requested by a prospective purchaser of the Bonds, would be required to be provided to such prospective purchaser pursuant to Rule 144A(d)(4) under the Securities Act. (c) Assuming the accuracy of the representations and warranties of the Initial Purchasers contained in Section 2 and their compliance with the agreements set forth therein and assuming that the purchasers to whom the Initial Purchasers resell the Bonds receive a copy of the Offering Memorandum, it is not necessary, in connection with the issuance and sale of the Bonds to the Initial Purchasers and the offer, resale and delivery of the Bonds by the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memorandum to register the Bonds under the Securities Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (d) Each Obligor is a limited liability company duly organized and validly existing under the laws of the State of Delaware, is duly qualified to do business as a foreign limited liability company in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification, and has all power and authority necessary to own or hold its property and to conduct the business in which it is now engaged or proposed to be engaged, except where the failure to so qualify or have such power or authority would not, singularly or in the aggregate, be reasonably expected to result in a material adverse effect on the financial condition, results of operations, business or prospects of the Obligors, taken as a whole (a "Material Adverse Effect"). (e) Each Obligor has all rights, powers and authority necessary to execute, deliver or assume, as applicable, to the extent party to, this Agreement, the 3 4 Indenture, the Registration Rights Agreement, the Bonds and the other Finance Documents and material Project Documents in effect as of the closing date of the Acquisition (collectively, the "Transaction Documents") to which it is a party and to perform its obligations hereunder and thereunder; and all limited liability company or other action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents and the consummation of the transactions contemplated thereby has been duly and validly taken. (f) This Agreement has been duly authorized, executed and delivered by each Obligor and constitutes a valid and legally binding agreement of each Obligor. (g) The Indenture has been duly authorized by the Issuer and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Issuer enforceable against the Issuer in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (h) The Registration Rights Agreement has been duly authorized by the Issuer and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Issuer enforceable against the Issuer in accordance with its terms, except to the extent that (x) such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law) and (y) the rights to indemnification and contribution thereunder may be limited by federal and state securities laws or the public policy underlying such laws. (i) The Guarantee has been duly authorized by the Subsidiary Guarantor and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Subsidiary Guarantor enforceable against the Subsidiary Guarantor in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). 4 5 (j) The Bonds have been duly authorized by the Issuer and, when duly executed, authenticated, issued and delivered as provided in the Indenture and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Issuer entitled to the benefits of the Indenture and enforceable against the Issuer in accordance with their terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (k) Each of the Transaction Documents to which either Obligor is a party (other than this Agreement, the Indenture, the Registration Rights Agreement, the Guarantee and the Bonds referred to above) has been duly authorized, and upon the closing of the Acquisition will be executed and delivered by such Obligor, to the extent a party thereto, and will constitute a valid and legally binding agreement of such Obligor enforceable against such Obligor in accordance with its terms, except to the extent that such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally and by general equitable principles (whether considered in a proceeding in equity or at law). (l) Each Transaction Document conforms in all material respects to the description thereof contained in the Offering Memorandum. To the best of each Obligor's knowledge, no event of force majeure has occurred under any material Project Document in effect as of the closing date of the Acquisition. (m) The execution, delivery and performance by each Obligor of each of the Transaction Documents to which it is a party, the issuance, authentication, sale and delivery of the Bonds and compliance by the Issuer with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not, upon satisfaction of the condition set forth in Section 5(s) hereof, conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of either Obligor pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which either Obligor is a party or by which either Obligor is bound or to which any of the property or assets of either Obligor are subject, except such conflicts, breaches, violations, defaults, liens, charges or encumbrances as would not reasonably be expected to result in a Material Adverse Effect, (ii) result in any violation of the provisions of the 5 6 certificate of formation, membership agreement or other organizational document of either Obligor or (iii) result in any violation of any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or governmental agency or body having jurisdiction over either Obligor or any of its properties or assets, except such violation as would not reasonably be expected to result in a Material Effect and except for blue sky laws and federal securities laws. (n) All consents, permissions, permits or decrees required by any applicable law (collectively, the "Requisite Governmental Approvals") which are required, as of the date of the closing of the Acquisition, to be obtained by, in the name of or on behalf of either Obligor in connection with (i) the issuance of the Bonds and (ii) the due execution, delivery and performance of each of the Transaction Documents by each Obligor party thereto will be duly obtained other than as may be required to be obtained or made under the Securities Act and applicable state securities laws as provided in the Registration Rights Agreement unless the failure to obtain such Requisite Governmental Approval would not reasonably be expected to result in a Material Adverse Effect and neither Obligor has received notification of any revocation, modification or other non-renewal of such Requisite Governmental Approval except such revocation, modification or non-renewal that would not reasonably be expected to result in a Material Adverse Effect. (o) PricewaterhouseCoopers LLP are independent certified public accountants with respect to each Obligor within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA") and its interpretations and rulings thereunder. The historical carve-out financial statements (including the related notes) contained in the Offering Memorandum have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby, except as may be set forth in such financial statements, and fairly present the financial position of the entities purported to be covered thereby at the respective dates indicated and the results of their operations and their cash flows for the respective periods indicated; and the financial information contained in the Offering Memorandum under the headings "Capitalization", "Selected Financial Data of Cajun Electric (Cajun Facilities)" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" are derived from the accounting records of such entities and fairly present the information purported to be shown thereby. The pro forma financial information contained in the Offering Memorandum has been prepared on a basis consistent with the historical financial statements contained in the Offering Memorandum (except for the pro forma adjustments specified therein), gives effect to reasonable assumptions which were 6 7 reasonably arrived at by, and represent the views of, each Obligor and fairly presents the historical and proposed transactions contemplated by the Offering Memorandum and the Transaction Documents. The other historical financial and statistical information and data included in the Offering Memorandum are, in all material respects, fairly presented. (p) There are no legal or governmental proceedings pending to which either Obligor is a party or of which any property or assets of either Obligor are the subject which would reasonably be expected to result in a Material Adverse Effect; and to the best knowledge of either Obligor, no such proceedings are threatened by governmental authorities or threatened by others. (q) No action, suit or proceeding is pending against or, to the best knowledge of either Obligor, threatened against or affecting such Obligor before any court or arbitrator or any governmental agency, body or official, domestic or foreign, which could reasonably be expected to interfere with or adversely affect the issuance of the Bonds or in any manner draw into question the validity or enforceability of any of the Transaction Documents or any action taken or to be taken pursuant thereto other than such actions, suits or proceeding which would not reasonably be expected to result in a Material Adverse Effect; and the Issuer has complied with any and all requests to the Issuer by any securities authority in any jurisdiction for additional information to be included in the Preliminary Offering Memorandum and the Offering Memorandum. (r) Neither Obligor is (i) in violation of its formation documents, (ii) in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any Finance Document or material Project Document to which it is a party or by which it is bound or to which any of its property or assets is subject, or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject, except in the case of clause (i), (ii) or (iii) as would not reasonably be expected to result in a Material Adverse Effect. (s) Each Obligor is a partnership for federal income tax purposes. Each Obligor has filed or caused to be filed all federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and has paid all taxes, fees, charges and assessments (collectively, "Taxes") due thereon, other than Taxes the payment of which are subject to a good faith contest and for which adequate reserves have been established. 7 8 (t) Neither Obligor is (i) an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations of the Commission thereunder, or (ii) a "public utility holding company," an "electric utility company" or a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended ("PUHCA"), nor subject to regulation under PUHCA except pursuant to Section 9(a)(2) or Section 32 thereof. The Subsidiary Guarantor is an "Exempt Wholesale Generator," as such term is defined in PUHCA. (u) Each Obligor maintains a system of internal accounting controls sufficient to provide reasonable assurance that: (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (v) All insurance policies that are required to be in place as of the closing date of the Acquisition, pursuant to the Transaction Documents, will be in place and will be in full force and effect. Neither Obligor has received any notice from any insurer or reinsurer that any insurance policy has ceased to be in full force and effect or claiming that the insurer's or reinsurer's liability under any insurance policy can be reduced or avoided. (w) As of the closing date of the Acquisition, each Obligor will own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the operation of the Project except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect; and the operation of the Project will not conflict in any material respect with, and neither Obligor has received any notice of any claim of conflict with, any such rights of others which would reasonably be expected to result in a Material Adverse Effect. (x) As of the closing date of the Acquisition, each Obligor will have good and marketable title in fee simple to, or will have valid rights to lease or otherwise 8 9 use, the Mortgaged Property and personal property which are material to the business of such Obligor, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except such as (i) do not materially interfere with the use made and proposed to be made of such property by such Obligor or (ii) would not reasonably be expected to have a Material Adverse Effect. (y) Neither Obligor sponsors, maintains, administers, contributes to, participates in or has any obligation to contribute to or any liability under, any Plan, nor since the date which is six (6) years immediately preceding the Closing Date has either Obligor established, sponsored, maintained, administered, contributed to, participated in or had any obligation to contribute to or any liability under, any Plan. No accumulated funding deficiency (as defined in Section 412 of the Code or Section 302 of ERISA) or Reportable Event has occurred with respect to any Plan. There are no Unfunded Benefit Liabilities under any Plan. Each Obligor and each member of its ERISA Controlled Group have complied with the requirements of Section 515 of ERISA with respect to each Multiemployer Plan and are not in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan. The aggregate potential total withdrawal liability, and the aggregate potential annual withdrawal liability payments of each Obligor and the members of its ERISA Controlled Group as determined in accordance with Title IV of ERISA as if each Obligor and the members of its ERISA Controlled Group had completely withdrawn from all Multiemployer Plans is not greater than $500,000 and $50,000, respectively. To the best knowledge of each Obligor and each member of its ERISA Controlled Group, no Multiemployer Plan is or is likely to be in reorganization (as defined in Section 4241 of ERISA or Section 418 of the Code) or is insolvent (as defined in Section 4245 of ERISA). No material liability to the PBGC (other than required premium payments), the Internal Revenue Service, any Plan or any trust established under Title IV of ERISA has been, or is expected by either Obligor or any member of its ERISA Controlled Group to be, incurred by such Obligor or any member of its ERISA Controlled Group. Neither Obligor nor any member of its ERISA Controlled Group has any contingent liability with respect to any post-retirement benefit under any "welfare plan" (as defined in Section 3(1) of ERISA), other than liability for continuation coverage under Part 6 of Title I of ERISA. No Lien under Section 412(n) of the Code or 302(f) of ERISA or requirement to provide security under Section 401(a)(29) of the Code or Section 307 of ERISA has been or is reasonably expected by either Obligor or any member of its ERISA Controlled Group to be imposed on the assets of such Obligor or any member of its ERISA Controlled Group. 9 10 (z) Neither Obligor has received any notices, claims, demands or similar communications by any Person alleging potential liability (including, without limitation, potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, fines or penalties) arising out of, based on or resulting from (i) the presence, or release into the environment, of any chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products at any location, whether or not owned by such Person or (ii) circumstances forming the basis of any violation, or alleged violation, of any environmental law of environmental approval which would reasonably be expected to result in a Material Adverse Effect. (aa) Except as provided in this Agreement, neither Obligor is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against either Obligor or the Initial Purchasers for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Bonds. (ab) The Bonds satisfy the eligibility requirements of Rule 144A(d)(3) under the Securities Act. (ac) None of the Obligors, any of their affiliates or any Person acting on its or their behalf has engaged or will engage in any directed selling efforts (as such term is defined in Regulation S under the Securities Act ("Regulation S")), and all such persons have complied and will comply with the offering restrictions requirement of Regulation S to the extent applicable. (ad) Neither Obligor has, directly or through any agent (other than the Initial Purchasers as to which the Issuer makes no representation), sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as such term is defined in the Securities Act), which sale, offer, solicitation or negotiation will be integrated with the sale of the Bonds in a manner that would require registration of the Bonds under the Securities Act. (ae) None of the Obligors or any of their affiliates or any other person acting on its or their behalf has engaged, in connection with the offering of the Bonds, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. (af) There are no securities of either Obligor registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or listed on a 10 11 national securities exchange or quoted in a U.S. automated inter-dealer quotation system. (ag) Neither Obligor has taken and will not take, directly or indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Bonds. (ah) No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Preliminary Offering Memorandum or the Offering Memorandum has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith. (ai) Since the date as of which information is given in the Offering Memorandum, except as otherwise stated therein, (i) there has been no material adverse change, and there has not been any development involving a prospective material adverse change, in the financial condition, or in the earnings, business affairs or management of either Obligor, whether or not arising in the ordinary course of business, (ii) neither Obligor has incurred any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iii) neither Obligor has entered into any material transaction other than in the ordinary course of business, (iv) there has not been any change in the equity interest or long-term debt of either Obligor, or any dividend or distribution of any kind declared, paid or made by either Obligor on any of its equity interests or (v) there has been no material adverse change in the financial condition, or in the earnings, business affairs, management or prospects of NRG Power Marketing, whether or not arising in the ordinary course of business, which, solely with respect to clause (v), would reasonably be expected to have a Material Adverse Effect. (aj) Upon closing of the Acquisition, the Security Documents will create, as security for the Bonds, valid and enforceable perfected Liens on all of the Collateral, in favor of the Collateral Agent for the ratable benefit of the Secured Parties, subject to no Liens other than Permitted Liens. All governmental filings or approvals necessary or desirable to perfect such Liens have been duly effected or taken or will be duly affected or taken on or before the closing date of the Acquisition. (ak) The sale price of the Acquired Assets was not established through means of collusion or fraud and the confirmation order was not obtained through means such as mistake, inadvertence or fraud. 11 12 2. Purchase and Resale of the Bonds. (a) On the basis of the representations, warranties and agreements contained herein, and subject to the terms and conditions set forth herein, the Issuer agrees to issue and sell to each of the Initial Purchasers, severally and not jointly, and each of the Initial Purchasers, severally and not jointly, agrees to purchase from the Issuer, the principal amount of Bonds set forth opposite the name of such Initial Purchaser on Schedule 1 hereto at a purchase price equal to 99.125% of the principal amount thereof. The Issuer shall not be obligated to deliver any of the Bonds except upon payment for all of the Bonds to be purchased as provided herein. (b) The Initial Purchasers agree with the Issuer that they will offer the Bonds for resale upon the terms and subject to the conditions set forth herein and in the Offering Memorandum. Each Initial Purchaser, severally and not jointly, represents and warrants to, and agrees with, the Issuer that: (i) it is purchasing the Bonds pursuant to a private sale exemption from registration under the Securities Act; (ii) it has not solicited offers for, or offered or sold, and will not solicit offers for, or offer or sell, the Bonds by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act ("Regulation D") or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and (iii) it has solicited and will solicit offers for the Bonds only from, and has offered or sold and will offer, sell or deliver the Bonds, as part of its initial offering, only (A) to persons whom it reasonably believes to be qualified institutional buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the Securities Act, or if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to it that each such account is a Qualified Institutional Buyer to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A and in each case, in transactions in accordance with Rule 144A or from institutional Accredited Investors within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act in minimum denominations of $250,000, and (B) outside the United States to persons other than U.S. persons in reliance on Regulation S under the Securities Act ("Regulation S"). (c) In connection with the offer and sale of Bonds in reliance on Regulation S, each Initial Purchaser, severally and not jointly, represents, warrants and agrees that: (i) The Bonds have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit 12 13 of, U.S. persons except pursuant to an exemption from, or in transactions not subject to, the registration requirements of the Securities Act. (ii) Such Initial Purchaser has offered and sold the Bonds, and will offer and sell the Bonds, (A) as part of their distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering of the Bonds and the Closing Date, only in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act. (iii) None of such Initial Purchasers or any of its affiliates or any other person acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Bonds, and all such persons have complied and will comply with the offering restrictions requirement of Regulation S. (iv) at or prior to the confirmation of sale of any Bonds sold in reliance on Regulation S, it will have sent to each distributor, dealer or other person receiving a selling concession, fee or other remuneration that purchase Bonds from it during the restricted period a confirmation or notice to substantially the following effect: "The Bonds covered hereby have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering of the Bonds and the date of original issuance of the Bonds, except in accordance with Regulation S or Rule 144A or any other available exemption from registration under the Securities Act. Terms used above have the meanings given to them by Regulation S." (v) it has not and will not enter into any contractual arrangement with any distributor with respect to the distribution of the Bonds, except with its affiliates or with the prior written consent of the Issuer. Terms used in this Section 2(c) have the meanings given to them by Regulation S. (d) Each Initial Purchaser, severally and not jointly, represents, warrants and agrees that (i) it has not offered or sold and prior to the date six months after the Closing Date will not offer or sell any Bonds to persons in the United Kingdom except 13 14 to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 and the Public Offers of Securities Regulations 1995 with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Bonds to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. (e) Each Initial Purchaser, severally and not jointly, agrees that, prior to or simultaneously with the confirmation of sale by such Initial Purchaser to any purchaser of any of the Bonds purchased by such Initial Purchaser from the Issuer pursuant hereto, such Initial Purchaser shall furnish to that purchaser a copy of the Offering Memorandum (and any amendment or supplement thereto that the Issuer shall have furnished to such Initial Purchaser prior to the date of such confirmation of sale). In addition to the foregoing, each Initial Purchaser acknowledges and agrees that the Issuer and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Sections 5(d) and (e), counsel for the Issuer and for the Initial Purchasers, respectively, may rely upon the accuracy of the representations and warranties of the Initial Purchasers and their compliance with their agreements contained in this Section 2, and each Initial Purchaser hereby consents to such reliance. (f) The Issuer acknowledges and agrees that the Initial Purchasers may sell Bonds to any affiliate of an Initial Purchaser and that any such affiliate may sell Bonds purchased by it to an Initial Purchaser; provided that such sale is in compliance with clause (b) of this Section 2 and such affiliate complies with such clause. 3. Delivery of and Payment for the Bonds. (a) Delivery of and payment for the Bonds shall be made at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, or at such other place as shall be agreed upon by the Initial Purchasers and the Issuer, at 10:00 A.M., New York City time, on March 30, 2000, or at such other time or date, not later than seven full business days thereafter, as shall be agreed upon by the Representatives and the Issuer (such date and time of payment and delivery being referred to herein as the "Closing Date"). 14 15 (b) On the Closing Date, payment of the purchase price for the Bonds shall be made to the Issuer by wire or book-entry transfer of same-day funds to such account or accounts as the Issuer shall specify prior to the Closing Date or by such other means as the parties hereto shall agree prior to the Closing Date against delivery to the Initial Purchasers of the certificates evidencing the Bonds. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of the Initial Purchasers hereunder. Upon delivery, the Bonds shall be in global form, registered in such names and in such denominations as CSI on behalf of the Initial Purchasers shall have requested in writing not less than two full business days prior to the Closing Date. The Issuer agrees to make one or more global certificates evidencing the Bonds available for inspection by CSI on behalf of the Initial Purchasers in New York, New York at least 24 hours prior to the Closing Date. 4. Further Agreements of the Issuer. The Issuer agrees with each of the several Initial Purchasers: (a) at any time prior to the completion of the initial resale of the Bonds by the Initial Purchasers, (i) to advise the Initial Purchasers promptly and, if requested, confirm such advice in writing, of the happening of any event which makes any statement of a material fact made in the Offering Memorandum untrue or which requires the making of any additions to or changes in the Offering Memorandum (as amended or supplemented from time to time) in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (ii) to advise the Initial Purchasers promptly of any order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum, of any suspension of the qualification of the Bonds for offering or sale in any jurisdiction and of the initiation or threatening of any proceeding for any such purpose; and to use its reasonable best efforts to prevent the issuance of any such order preventing or suspending the use of the Preliminary Offering Memorandum or the Offering Memorandum or suspending any such qualification and, if any such suspension is issued, to use its reasonable best efforts to obtain the lifting thereof as soon as is practicable; (b) to furnish promptly to each of the Initial Purchasers and counsel for the Initial Purchasers, without charge, prior to the completion of the initial resale of the Bonds by the Initial Purchasers or the date which is six months following the Closing Date, whichever is earlier, as many copies of the Preliminary Offering Memorandum and the Offering Memorandum (and any amendments or supplements thereto) as may be reasonably requested; 15 16 (c) prior to making any amendment or supplement to the Offering Memorandum, to furnish a copy thereof to each of the Initial Purchasers and counsel for the Initial Purchasers and not to effect any such amendment or supplement to which the Initial Purchasers shall reasonably object by notice to the Issuer after a reasonable period to review; (d) if, at any time prior to the completion of the resale of the Bonds by the Initial Purchasers, any event shall occur or condition exist as a result of which it is necessary, in the opinion of counsel for the Initial Purchasers or counsel for the Issuer, to amend or supplement the Offering Memorandum in order that the Offering Memorandum will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time it is delivered to a transferee of any Initial Purchaser, not misleading, or if it is necessary to amend or supplement the Offering Memorandum to comply with applicable law, to promptly prepare such amendment or supplement as may be necessary to correct such untrue statement or omission or so that the Offering Memorandum, as so amended or supplemented, will comply with applicable law; (e) for so long as the Bonds are outstanding and are "restricted securities" within the meaning of Rule 144(a)(3) under the Securities Act, to furnish to holders of the Bonds and prospective purchasers of the Bonds designated by such holders, upon request of such holders or such prospective purchasers, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act, unless the Issuer is then subject to and in compliance with Section 13 or 15(d) of the Exchange Act (the foregoing agreement being for the benefit of the holders from time to time of the Bonds and prospective purchasers of the Bonds designated by such holders); (f) to promptly use its reasonable best efforts to take from time to time such actions as the Initial Purchasers may reasonably request to qualify the Bonds for offering and sale under the securities or Blue Sky laws of such states of the United States as the Initial Purchasers may designate and to continue such qualifications in effect for so long as required for the resale of the Bonds by the Initial Purchasers, and to arrange for the determination of the eligibility for investment of the Bonds under the laws of such states of the United States as the Initial Purchasers may reasonably request; provided that the Issuer and its subsidiaries shall not be obligated to qualify as foreign corporations or as a dealer in securities in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction or take any other action that will subject the Issuer to any tax it would not otherwise be subject to; 16 17 (g) to assist the Initial Purchasers in arranging for the Bonds to be designated Private Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market securities in accordance with the rules and regulations adopted by the National Association of Securities Dealers, Inc. ("NASD") relating to trading in the PORTAL Market and for the Bonds to be eligible for clearance and settlement through The Depository Trust Company ("DTC"); (h) not to, and to cause its affiliates not to, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as such term is defined in the Securities Act) the offer or sale of which could be integrated with the sale of the Bonds in a manner which would require registration of the Bonds under the Securities Act; (i) except following the effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, not to, and to cause its affiliates not to, authorize or knowingly permit any person acting on their behalf to, solicit any offer to buy or offer to sell the Bonds by means of any form of general solicitation or general advertising within the meaning of Regulation D or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act; and not to offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act to cease to be applicable to the offering and sale of the Bonds as contemplated by this Agreement and the Offering Memorandum; (j) except as required by the Registration Rights Agreement, for a period of 180 days from the date of the Offering Memorandum, not to offer for sale, sell, contract to sell or otherwise dispose of, directly or indirectly, or file a registration statement for, or announce any offer, sale, contract for sale of or other disposition of, any debt securities issued or guaranteed by either Obligor (other than the Bonds) without the prior written consent of the Initial Purchasers; (k) during the period from the Closing Date until two years after the Closing Date, without the prior written consent of the Initial Purchasers, not to, and not permit any of its affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Bonds that have been reacquired by them, except for Bonds purchased by the Issuer or any of its affiliates and resold in a transaction registered under the Securities Act; 17 18 (l) in connection with the offering of the Bonds, until CSI on behalf of the Initial Purchasers shall have notified the Issuer of the completion of the resale of the Bonds, not to, and to cause its affiliated purchasers (as defined in Regulation M under the Exchange Act) not to, either alone or with one or more other persons, bid for or purchase, for any account in which it or any of its affiliated purchasers has a beneficial interest, any Bonds, or attempt to induce any person to purchase any Bonds; and not to, and to cause its affiliated purchasers not to, make bids or purchase for the purpose of creating actual, or apparent, active trading in or of raising the price of the Bonds; (m) in connection with the offering of the Bonds, to make its representatives, including independent accountants and legal counsel, reasonably available upon request by the Initial Purchasers; (n) to do and perform all things required to be done and performed by it under this Agreement that are within its control prior to or after the Closing Date, and to use its reasonable efforts to satisfy all conditions precedent on its part to the delivery of the Bonds; (o) except for actions described in the Offering Memorandum, to not take any action prior to the execution and delivery of the Indenture which, if taken after such execution and delivery, would have violated any of the covenants contained in the Indenture; (p) prior to the Closing Date, not to issue any press release or other communication, directly or indirectly, or hold any press conference with respect to either Obligor, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Obligors and of which the Initial Purchasers are notified), without the prior written consent of the Initial Purchasers, unless in the judgment of the Issuer and its counsel, and after notification to the Initial Purchasers, such press release or communication is required by law; and (q) to apply the net proceeds from the sale of the Bonds as set forth in the Offering Memorandum under the heading "Use of Proceeds". (r) The Subsidiary Guarantor shall use its best efforts to obtain third party consents to assignment from each of the parties contracting under any Project Document listed on Part A of Schedule II hereto with the Subsidiary Guarantor, in each case to the reasonable satisfaction of each of the Initial Purchasers. 18 19 5. Conditions of Initial Purchasers' Obligations. The respective obligations of the several Initial Purchasers hereunder are subject to the accuracy, on and as of the date hereof and the Closing Date, of the representations and warranties of each Obligor contained herein, to the accuracy of the statements of the each Obligor made in any certificates delivered pursuant hereto, to the performance by each Obligor of its obligations hereunder, and to each of the following additional terms and conditions: (a) The Offering Memorandum (and any amendments or supplements thereto) shall have been printed and copies distributed to the Initial Purchasers as promptly as practicable on or following the date of this Agreement or at such other date and time as to which the Initial Purchasers may agree; and no stop order suspending the sale of the Bonds in any jurisdiction shall have been issued, and no proceeding for that purpose shall have been commenced or shall be pending or threatened. (b) None of the Initial Purchasers shall have discovered and disclosed to the Issuer on or prior to the Closing Date that the Offering Memorandum or any amendment or supplement thereto contains an untrue statement of a fact which, in the reasonable opinion of counsel for the Initial Purchasers, is material or omits to state any fact which, in the reasonable opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents and the Offering Memorandum, and all other legal matters relating to the Transaction Documents and the transactions contemplated thereby, shall be satisfactory in all material respects to the Initial Purchasers, and each Obligor shall have furnished to the Initial Purchasers all documents and information that they or their counsel may reasonably request to enable them to pass upon such matters. (d) (i) Gibson, Dunn & Crutcher LLP shall have furnished to the Initial Purchasers their written opinion, as special New York counsel for each Obligor and certain other parties specified therein, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth in Annex A-1 hereto. (ii) Jones, Walker, Waechter, Poitevent, Carrere and Denegre, shall have furnished to the Initial Purchasers their written opinion, as counsel to each Obligor, addressed to the Initial Purchasers and dated the Closing Date, in form 19 20 and substance reasonably satisfactory to the Initial Purchasers, substantially to the effect set forth in Annex A-2 hereto. (iii) Van Ness Feldman shall have furnished to the Initial Purchasers their written opinion, as federal regulatory counsel to the Obligors, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, addressing federal regulatory issues related to each Obligor. (e) (i) The Initial Purchasers shall have received from Skadden, Arps, Slate, Meagher & Flom LLP, special New York counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to such matters as the Initial Purchasers may reasonably require, and each Obligor shall have furnished to such counsel such documents and information as they reasonably request for the purpose of enabling them to pass upon such matters. (ii) The Initial Purchasers shall have received from Liskow & Lewis, Louisiana counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to such matters as the Initial Purchasers may reasonably require, and each Obligor shall have furnished to such counsel such documents and information as they reasonably request for the purpose of enabling them to pass upon such matters. (f) The Issuer shall have furnished to the Initial Purchasers a letter (the "Initial Letter") of PricewaterhouseCoopers LLP, addressed to the Representatives and dated the date hereof, in form and substance satisfactory to the Initial Purchasers, substantially to the effect set forth in Annex B hereto. (g) The Issuer shall have furnished to the Initial Purchasers a letter (the "Bring-Down Letter") of PricewaterhouseCoopers LLP, addressed to the Representatives and dated the Closing Date, (i) confirming that they are independent public accountants with respect to each Obligor within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings thereunder, (ii) stating, as of the date of the Bring-Down Letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Offering Memorandum, as of a date not more than three business days prior to the date of the Bring-Down Letter), that the conclusions and findings of such accountants with respect to the financial information and other matters 20 21 covered by the Initial Letter are accurate, and (iii) confirming in all material respects the conclusions and findings set forth in the Initial Letter. (h) Each Obligor shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, executed on behalf of such Obligor, stating that (A) such Obligor has examined the Offering Memorandum, (B) in its opinion, the Offering Memorandum, as of its date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and since the date of the Offering Memorandum, no event has occurred which should have been set forth in a supplement or amendment to the Offering Memorandum so that the Offering Memorandum (as so amended or supplemented) would not include any untrue statement of a material fact and would not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, (C) as of the Closing Date, the representations and warranties of such Obligor in this Agreement are true and correct in all material respects, such Obligor has complied in all material respects with all agreements and satisfied in all material respects all conditions on its part to be performed or satisfied hereunder on or prior to the Closing Date, and subsequent to the date of the most recent financial statements contained in the Offering Memorandum, there has been no material adverse change in the financial position or results of operation of the Obligors, taken as a whole, or any change, or any development including a prospective change, in or affecting the financial condition, results of operations, business or prospects of the Obligors, taken as a whole, except as set forth in the Offering Memorandum and (D) no Default or Event of Default under any Finance Document shall have occurred and be continuing. (i) On or prior to the Closing Date, each Finance Document and material Project Document shall have been executed and a copy thereof delivered to the Initial Purchasers in form and substance reasonably satisfactory to the Initial Purchasers. The Bonds shall have been duly authenticated by the Bond Trustee. (j) If any event shall have occurred that required the Issuer under Section 4(d) to prepare an amendment or supplement to the Offering Memorandum, such amendment or supplement shall have been prepared, the Initial Purchasers shall have been given a reasonable opportunity to comment thereon, and copies thereof shall have been delivered to the Initial Purchasers reasonably in advance of the Closing Date. 21 22 (k) There shall not have occurred any invalidation of Rule 144A under the Securities Act by any court or any withdrawal or proposed withdrawal of any rule or regulation under the Securities Act or the Exchange Act by the Commission or any amendment or proposed amendment thereof by the Commission which, in the reasonable judgment of the Initial Purchasers, would materially impair the ability of the Initial Purchasers to purchase, hold or effect resales of the Bonds as contemplated hereby. (l) Except as contemplated in the Offering Memorandum or any Finance Document, subsequent to the execution and delivery of this Agreement or, if earlier, the dates as of which information is given in the Offering Memorandum (exclusive of any amendment or supplement thereto), there shall not have been any change in either Obligor's equity or long-term debt or any change, or any development involving a prospective change, in or affecting the financial condition, results of operations, business or prospects of the Obligors taken as a whole, the effect of which, in any such case described above, is, in the reasonable judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or delivery of the Bonds on the terms and in the manner contemplated by this Agreement and the Offering Memorandum (exclusive of any amendment or supplement thereto). (m) No action shall have been taken, and no statute, rule, regulation or order shall have been enacted, adopted or issued, by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Bonds; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Bonds; (n) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Bonds by any Rating Agency, and (ii) no such organization shall have publicly announced that it has under surveillance or review (other than an announcement with positive implications of a possible upgrading), its rating of the Bonds. (o) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the over-the-counter market shall have been suspended or materially limited, or minimum prices shall have been established on any such exchange or market by the Commission, by any such 22 23 exchange or by any other regulatory body or governmental authority having jurisdiction, or trading in any securities of the Issuer on any exchange or in the over-the-counter market shall have been suspended, or (ii) any general moratorium on commercial banking activities shall have been declared by federal or New York state authorities, or (iii) an outbreak or escalation of hostilities or a declaration by the United States of a national emergency or war, or (iv) a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) the effect of which, in the case of this clause (iv), is, in the reasonable judgment of the Initial Purchasers, so material and adverse as to make it impracticable or inadvisable to proceed with the sale or the delivery of the Bonds on the terms and in the manner contemplated by this Agreement and in the Offering Memorandum (exclusive of any amendment or supplement thereto). (p) Stone & Webster (the "Independent Engineer") shall have consented to the references to it in the Offering Memorandum and the inclusion of the Independent Engineer's Report prepared by the Independent Engineer in Appendix A to the Offering Memorandum; and shall have provided a certificate, dated as of the Closing Date, confirming that since the date of the Independent Engineer's Report, no event affecting the Independent Engineer's Report or the matters referred to therein shall have occurred (i) which shall make untrue or incorrect in any material respect, as of the Closing Date, any information or statement contained in the Independent Engineer's Report or in the Offering Memorandum relating to matters referred to in the Independent Engineer's Report, or (ii) which shall cause the Offering Memorandum to omit to state a material fact necessary in order to make the statements and information contained in the Independent Engineer's Report, or in the Offering Memorandum relating to matters referred to in the Independent Engineer's Report, in light of the circumstances under which they were made, not misleading. (q) Pace Global Energy Services (the "Independent Market Consultant") shall have consented to the references to it in the Offering Memorandum and the inclusion of the Independent Market Consultant's Report prepared by the Independent Market Consultant in Appendix B to the Offering Memorandum; and shall have provided a certificate, dated as of the Closing Date, confirming that since the date of the Independent Market Consultant's Report, no event affecting the Independent Market Consultant's Report or the matters referred to therein shall have occurred (i) which shall make untrue or incorrect in any material respect, as of the Closing Date, any information or statement contained in the Independent Market Consultant's Report or in the Offering Memorandum relating to matters referred to in the Independent Market Consultant's Report, or (ii) which shall cause the Offering Memorandum to omit to state a material 23 24 fact necessary in order to make the statements and information contained in the Independent Market Consultant's Report, or in the Offering Memorandum relating to matters referred to in the Independent Market Consultant's Report, in light of the circumstances under which they were made, not misleading. (r) Marsh USA, Inc. (the "Insurance Consultant") shall have consented to the references to it in the Offering Memorandum; and shall have provided a certificate, dated as of the Closing Date, confirming that since the date of the Insurance Consultant's Report, no event affecting the Insurance Consultant's Report or the matters referred to therein shall have occurred (i) which shall make untrue or incorrect in any material respect, as of the Closing Date, any information or statement contained in the Insurance Consultant's Report or in the Offering Memorandum relating to matters referred to in the Insurance Consultant's Report, or (ii) which shall cause the Offering Memorandum to omit to state a material fact necessary in order to make the statements and information contained in the Insurance Consultant's Report, or in the Offering Memorandum relating to matters referred to in the Insurance Consultant's Report, in light of the circumstances under which they were made, not misleading. (s) On or prior to the Closing Date, each of the UCC-1 financing statements describing the Collateral and naming the Collateral Agent as secured party (the "Financing Statements") shall have been delivered to the Collateral Agent for filing, recordation and/or registration in each office and in each jurisdiction where required to create and perfect a valid and enforceable security interest in the Collateral covered or purported to be covered by the Security Documents, with the priority purported to be created thereby. All taxes and recording and filing fees required to be paid with respect to the execution, recording or filing of the Financing Statements shall have been paid or provided for. (t) The Subsidiary Guarantor shall have obtained third party consents to assignment from each of the parties contracting under any Project Document listed on Part B of Schedule II hereto with the Subsidiary Guarantor, in each case to the reasonable satisfaction of each of the Initial Purchasers and including, without limitation, a legal opinion from such third party's counsel with respect to such consent. (u) NRG shall have made a cash equity contribution to the Issuer of at least $247 million which shall be deposited by the Issuer into the Escrow Account. (v) The Subsidiary Guarantor shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, executed on behalf of the Subsidiary 24 25 Guarantor, stating that the Acquisition Agreement, as amended, is in full force and effect and no material term or condition thereof has been amended, modified or waived since the date hereof (without the consent of the Initial Purchasers (such consent not to be unreasonably withheld or delayed)). (w) The Subsidiary Guarantor shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, executed on behalf of the Subsidiary Guarantor, stating that there is no order, writ, judgment, injunction, decree or determination of any governmental authority that directs that the Acquisition not be consummated. (x) The Subsidiary Guarantor shall have furnished to the Initial Purchasers a certificate, dated the Closing Date, executed on behalf of the Subsidiary Guarantor, stating that simultaneously with the closing of the Acquisition, the Acquired Assets will be transferred free and clear of all liens, encumbrances and other charges other than Permitted Liens. (y) The Bonds shall have received a rating no lower than "BBB-" from S&P and "Baa2" from Moody's. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Initial Purchasers. 6. Termination. The obligations of the Initial Purchasers hereunder may be terminated by the Initial Purchasers, in their absolute discretion, by notice given to and received by the Issuer prior to delivery of and payment for the Bonds if, prior to that time, any of the events described in Section 5(k), (l), (m), (n) or (o) shall have occurred and be continuing. 7. Defaulting Initial Purchasers. (a) If, on the Closing Date, any Initial Purchaser defaults in the performance of its obligations under this Agreement, the non-defaulting Initial Purchaser shall make arrangements for the purchase of the Bonds which such defaulting Initial Purchaser agreed but failed to purchase; provided, however, that in the event the aggregate principal amount of Bonds which the defaulting Initial Purchaser or Initial Purchasers agreed but failed to purchase shall exceed one-eleventh of the aggregate principal amount of Bonds set forth on Schedule I hereto, the non-defaulting Initial Purchasers shall have the right to purchase all, but shall not be 25 26 under any obligation to purchase any of the Bonds. If such non-defaulting Initial Purchasers do not purchase all of the Bonds, or if no such arrangements are made within 36 hours after such default, this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchaser or the Issuer, except that the Issuer will continue to be liable for the payment of expenses to the non-defaulting Initial Purchasers to the extent set forth in Sections 8 and 12 and except that the provisions of Sections 9 and 10 shall not terminate and shall remain in effect. As used in this Agreement, the term "Initial Purchasers" includes, for all purposes of this Agreement unless the context otherwise requires, any party not listed in Schedule 1 hereto that, pursuant to this Section 7, purchases Bonds which a defaulting Initial Purchaser agreed but failed to purchase. (b) Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Issuer or any non-defaulting Initial Purchaser for damages caused by its default. If other persons are obligated or agree to purchase the Bonds of a defaulting Initial Purchaser, either the non-defaulting Initial Purchaser or the Issuer may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Issuer or counsel for the non-defaulting Initial Purchaser may be necessary in the Offering Memorandum or in any other document or arrangement, and the Issuer agrees to promptly prepare any amendment or supplement to the Offering Memorandum that effects any such changes. 8. Reimbursement of Initial Purchasers' Expenses. If (a) this Agreement shall have been terminated pursuant to Section 6 or 7, (b) the Issuer shall fail to tender the Bonds for delivery to the Initial Purchasers for any reason permitted under this Agreement or (c) the Initial Purchasers shall decline to purchase the Bonds for any reason permitted under this Agreement, the Issuer shall reimburse the Initial Purchasers for such out-of-pocket expenses (including reasonable fees and disbursements of counsel) as shall have been reasonably incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase and resale of the Bonds. If this Agreement is terminated pursuant to Section 7 by reason of the default of one or more of the Initial Purchasers, the Issuer shall not be obligated to reimburse any defaulting Initial Purchaser on account of such expenses. 9. Indemnification. (a) The Issuer shall indemnify and hold harmless each Initial Purchaser, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls any Initial Purchaser within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(a) and Section 10 as an Initial Purchaser), from and 26 27 against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of the Bonds), to which that Initial Purchaser may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or in any information provided by the Issuer pursuant to Section 4(e) or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Initial Purchaser promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Issuer shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Initial Purchasers' Information; and provided, further, that with respect to any such untrue statement in or omission from the Preliminary Offering Memorandum, the indemnity agreement contained in this Section 9(a) shall not inure to the benefit of any such Initial Purchaser to the extent that the sale to the person asserting any such loss, claim, damage, liability or action was an initial resale by such Initial Purchaser and any such loss, claim, damage, liability or action of or with respect to such Initial Purchaser results from the fact that both (A) to the extent required by applicable law, a copy of the Offering Memorandum or any amendment or supplement to the Offering Memorandum was not sent or given to such person at or prior to the written confirmation of the sale of such Bonds to such person and (B) the untrue statement in or omission from the Preliminary Offering Memorandum or any amendment or supplement to the Offering Memorandum was corrected in the Offering Memorandum or any amendment or supplement to the Offering Memorandum, unless, in either case, such failure to deliver the Offering Memorandum was a result of non-compliance by the Issuer with Section 4(b). (b) Each Initial Purchaser, severally and not jointly, shall indemnify and hold harmless the Issuer, its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Issuer within the 27 28 meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 9(b) and Section 10 as the Issuer), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Issuer may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Offering Memorandum or the Offering Memorandum or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with any Initial Purchasers' Information, and shall reimburse the Issuer for any legal or other expenses reasonably incurred by the Issuer in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 9(a) or 9(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 9 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but 28 29 the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 9(a) and 9(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. The obligations of the Issuer and the Initial Purchasers in this Section 9 and in Section 10 are in addition to any other liability that the Issuer or the Initial Purchasers, as the case may be, may otherwise have, including in respect of any breaches of representations, warranties and agreements made herein by any such party. 29 30 Exhibit 1.1 10. Contribution. If the indemnification provided for in Section 9 is unavailable or insufficient to hold harmless an indemnified party under Section 9(a) or 9(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Issuer on the one hand and the Initial Purchasers on the other from the offering of the Bonds or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Issuer on the one hand and the Initial Purchasers on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Issuer on the one hand and the Initial Purchasers on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Bonds purchased under this Agreement (before deducting expenses) received by or on behalf of the Issuer, on the one hand, and the total discounts and commissions received by the Initial Purchasers with respect to the Bonds purchased under this Agreement, on the other, bear to the total gross proceeds from the sale of the Bonds under this Agreement, in each case as set forth in the table on the cover page of the Offering Memorandum. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Issuer or information supplied by the Issuer on the one hand or to any Initial Purchasers' Information on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Issuer and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 10 were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 10 shall be deemed to include, for purposes of this Section 10, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend any such action or claim. Notwithstanding the provisions of this Section 10, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total discounts and commissions received by such Initial Purchaser with respect to the Bonds purchased by it under this Agreement exceeds the amount of any damages which such Initial Purchaser has otherwise paid or become liable to pay by reason of 30 31 any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Initial Purchasers' obligations to contribute as provided in this Section 10 are several in proportion to their respective purchase obligations and not joint. 11. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Issuer and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except as provided in Sections 9 and 10 with respect to affiliates, officers, directors, employees, representatives, agents and controlling persons of the Issuer and the Initial Purchasers and in Section 4(e) with respect to holders and prospective purchasers of the Bonds. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 11, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 12. Expenses. The Issuer agrees with the Initial Purchasers to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Bonds and any taxes payable in that connection; (b) the costs incident to the preparation, printing and distribution of the Preliminary Offering Memorandum, the Offering Memorandum and any amendments or supplements thereto; (c) the costs of reproducing and distributing each of the Transaction Documents; (d) the costs incident to the preparation, printing and delivery of the certificates evidencing the Bonds, including stamp duties and transfer taxes, if any, payable upon issuance of the Bonds; (e) the fees and expenses of the Issuer's counsel and independent accountants; (f) the fees and expenses of qualifying the Bonds under the Bonds laws of the several jurisdictions as provided in Section 4(f) and of preparing, printing and distributing Blue Sky Memoranda (including reasonable related fees and expenses of counsel for the Initial Purchasers); (g) any fees charged by rating agencies for rating the Bonds; (h) the reasonable fees and expenses of the Initial Purchasers, the Bond Trustee, the Collateral Agent, the Depositary Bank and any paying agent (including reasonable related fees and expenses of any counsel to such parties (provided that the payment obligations with respect to fees of New York legal counsel shall be in accordance with that certain letter, dated February 14, 2000, from Harold F. Moore to Christopher Lowe)); (i) all expenses and application fees incurred in connection with the application for the inclusion of the Bonds on the PORTAL Market and the approval of the Bonds for book-entry transfer by DTC; (j) fees and expenses relating to the engagement of the Independent 31 32 Consultants; and (k) all other costs and expenses incident to the performance of the obligations of the Issuer under this Agreement which are not otherwise specifically provided for in this Section 12. 13. Survival. The respective indemnities, rights of contribution, representations, warranties and agreements of the Issuer and the Initial Purchasers contained in this Agreement or made by or on behalf of the Issuer or the Initial Purchasers pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Bonds and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any of them or any of their respective affiliates, officers, directors, employees, representatives, agents or controlling persons. 14. Notices, etc.. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) if to the Initial Purchasers, shall be delivered or sent by mail or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New York, New York 10017, Attention: Stephen B. Grant (telecopier no.: (212) 270-7487); (b) if to the Issuer, shall be delivered or sent by mail or telecopy transmission to NRG South Central Generating UC, 1221 Nicollet Mall, Suite 700, Minneapolis, Minnesota 55403, Attention: General Counsel (telecopier no.: (612) 373-5391); or (c) if to the Subsidiary Guarantor, shall be delivered or sent by mail or telecopy transmission to Louisiana Generating LLC, P.O. Box 15540, Baton Rouge, Louisiana 70895, Attention: Alan Williams (telecopier no.: (225) 296-1746); provided that any notice to an Initial Purchaser pursuant to Section 9(c) shall also be delivered or sent by mail to such Initial Purchaser at its address set forth on the signature page hereof. Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Issuer shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by CSI. 15. Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the 32 33 Securities Act, and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. 16. Initial Purchasers' Information. The parties hereto acknowledge and agree that, for all purposes of this Agreement, the Initial Purchasers' Information consists solely of the following information in the Preliminary Offering Memorandum and the Offering Memorandum: (i) the last paragraph on the front cover page concerning the terms of the offering by the Initial Purchasers; (ii) the paragraph under the heading "Plan of Distribution" concerning over-allotment and trading activities by the Initial Purchasers; and (iii) the statements concerning the Initial Purchasers contained in the first four and last two paragraphs under the heading "Plan of Distribution". 17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. 18. Submission to Jurisdiction. (a) Any legal action or proceeding against either Obligor with respect to this Agreement may be brought in the courts of the State of New York in the County of New York or of the United States for the Southern District of New York and, by execution and delivery of this Agreement, each Obligor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Obligor agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon such Obligor, and may be enforced in any other jurisdiction by a suit upon such judgment, a certified copy of which shall be conclusive evidence of the judgment. Each Obligor irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Obligor, at its address referred to in Section 14, such service to become effective thirty (30) days after such mailing. Nothing herein shall affect the right of the Bond Trustee or any other Person to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against either Obligor in any other jurisdiction. (b) Each Obligor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 33 34 19. Counterparts. This Agreement may be executed in one or more counterparts (which may include counterparts delivered by telecopier), and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 20. Amendments. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto. 21. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. [The remainder of this page has been intentionally left blank.] 34 35 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us a counterpart hereof, whereupon this instrument will become a binding agreement between the Obligors and the several Initial Purchasers in accordance with its terms. Very truly yours, NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Mataczynski ________________________ Name: Craig A. Mataczynski Title: President LOUISIANA GENERATING LLC By: /s/ Craig A. Mataczynski ________________________ Name: Craig A. Mataczynski Title: Vice President Agreed and Accepted: CHASE SECURITIES INC. By /s/ [illegible] - -------------------- Authorized Signatory LEHMAN BROTHERS INC. By /s/ [illegible] - -------------------- Authorized Signatory 36 SCHEDULE 1
Principal Amount Initial Purchasers of Bonds ------------------ -------- Chase Securities Inc. $440,000,000 Lehman Brothers Inc. $280,000,000 Credit Suisse First Boston Corporation $ 40,000,000 Salomon Smith Barney Inc. $ 40,000,000 ------------ Total $800,000,000
36 37 SCHEDULE II PART A SWEPCO PPA MEAM PPA SMEPA PPA PART B Power Marketing Agreement Corporate Services Agreement (Issuer) Corporate Services Agreement (Subsidiary Guarantor) Operation and Management Services Agreement 37 38 ANNEX A-1 [Form of Opinion of Special New York counsel for the Obligor] (i) each Obligor, NRG Central U.S. LLC and South Central Generation Holding LLC (collectively, the "Companies") is an existing limited liability company in good standing under the laws of the State of Delaware; (ii) the Indenture and the other Documents specified on a schedule to the opinion (the "Transaction Documents") to which any of the Companies is party have been duly authorized, executed and delivered; the issuance and sale of the Bonds have been duly authorized, executed and delivered by the Issuer; making customary assumptions regarding parties thereto other than the Companies, the Indenture, the Bonds and such other Transaction Documents constitute valid and legally binding obligations of such Company party thereto enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles except that the waiver set forth in Section 5.11 of the Indenture may be unenforceable; (iii) the Power Marketing Security Agreement is, with respect to NRG Power Marketing, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (iv) no Company is or, after giving effect to the offering and sale of the Bonds and the application of the proceeds thereof as contemplated by the Transaction Documents will be, an "investment company" as defined in the Investment Company Act; (v) to the best of our knowledge, no Governmental Approval is required in connection with (x) the issuance of the Bonds and (y) the execution, delivery and performance by any Company of the Transaction Documents except for Governmental Approvals which have been obtained or made prior to the date hereof or, that, if not made or obtained, would not have a material adverse effect on the Obligors and their subsidiaries, taken as a whole; A-1-1 39 (vi) the execution, delivery and performance by each Company of each of the Transaction Documents to which it is a party and the issuance and sale of the Bonds and compliance with the terms and provisions thereof will not result in a breach or violation of any of the terms and provisions of, or constitute a default under, to our actual knowledge any statute, any rule, regulation or order of any governmental agency or body or any court having jurisdiction over any Company or any of their properties, or, based solely upon review of the documents identified to us by officers of each Company as constituting all material contracts of such Company, which are listed on a Schedule to this opinion (the "Material Contracts"), any material agreement or instrument to which any Company is a party or by which any Company is bound or to which any of the properties of any Company is subject, or the certificate of formation, limited liability company agreement, certificate of incorporation or by-laws, as applicable. Each Company has the power and authority to execute and deliver each of the Transaction Documents to which it is a party and to perform its obligations thereunder; (vii) upon delivery to the Collateral Agent in the State of New York of the membership certificates described in and in accordance with the provisions of the Pledge Agreements (the "Pledged Shares"), the Collateral Agent will have a valid and perfected security interest in the Pledged Shares, securing the performance of the obligations of the respective Obligors under the Finance Documents; (viii) each Obligor has granted a valid security interest in favor of the Collateral Agent in the Collateral described in the Security Agreements and the Pledge Agreements securing the performance of the obligations of such Obligor under the Finance Documents, to the extent a security interest can be created therein under Article 9 of the New York UCC; (ix) the relevant provisions of the Indenture are effective to perfect such security interests by control (as defined in Section 8-106) of the New York UCC), to the extent the Collateral constitutes "security entitlements" and "securities accounts" (each as defined in Article 8 of the New York UCC); (x) upon the filing of the Financing Statements with the governmental offices indicated on Schedule A, such security interest in such Collateral will be perfected to the extent security interests therein can be perfected by filing UCC-1 financing statements under Article 9 of the New York UCC; A-1-2 40 (xi) assuming the Issuer uses the proceeds from the sale of the Bonds as described under the caption "Use of Proceeds" in the Offering Memorandum, neither the consummation of the transactions contemplated by the Purchase Agreement nor the sale, issuance, execution or delivery of the Bonds by the Issuer will violate Regulation T, U, or X of the Federal Reserve Board; (xii) to our actual knowledge, there exists no current or pending legal or governmental actions, suits or proceedings against any Obligor which would be required to be described in the Offering Memorandum pursuant to Item 103 of S-K under the Securities Act of 1933, as amended (the "Securities Act"), if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 which are not described as so required; (xiii) no registration of the Bonds under the Securities Act or qualification of the Indenture under the Trust Indenture Act is required in connection with the issuance and sale of the Bonds by the Issuer and the offer, initial resale and delivery of the Bonds by the Initial Purchasers in the manner contemplated by the Purchase Agreement and the Offering Memorandum, it being understood that we do not express any opinion as to any subsequent resale of any Bonds. (xiv) the statements contained in the Offering Memorandum under the captions "Summary of Certain Principal Agreements" and "Description of Principal Financing Documents," insofar as they constitute summaries of the documents referred to therein, fairly summarize in all material respects the matters referred to therein; the statements in the Offering Memorandum under the heading "Certain U.S. Federal Tax Considerations for Non-U.S. Holders", to the extent that they discuss matters of law or legal conclusions are correct in all material respects; Such counsel shall also state that such counsel has participated in conferences with officers and other representatives of the Companies, representatives of the independent auditors of the Obligors and your representatives and counsel at which the contents of the Offering Memorandum and related matters were discussed. Because the purpose of such counsel's professional engagement was not to establish or confirm factual matters and because the scope of such counsel's examination of the affairs of the Companies did not permit such counsel to verify the accuracy, completeness or fairness of the statements set forth in the Offering Memorandum, such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in such documents, except to the A-1-3 41 extent set forth in the next sentence or in the preceding paragraphs of the opinion. On the basis of the foregoing, and except for the financial statements and schedules and other financial and statistical data included therein, as to which such counsel expresses no opinion or belief, no facts have come to such counsel's attention that lead such counsel to believe that the Offering Memorandum, as of its date and as of the closing date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. A-1-4 42 ANNEX A-2 [Form of Opinion of Louisiana counsel for the Obligors] (i) each of the Transaction Documents governed by the laws of the State of Louisiana (collectively, the "Louisiana Documents") executed as of the Closing Date has been duly executed and delivered by the Subsidiary Guarantor and each of the Louisiana Documents constitute or, if executed in a form substantially similar to the applicable form we have reviewed, will constitute a legally valid and binding obligation of the Subsidiary Guarantor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (ii) the Louisiana Public Service Commission Approval ("LPSC Approval") that is required or will become required under applicable Louisiana law for the ownership or operation of the Project is in full force and effect and is not subject to any appeals or further proceedings or to any unsatisfied condition that may allow modification or revocation. The Subsidiary Guarantor is in compliance with the LPSC Approval referred to in the immediately preceding sentence. LPSC Approval is not required to be obtained by, in the name of, or on behalf of either Obligor in connection with (x) the issuance of the Bonds and (y) the execution, delivery and performance by each Obligor of the Finance Documents; (iii) the execution and delivery of each Transaction Document to which the Subsidiary Guarantor is a party will not conflict with or constitute a breach or violation of any Louisiana state statute, rule or regulation applicable to the Subsidiary Guarantor; (iv) the Mortgage is in an appropriate form for recordation with the Clerk of Court and Recorder of Mortgages for the Parishes listed on a schedule to the opinion for encumbering real property and interests in real property; (v) the recording of the Mortgage with the Clerk of Court Offices listed on a schedule to the opinion is the only recording necessary to give constructive notice to third parties of the lien of the Mortgage on the real property interests described therein; A-2-1 43 (vi) there are no mortgage taxes or filing fees payable to the State of Louisiana or any of its political subdivisions as a consequence of the execution or delivery of the Louisiana Documents or the creation of the indebtedness evidenced or secured by any of the Louisiana Documents or the filing or recording of any of the Louisiana Documents, except (i) normal filing fees payable to the Clerk of Court Offices for normal recording fees; and (ii) any fee or charge payable to any entity whose services may have been used to assist in such filing and recordation; (vii) each Financing Statement is in appropriate form for filing in each jurisdiction where required to create and perfect a valid and enforceable security interest in the collateral covered or purported to be covered by the Guarantor Security Agreement. Upon the proper filing of each such Financing Statement in such jurisdiction, the security interest in favor of the Collateral Agent in the collateral described in each Financing Statement which is subject to Article 9 of the LAUCC will be perfected to the extent a security interest in such collateral can be perfected by filing a Financing Statement under the provisions of the LAUCC. Each LAUCC fixture filing is in an appropriate form for recordation in the appropriate jurisdiction as a fixture filing encumbering interests in any "fixtures" (as such terms are defined in Article 9 of the LAUCC) described in the fixture filing; and (viii) such counsel has no reason to believe that the section of the Offering Memorandum addressing state regulatory approvals, or any amendment or supplement thereto, as of the date hereof and as of the Closing Date, contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein not misleading; the descriptions of statutes, legal and governmental proceedings and contracts and other documents in the section of the Offering Memorandum addressing state regulatory approvals are accurate and fairly present the relevant information; it being understood that (a) such counsel need only express an opinion insofar as the Offering Memorandum relates to matters of Louisiana law or the Louisiana Documents and (b) such counsel need express no opinion as to the financial statements or other financial data contained in the Offering Memorandum. B-1 44 ANNEX B [Form of Initial Comfort Letter] (i) they are independent certified public accountants with respect to the Obligors within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA and its interpretations and rulings; (ii) in their opinion, the audited financial statements included in the Offering Memorandum and reported on by them comply in form in all material respects with the accounting requirements of the Exchange Act and the related published rules and regulations of the Commission thereunder that would apply to the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act (except that certain supporting schedules are omitted); (iii) based upon a reading of the latest unaudited financial statements made available by the Obligors, the procedures of the AICPA for a review of interim financial information as described in Statement of Auditing Standards No. 71, reading of minutes and inquiries of certain officials of the Obligors who have responsibility for financial and accounting matters and certain other limited procedures requested by the Initial Purchasers and described in detail in such letter, nothing has come to their attention that causes them to believe that (A) any unaudited financial statements included in the Offering Memorandum do not comply as to form in all material respects with applicable accounting requirements, (B) any material modifications should be made to the unaudited financial statements included in the Offering Memorandum for them to be in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Offering Memorandum or (C) the information included under the headings "Capitalization", "Selected Financial Data of Cajun Electric (Cajun Facilities)", "Management's Discussion and Analysis of Results of Operations and Financial Condition" is not in conformity with the disclosure requirements of Regulation S-K that would apply to the Offering Memorandum if the Offering Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act; (iv) based upon the procedures detailed in such letter with respect to the period subsequent to the date of the last available balance sheet, including reading of minutes and inquiries of certain officials of the Obligors who have responsibility for B-2 45 financial and accounting matters, nothing has come to their attention that causes them to believe that (A) at a specified date not more than three business days prior to the date of such letter, there was any change in capital stock, increase in long-term debt or decrease in net current assets as compared with the amounts shown in the _________, __ unaudited balance sheet included in the Offering Memorandum or (B) for the period from ___________, __ , to a specified date not more than three business days prior to the date of such letter, there were any decreases, as compared with the corresponding period in the preceding year, in net sales, income from operations, EBITDA or net income, except in all instances for changes, increases or decreases that the Offering Memorandum discloses have occurred or which are set forth in such letter, in which case the letter shall be accompanied by an explanation by the Obligors as to the significance thereof unless said explanation is not deemed necessary by the Initial Purchasers; (v) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Obligors set forth in the Offering Memorandum agrees with the accounting records of the Obligors, excluding any questions of legal interpretation. B-3 EX-3.1 3 y57012ex3-1.txt CERTIFICATE OF FORMATION 1 Exhibit 3.1 State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF "NRG SOUTH CENTRAL GENERATING LLC" AS RECEIVED AND FILED IN THIS OFFICE. THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED: CERTIFICATE OF FORMATION, FILED THE TWELFTH DAY OF JANUARY, A.D. 2000, AT 3:30 O'CLOCK P.M. CERTIFICATE OF AMENDMENT, CHANGING ITS NAME FROM "NRG CENTRAL GENERATING LLC" TO "NRG SOUTH CENTRAL GENERATING LLC", FILED THE TWENTY-SEVENTH DAY OF JANUARY, A.D. 2000, AT 12 O'CLOCK P.M. /s/ Edward J. Freel [SEAL] ---------------------------------------- Edward J. Freel, Secretary of State 3158950 8100H AUTHENTICATION: 0326949 001140866 DATE: 03-21-00 2 CERTIFICATE OF FORMATION OF NRG CENTRAL GENERATING LLC The undersigned, being a natural person 18 years of age or older and for the purpose of forming a limited liability company for general business purposes under the Delaware Limited Liability Act, hereby adopts the following Certificate of Formation: 1. Name: The name of the limited liability company is NRG Central Generating LLC. 2. Registered Office: The address of the registered office of the limited liability company is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. Organizer: The name and address of the sole organizer of the limited liability company is Michael J. Young, NRG Energy, Inc., 1221 Nicollet Mall, Suite 700, Minneapolis, Minnesota 554O3-2445. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of NRG Central Generating LLC this 12th day of January, 2000. /s/ Michael J. Young ---------------------------------------- Michael J. Young Authorized Person 3 CERTIFICATE OF AMENDMENT OF NRG CENTRAL GENERATING LLC 1. The name of the limited liability company is NRG Central Generating LLC. 2. The Certificate of Formation of the limited liability company is hereby amended as follows: The name of the limited liability company is NRG South Central Generating LLC. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment of NRG Central Generating LLC this 27th day of January, 2000. /s/ Craig A. Mataczynski ---------------------------------------- Craig A. Mataczynski Manager EX-3.2 4 y57012ex3-2.txt LIMITED LIABILITY COMPANY AGREEMENT 1 Exhibit 3.2 LIMITED LIABILITY COMPANY AGREEMENT OF NRG SOUTH CENTRAL GENERATING LLC A Delaware Limited Liability Company THIS LIMITED LIABILITY COMPANY AGREEMENT OF NRG SOUTH CENTRAL GENERATING LLC (this "Agreement"), dated as of January 12, 2000 (the "Effective Date"), is adopted, executed and agreed to, for good and valuable consideration, by the Members (as defined below). RECITALS 1. NRG Central U.S. LLC ("NRG Central") and South Central Generation Holding LLC ("South Central"), both of which are Delaware limited liability companies, agree to become Members of the Company (as defined below), which was formed for the purpose of acquiring and owning the Projects (as defined below). 2. NRG Central and South Central desire to enter into this Agreement to agree upon various matters relating to the Company. ARTICLE 1 DEFINITIONS 1.01 Definitions. As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Sections referred to below: Acquisition - the Owner Entities' acquisition of the Projects from the Seller pursuant to the Asset Purchase Agreement. Act - the Delaware Limited Liability Company Act. Affected Member - Section 9.01. Affiliate - with respect to any Person, (a) each entity that such Person Controls; (b) each Person that Controls such Person, including, in the case of a Member, such Member's Parent; and (c) each entity that is under common Control with such Person, including, in the case of a Member, each entity that is Controlled by such Member's Parent. Agreement - introductory paragraph. Alternate Representative - Section 6.02(a)(i). Asset Purchase Agreement - that certain Fifth Amended and Restated Asset Purchase and Reorganization Agreement, dated as of September 21, 1999, by and between the Seller, Louisiana Generating and, as to certain sections only, NRG, and all ancillary agreements and documents related thereto. 2 Assignee - any Person that acquires a Membership Interest or any portion thereof through a Disposition; provided, however, that, an Assignee shall have no right to be admitted to the Company as a Member except in accordance with Section 3.03(b)(iii). Bankruptcy or Bankrupt - with respect to any Person, that (a) such Person (i) makes a general assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceedings; (iv) files a petition or answer seeking for such Person a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Law; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties; or (b) against such Person, a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Law has been commenced and 60 Days have expired without dismissal thereof or with respect to which, without such Person's consent or acquiescence, a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties has been appointed and 60 Days have expired without the appointment's having been vacated or stayed, or 60 Days have expired after the date of expiration of a stay, if the appointment has not previously been vacated. Business Day - any day other than a Saturday, a Sunday, or a holiday on which national banking associations in Minnesota, Illinois or New York are not open for business. Buyout Event - Section 9.01. Capital Account - the account to be maintained by the Company for each Member in accordance with Section 4.06. Capital Contribution - with respect to any Member, the amount of money and the net agreed value of any property (other than money) contributed to the Company by the Member. Any reference in this Agreement to the Capital Contribution of a Member shall include a Capital Contribution of its predecessors in interest. Certified Public Accountants - a firm of independent public accountants selected from time to time by the Management Committee. Change of Member Control - with respect to any Member, an event (such as a Disposition of voting securities) that causes such Member to cease to be Controlled by such Member's Parent; provided, however, that an event that causes any of such Member's Parents to be Controlled by another Person shall not constitute a Change of Member Control. Claim - any and all judgments, claims, causes of action, demands, lawsuits, suits, proceedings, Governmental investigations or audits, losses, assessments, fines, penalties, administrative orders, obligations, costs, expenses, liabilities and damages (whether actual, consequential or punitive), including interest, penalties, reasonable attorney's fees, disbursements and costs of investigations, deficiencies, levies, duties and imposts. 2 3 Code - the Internal Revenue Code of 1986, as amended. Company - NRG South Central Generating LLC, a Delaware limited liability company. Confidential Information - information and data (including all copies thereof) that is furnished or submitted by any of the Members or their Affiliates, whether oral (and if oral, reduced to writing and marked "confidential" within 10 days of disclosure), written, or electronic, on a confidential basis to the other Members or their Affiliates in connection with the Company, and any and all of the activities and studies performed pursuant to this Agreement, the Asset Purchase Agreement, or the Loan Documents, and the resulting information and data obtained from those studies. Notwithstanding the foregoing, the term "Confidential Information" shall not include any information that: (a) is in the public domain at the time of its disclosure or thereafter (other than as a result of a disclosure directly or indirectly by a Member or its Affiliates in contravention of this Agreement); (b) as to any Member, was in the possession of such Member or its Affiliates prior to the execution of this Agreement; or (c) is engineering information (for example, heat balance and capital cost information) that has been independently acquired or developed by a Member or its Affiliates without violating any of the obligations of such Member or its Affiliates under this Agreement. Control - the possession, directly or indirectly of either of the following: (a) (i) in the case of a corporation, more than 50% of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, more than 50% of the beneficial interest therein; and (iv) in the case of any other entity, more than 50% of the economic or beneficial interest therein; or (b) in the case of any entity, the power or authority, through ownership of voting securities, by contract or otherwise, to exercise a controlling influence over the management of the entity. Day - a calendar day; provided, however, that if any period of Days referred to in this Agreement shall end on a Day that is not a Business Day, then the expiration of such period shall be automatically extended until the end of the first succeeding Business Day. Default - the failure of a Member to comply in any material respect with any of its material agreements, covenants or obligations under this Agreement; the failure of any representation or warranty made by a Member in this Agreement to have been true and correct in all material respects at the time it was made; or the failure of a Member, without justified cause, to take any action materially necessary for the progress of the business of 3 4 South Central consistent with or required by the terms of this Agreement (including participating in meetings or decisions). Default Rate - a rate per annum equal to the lesser of (a) a varying rate per annum equal to the sum of (i) the prime rate as published in The Wall Street Journal, with adjustments in that varying rate to be made on the same date as any change in that rate is so published, plus (ii) 3% per annum, and (b) the maximum rate permitted by Law. Delaware Certificate - Section 2.01. Dispose, Disposing or Disposition - with respect to any asset (including a Membership Interest or any portion thereof), a sale, assignment, transfer, conveyance, gift, exchange or other disposition (other than the pledge or assignment to any creditor of the Company or any collateral agent for such creditor, of any Membership Interest as security for the indebtedness to such creditor) of such asset, whether such disposition be voluntary, involuntary or by operation of Law, including the following: (a) in the case of an asset owned by a natural person, a transfer of such asset upon the death of its owner, whether by will, intestate succession or otherwise; (b) in the case of an asset owned by an entity, (i) a merger or consolidation of such entity (other than where such entity is the survivor thereof), (ii) a conversion of such entity into another type of entity, or (iii) a distribution of such asset, including in connection with the dissolution, liquidation, winding-up or termination of such entity (unless, in the case of dissolution, such entity's business is continued without the commencement of liquidation or winding-up); and (c) a disposition in connection with, or in lieu of, a foreclosure of an Encumbrance; but such terms shall not include the creation of an Encumbrance. Dispute - Section 10.01. Dispute Notice - Section 10.02. Disputing Member - Section 10.01. Dissolution Event - Section 11.01(a). Effective Date - introductory paragraph. Encumber, Encumbering, or Encumbrance - the creation of a security interest, lien, pledge, mortgage or other encumbrance, whether such encumbrance be voluntary, involuntary or by operation of Law; provided, however, that the pledge or assignment to any creditor of the Company or any collateral agent for such creditor, of any Membership Interest as security for the indebtedness to such creditor shall not be deemed to be an Encumbrance thereof. Fair Market Value - Section 9.03. Governmental Authority (or Governmental) - a federal, state, local or foreign governmental authority; a state, province, commonwealth, territory or district thereof; a county or parish; a city, town, township, village or other municipality; a district, ward or other subdivision of any of the foregoing; any executive, legislative or other governing body 4 5 of any of the foregoing; any agency, authority, board, department, system, service, office, commission, committee, council or other administrative body of any of the foregoing; any court or other judicial body; and any officer, official or other representative of any of the foregoing. including - including, without limitation. Independent Member - means a Member of NRG Central of South Central that is a natural person who is not an officer, director, agent, employee or representative of the Company, NRG, NRG Central, South Central, any Owner Entity, or any Affiliate of any of the foregoing. Law - any applicable constitutional provision, statute, act, code (including the Code), law, regulation, rule, ordinance, order, decree, ruling, proclamation, resolution, judgment, decision, declaration, or interpretative or advisory opinion or letter of a Governmental Authority having valid jurisdiction. Lending Member - Section 4.03(a)(ii). Loan Documents - any and all documents relating to money borrowed by the Company, including money borrowed through public or private sales of its debt securities, as the same may be amended or restated from time to time. Louisiana Generating - Louisiana Generating LLC, a Delaware limited liability company. Management Committee - Section 6.02. Member - any Person executing this Agreement as of the date of this Agreement as a member or hereafter admitted to the Company as a member as provided in this Agreement, but such term does not include any Person who has ceased to be a member in the Company. Membership Interest - with respect to any Member, (a) that Member's status as a Member; (b) that Member's share of the income, gain, loss, deduction and credits of, and the right to receive distributions from, the Company; (c) all other rights, benefits and privileges enjoyed by that Member (under the Act, this Agreement, or otherwise) in its capacity as a Member, including that Member's rights to vote, consent and approve and otherwise to participate in the management of the Company, including through the Management Committee; and (d) all obligations, duties and liabilities imposed on that Member (under the Act, this Agreement or otherwise) in its capacity as a Member, including any obligations to make Capital Contributions. Non-Contributing Member - Section 4.03(a). NRG - NRG Energy, Inc., a Delaware corporation. NRG New Roads - NRG New Roads Holdings LLC, a Delaware limited liability company. 5 6 Officer - any Person designated as an officer of the Company as provided in Section 6.02(j), but such term does not include any Person who has ceased to be an officer of the Company. Owner Entities - Louisiana Generating and NRG New Roads. Outside Activities - Section 6.04. Parent - if applicable to a Member, the company or companies set forth opposite the name of such Member on Exhibit A. Permits - all permits, licenses, approvals or other actions of Governmental Authorities that are required for the ownership and operation of the businesses of the Company, as contemplated by this Agreement. Person - the meaning assigned that term in Section 18-101(11) of the Act and also includes a Governmental Authority and any other entity. Projects - the electricity generating plants and facilities and all related items of tangible and intangible property to be acquired by the Owner Entities pursuant to the Asset Purchase Agreement. Purchase Price - Section 9.03. Representative - Section 6.02(a)(i). Securities Act - the Securities Act of 1933. Seller - Ralph R. Mabey as Chapter 11 Trustee of Cajun Electric Power Cooperative, Inc. Sharing Ratio - subject in each case to adjustments in accordance with this Agreement or in connection with Dispositions of Membership Interests, (a) in the case of a Member executing this Agreement as of the date of this Agreement or a Person acquiring such Member's Membership Interest, the percentage specified for that Member as its Sharing Ratio on Exhibit A, and (b) in the case of Membership Interest issued pursuant to Section 3.04, the Sharing Ratio established pursuant thereto; provided, however, that the total of all Sharing Ratios shall always equal 100%. Sole Discretion - a Member's sole and absolute discretion, with or without cause, and subject to whatever limitations or qualifications the Member may impose. Tax Matters Member - Section 7.03(a). Term - Section 2.06. Terminated Member - Section 9.05. 6 7 Treasury Regulations - the regulations (including temporary regulations) promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code. All references herein to sections of the Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar or substitute, temporary or final Treasury Regulations. Uniform Commercial Code - means the Uniform Commercial Code as in effect from time to time in the State of New York. Other terms defined herein have the meanings so given them. 1.02 Construction. Unless the context requires otherwise: (a) the gender (or lack of gender) of all words used in this Agreement includes the masculine, feminine, and neuter; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (d) references to Laws refer to such Laws as they may be amended from time to time, and references to particular provisions of a Law include any corresponding provisions of any succeeding Law; and (e) references to money refer to legal currency of the United States of America. ARTICLE 2 ORGANIZATION 2.01 Formation. The Company has been organized as a Delaware limited liability company by the filing of a Certificate of Formation, dated as of the Effective Date (the "Delaware Certificate"), with the Secretary of State of Delaware pursuant to the Act. 2.02 Name. The name of the Company is "NRG South Central Generating LLC" and all Company business must be conducted in that name or such other names that comply with Law as the Management Committee may select. 2.03 Registered Office; Registered Agent; Principal Office in the United States; Other Offices. The registered office of the Company required by the Act to be maintained in the State of Delaware shall be the office of the initial registered agent named in the Delaware Certificate or such other office (which need not be a place of business of the Company) as the Management Committee may designate in the manner provided by Law. The registered agent of the Company in the State of Delaware shall be the initial registered agent named in the Delaware Certificate or such other Person or Persons as the Management Committee may designate in the manner provided by Law. The principal office of the Company in the United States shall be at such place as the Management Committee may designate, which need not be in the State of Delaware, and the Company shall maintain records there or such other place as the Management Committee shall designate and shall keep the street address of such principal office at the registered office of the Company in the State of Delaware. The Company may have such other offices as the Management Committee may designate. 2.04 Purposes. The purposes of the Company are (i) to acquire a 100% member interest in each of the Owner Entities; (ii) to cause the Owner Entities to enter into, and perform their respective obligations under the Asset Purchase Agreement; and (iii) to engage in any activities directly or indirectly relating thereto, including obtaining financing for and contributing required capital to the Owner Entities for the foregoing purposes. 7 8 2.05 Foreign Qualification. Prior to the Company's conducting business in any jurisdiction other than Delaware, the Management Committee shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Management Committee, with all requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. At the request of the Management Committee, each Member shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to qualify, continue, and terminate the Company as a foreign limited liability company in all such jurisdictions in which the Company may conduct business. 2.06 Term. The period of existence of the Company (the "Term") commenced on the Effective Date and shall end at such time as a certificate of cancellation is filed with the Secretary of State of Delaware in accordance with Section 11.04. Such period may be extended from time to time by Members holding a majority of the Membership Interests. 2.07 No State-Law Partnership. The Members intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member, for any purposes other than federal and state tax purposes, and this Agreement may not be construed to suggest otherwise. 2.08 Units; Certificates of Membership Interest; Applicability of Article 8 of UCC. Membership Interests shall be represented by units ("Units"). The number of authorized Units shall be one thousand (1,000). All Membership Interests shall be represented by certificates in such form as the Management Committee shall from time to time approve, shall be recorded in a register thereof maintained by the Company, and shall be subject to such rules for the issuance thereof as the Management Committee may from time to time determine. Membership Interests shall be subject to the provisions of Article 8 of the Uniform Commercial Code as may be applicable from time to time. ARTICLE 3 MEMBERSHIP; DISPOSITIONS OF INTERESTS 3.01 Initial Members. The initial Members of the Company are the Persons executing this Agreement as of the date of this Agreement as Members, each of which is admitted to the Company as a Member effective contemporaneously with the execution by such Person of this Agreement. 3.02 Representations, Warranties and Covenants. Each Member hereby represents, warrants and covenants to the Company and each other Member that the following statements are true and correct as of the Effective Date and shall be true and correct at all times that such Member is a Member: (a) that Member is duly incorporated, organized or formed (as applicable), validly existing, and (if applicable) in good standing under the Law of the jurisdiction of its incorporation, organization or formation; if required by applicable Law, that Member is duly qualified and in good standing in the jurisdiction of its principal place of business, if different from its jurisdiction of incorporation, organization or formation; and that Member has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all necessary actions by the board of directors, shareholders, 8 9 members, partners, trustees, beneficiaries, or other applicable Persons necessary for the due authorization, execution, delivery, and performance of this Agreement by that Member have been duly taken; (b) that Member has duly executed and delivered this Agreement and the other documents contemplated herein, and they constitute the legal, valid and binding obligation of that Member enforceable against it in accordance with their terms (except as may be limited by bankruptcy, insolvency or similar Laws of general application and by the effect of general principles of equity, regardless of whether considered at law or in equity); and (c) that Member's authorization, execution, delivery, and performance of this Agreement does not and will not (i) conflict with, or result in a breach, default or violation of, (A) the organizational documents of such Member, (B) any contract or agreement to which that Member is a party or is otherwise subject, or (C) any Law, order, judgment, decree, writ, injunction or arbitral award to which that Member is subject; or (ii) require any consent, approval or authorization from, filing or registration with, or notice to, any Governmental Authority or other Person, unless such requirement has already been satisfied. 3.03 Dispositions and Encumbrances of Membership Interests. (a) General Restriction. A Member may not Dispose of or Encumber all or any portion of its Membership Interest except in strict accordance with this Section 3.03. (References in this Section 3.03 to Dispositions or Encumbrances of a "Membership Interest" shall also refer to Dispositions or Encumbrances of a portion of a Membership Interest.) Any attempted Disposition or Encumbrance of a Membership Interest, other than in strict accordance with this Section 3.03, shall be, and is hereby declared, null and void ab initio. The Members agree that a breach of the provisions of this Section 3.03 may cause irreparable injury to the Company and to the other Members for which monetary damages (or other remedy at law) are inadequate in view of (i) the complexities and uncertainties in measuring the actual damages that would be sustained by reason of the failure of a Member to comply with such provision and (ii) the uniqueness of the Company business and the relationship among the Members. Accordingly, the Members agree that the provisions of this Section 3.03 may be enforced by specific performance. (b) Dispositions of Membership Interests. (i) General Restriction. A Member may not Dispose of all or any portion of its Membership Interest except by complying with all of the following requirements: (A) such Member must receive the unanimous consent of the non-Disposing Members, which consent shall not be unreasonably withheld by each of such other Members; provided, however, that such consent need not be obtained if (I) the proposed Assignee is a Wholly-Owned Affiliate of the Disposing Member and (II) such proposed Assignee demonstrates to the reasonable satisfaction of the other Members that it has the ability to meet the financial and contractual commitments and other obligations of the Disposing Member; and 9 10 (B) such Member must comply with the requirements of Section 3.03(b)(iii) and, if the Assignee is to be admitted as a Member, Section 3.03(b)(ii). (ii) Admission of Assignee as a Member. An Assignee has the right to be admitted to the Company as a Member, with the Membership Interest (and attendant Sharing Ratio) so transferred to such Assignee, only if (A) the Disposing Member making the Disposition has granted the Assignee either (I) the Disposing Member's entire Membership Interest or (II) the express right to be so admitted; and (B) such Disposition is effected in strict compliance with this Section 3.03. (iii) Requirements Applicable to All Dispositions and Admissions. In addition to the requirements set forth in Sections 3.03(b)(i) and 3.03(b)(ii), any Disposition of a Membership Interest and any admission of an Assignee as a Member shall also be subject to the following requirements, and such Disposition (and admission, if applicable) shall not be effective unless such requirements are complied with; provided, however, that the Management Committee, in its sole and absolute discretion, may waive any of the following requirements: (A) Disposition Documents. The following documents must be delivered to the Management Committee and must be satisfactory, in form and substance, to the Management Committee: (I) Disposition Instrument. A copy of the instrument pursuant to which the Disposition is effected. (II) Ratification of this Agreement. An instrument, executed by the Disposing Member and its Assignee, containing the following information and agreements, to the extent they are not contained in the instrument described in Section 3.03(b)(iii)(A)(I): (1) the notice address of the Assignee; (2) if applicable, the Parent of the Assignee; (3) the Sharing Ratios after the Disposition of the Disposing Member and its Assignee (which together must total the Sharing Ratio of the Disposing Member before the Disposition); (4) the Assignee's ratification of this Agreement and agreement to be bound by it, and its confirmation that the representations and warranties in Section 3.02 are true and correct with respect to it; (5) the Assignee's ratification of all of the Company's Agreements and agreement by be bound by them, to the same extent that the Disposing Member was bound by them prior to the Disposition; and (6) representations and warranties by the Disposing Member and its Assignee (aa) that the Disposition and admission is being made in accordance with all applicable Laws, and (bb) that the matters set forth in Sections 3.03(b)(iii)(A)(III) and (IV) are true and correct. (III) Securities Law Opinion. Unless the Membership Interest subject to the Disposition is registered under the Securities Act and any applicable state securities Law, or the 10 11 proposed Assignee is a Wholly-Owned Affiliate as described in 3.03(b)(i)(A) above, a favorable opinion of the Company's legal counsel, or of other legal counsel acceptable to the Management Committee, to the effect that the Disposition and admission is being made pursuant to a valid exemption from registration under those Laws and in accordance with those Laws. (IV) Tax Opinion. A favorable opinion of the Certified Public Accountants, or of other certified public accountants acceptable to the Management Committee, to the effect that the Disposition would not result in the Company's being considered to have terminated within the meaning of Code Section 708. (B) Payment of Expenses. The Disposing Member and its Assignee shall pay, or reimburse the Company for, all reasonable costs and expenses incurred by the Company in connection with the Disposition and admission, including the legal fees incurred in connection with the legal opinions referred to in Sections 3.03(b)(iii)(A)(III) and (IV), on or before the tenth Day after the receipt by that Person of the Company's invoice for the amount due. (C) No Release. No Disposition of a Membership Interest shall effect a release of the Disposing Member from any liabilities to the Company or the other Members arising from events occurring prior to the Disposition. (iv) Change of Member Control. A Change of Member Control must also comply with the requirements of this Section 3.03. (c) Encumbrances of Membership Interest. A Member may Encumber its Membership Interest if (i) the instrument creating such Encumbrance provides that any foreclosure of such Encumbrance (or Disposition in lieu of such foreclosure) must comply with the requirements of Section 3.03(b), and (ii) any such Encumbrance is not prohibited by the Loan Documents. (d) Right of First Refusal. Except as otherwise expressly permitted by this Agreement, this Section 3.03(d) shall apply to any proposed voluntary Disposition of a Membership Interest to any purchaser (other than a majority owned Affiliate of the disposing party) for consideration in the form of cash or promissory notes or other obligations to pay sums certain. The Member proposing to make such a Distribution shall provide written notice (a "Disposition Notice") to the remaining Members at least 90 days prior to the proposed Disposition. The Disposition Notice must set forth the identity of the proposed transferee, the sale price, and all other material terms and conditions of the proposed Disposition. In the Case of a Change of member Control, the Disposition notice must set forth the portion, if less than 100%, of the total purchase price that is applicable to such Member's Membership Interest. Upon receipt of a Disposition Notice, the remaining Members shall have the option for a period of 30 days to purchase all, but not less than all, of such Membership Interest. Such Membership Interest shall be allocated to the Members exercising their option under this Section 3.03(d) pro rata in accordance with their 11 12 Membership Interests. The purchase pursuant to the exercise of this option shall be at the price and pursuant to the terms and conditions of the proposed Disposition. If no Member exercises such option, the Member proposing such Disposition shall be free, for a period of 60 days after the expiration of the remaining Members' options, to Dispose of the Membership Interests that were the subject of the Disposition Notice, but only to the party, and for the price and on the terms and conditions, set forth in the Disposition Notice. If the proposed disposition does not occur within 60 days after the expiration of the remaining Members' options, the Membership Interest may not be Disposed of pursuant to this Section 30.3(d) unless the Member again complies with the terms of this Agreement. (e) Rights In Membership Interests Pledged as Collateral. Any other provision of this Agreement to the contrary notwithstanding, by executing and delivering this Agreement, each Member shall be deemed to have consented to (i) the pledge, assignment, hypothecation and transfer to any creditor of the Company or South Central or its agents, successors or assigns of, and the grant to such creditor or other Person of a lien on and security interest in, as security for the indebtedness of the Company or South Central to such creditor, all of such Member's right, title and interest in, to and under its Membership Interest and any other collateral securing such indebtedness, (ii) the exercise by any such creditor or other Person of the rights and remedies under any security document related to such collateral, including, without limitation, the right to exercise the voting and consensual rights and other powers of each Member to the extent provided in any such security document, and the right to foreclose upon or exercise a power of sale with respect to the Membership Interest of each Member and any other collateral subject to such security documents and to cause the agent or designee of such creditor or any third party purchaser of such Membership Interest to become an additional or substitute Member, and (iii) all other provisions of the loan and security documents relating to such indebtedness or collateral, the issuance of new or substituted Membership Interests, or the ownership of Membership Interests. 3.04 Creation of Additional Membership Interest. Additional Membership Interests may be created and issued to existing Members or to other Persons, and such other Persons may be admitted to the Company as Members, with the unanimous consent of the existing Members, on such terms and conditions as the existing Members may unanimously determine at the time of admission. The terms of admission or issuance must specify the Sharing Ratios applicable thereto and may provide for the creation of different classes or groups of Members having different rights, powers, and duties. The Management Committee may reflect the creation of any new class or group in an amendment to this Agreement indicating the different rights, powers, and duties. Any such admission is effective only after the new Member has executed and delivered to the Members an instrument containing the notice address of the new Member, the Assignee's ratification of this Agreement and agreement to be bound by it, and its confirmation that the representations and warranties in Section 3.02 are true and correct with respect to it. The provisions of this Section 3.04 shall not apply to Dispositions of Membership Interests or admissions of Assignees in connection therewith, such matters being governed by Section 3.03. 3.05 Access to Information. Each Member shall be entitled to receive any information that it may request concerning the Company; provided, however, that this Section 3.05 shall not obligate the Company or the Management Committee to create any information that does not already exist at the time of such request (other than to convert existing information from one medium to another, such as providing a printout of information that is stored in a computer database). Each 12 13 Member shall also have the right, upon reasonable notice, and at all reasonable times during usual business hours to inspect the properties of the Company and to audit, examine and make copies of the books of account and other records of the Company. Such right may be exercised through any agent or employee of such Member designated in writing by it or by an independent public accountant, engineer, attorney or other consultant so designated. The Member making the request shall bear all costs and expenses incurred in any inspection, examination or audit made on such Member's behalf. Confidential Information obtained pursuant to this Section 3.05 shall be subject to the provisions of Section 3.06. 3.06 Confidential Information. (a) Except as permitted by Section 3.06(b), (i) each Member shall keep confidential all Confidential Information and shall not disclose any Confidential Information to any Person, including any of its Affiliates, and (ii) each Member shall use the Confidential Information only in connection with the Company. (b) Notwithstanding Section 3.06(a), but subject to the other provisions of this Section 3.06, a Member may make the following disclosures and uses of Confidential Information: (i) disclosures to another Member in connection with the Company; (ii) disclosures and uses that are approved by the Management Committee; (iii) disclosures to an Affiliate of such Member on a "need to know" basis in connection with the Company, if such Affiliate has agreed to abide by the terms of this Section 3.06; (iv) disclosures to a Person that is not a Member or an Affiliate of a Member, if such Person has been retained to provide services by the Member in connection with the Company or such Member's Membership Interest and has agreed to abide by the terms of this Section 3.06; (v) disclosures to lenders, potential lenders or other Persons providing financing to the Company and potential purchasers of equity interests in the Company, so long as such Persons have agreed to abide by the terms of this Section 3.06; (vi) disclosures to any independent system operator or its consultants and representatives in connection with the conduct of the businesses of the Owner Entities; (vii) disclosures to Governmental Authorities that are necessary to operate the Projects; 13 14 (viii) disclosures that a Member is legally compelled to make by deposition, interrogatory, request for documents, subpoena, civil investigative demand, order of a court of competent jurisdiction, or similar process, or otherwise by Law or securities exchange requirements; provided, however, that, prior to any such disclosure, such Member shall, to the extent legally permissible: (A) provide the Management Committee with prompt notice of such requirements so that one or more of the Members may seek a protective order or other appropriate remedy or waive compliance with the terms of this Section 3.06(b)(vii); (B) consult with the Management Committee on the advisability of taking steps to resist or narrow such disclosure; and (C) cooperate with the Management Committee and with the other Members in any attempt one or more of them may make to obtain a protective order or other appropriate remedy or assurance that confidential treatment will be afforded the Confidential Information; and in the event such protective order or other remedy is not obtained, or the other Members waive compliance with the provisions hereof, such Member agrees (I) to furnish only that portion of the Confidential Information that the other Members are advised by counsel to the disclosing Member is legally required and (II) to exercise all reasonable efforts to obtain assurance that confidential treatment will be accorded such Confidential Information. (c) Each Member shall take such precautionary measures as may be required to ensure (and such Member shall be responsible for) compliance with this Section 3.06 by any of its Affiliates, and its and their directors, officers, employees and agents, and other Persons to which it may disclose Confidential Information in accordance with this Section 3.06. (d) A Terminated Member shall promptly destroy (and provide a certificate of destruction to the Company with respect to) or return to the Company, as directed by the Management Committee, all Confidential Information in its possession. Notwithstanding the immediately-preceding sentence, a Terminated Member may, subject to the other provisions of this Section 3.06, retain and use Confidential Information for the limited purpose of preparing such Terminated Member's tax returns and defending audits, investigations and proceedings relating thereto. (e) The Members agree that no adequate remedy at law exists for a breach or threatened breach of any of the provisions of this Section 3.06, the continuation of which unremedied will cause the Company and the other Members to suffer irreparable harm. Accordingly, the Members agree that the Company and the other Members shall be entitled, in addition to other remedies that may be available to them, to immediate injunctive relief from any breach of any of the provisions of this Section 3.06 and to specific performance of their rights hereunder, as well as to any other remedies available at law or in equity. (f) The obligations of the Members under this Section 3.06 shall terminate on the third anniversary of the end of the Term. 14 15 3.07 Liability to Third Parties. No Member shall be liable for the debts, obligations or liabilities of the Company. 3.08 Withdrawal. A Member may not withdraw or resign from the Company. ARTICLE 4 CAPITAL CONTRIBUTIONS 4.01 Initial Capital Contributions. Contemporaneously with the execution by such Member of this Agreement, each Member shall make the Capital Contributions described for that Member in Exhibit A. 4.02 Subsequent Capital Contributions. Without creating any rights in favor of any third party, each Member shall contribute to the Company, in cash, on or before the date specified as hereinafter described, that Member's Sharing Ratio of all monies that in the unanimous judgment of the Management Committee are necessary to enable the Company to acquire additional businesses for South Central and to cause the existing businesses of South Central to be properly operated and maintained and to pay and perform their respective costs, expenses, obligations, and liabilities. The Management Committee shall notify each other Member of the need for Capital Contributions pursuant to this Section 4.02 when appropriate, which notice must include a statement in reasonable detail of the proposed uses of the Capital Contributions and a date (which date may be no earlier than the fifth Business Day following each Member's receipt of its notice) before which the Capital Contributions must be made. Notices for Capital Contributions must be made to all Members in accordance with their Sharing Ratios. 4.03 Failure to Contribute. (a) If a Member does not contribute, within 10 Days of the date required, all or any portion of a Capital Contribution that Member is required to make as provided in this Agreement, the other Members may cause the Company to exercise, on notice to that Member (the "Non-Contributing Member"), one or more of the following remedies: (i) taking such action (including court proceedings) as the other Members may deem appropriate to obtain payment by the Non-Contributing Member of the portion of the Non-Contributing Member's Capital Contribution that is in default, together with interest thereon at the Default Rate from the date that the Capital Contribution was due until the date that it is made, all at the cost and expense of the Non-Contributing Member; (ii) permitting the other Members in proportion to their Sharing Ratios or in such other percentages as they may agree (the "Lending Member," whether one or more), to advance the portion of the Non-Contributing Member's Capital Contribution that is in default, with the following results: (A) the sum advanced constitutes a loan from the Lending Member to the Non-Contributing Member and a Capital Contribution of that sum to the Company by the Non-Contributing Member pursuant to the applicable provisions of this Agreement, 15 16 (B) the principal balance of the loan and all accrued unpaid interest thereon is due and payable in whole on the tenth Day after written demand therefor by the Lending Member to the Non-Contributing Member, (C) the amount lent bears interest at the Default Rate from the Day that the advance is deemed made until the date that the loan, together with all interest accrued on it, is repaid to the Lending Member, (D) all distributions from the Company that otherwise would be made to the Non-Contributing Member (whether before or after dissolution of the Company) instead shall be paid to the Lending Member until the loan and all interest accrued on it have been paid in full to the Lending Member (with payments being applied first to accrued and unpaid interest and then to principal), (E) the payment of the loan and interest accrued on it is secured by a security interest in the Non-Contributing Member's Membership Interest, as more fully set forth in Section 4.03(b), and (F) the Lending Member has the right, in addition to the other rights and remedies granted to it pursuant to this Agreement or available to it at Law or in equity, to take any action (including court proceedings) that the Lending Member may deem appropriate to obtain payment by the Non-Contributing Member of the loan and all accrued and unpaid interest on it, at the cost and expense of the Non-Contributing Member; (iii) exercising the rights of a secured party under the Uniform Commercial Code, as more fully set forth in Section 4.03(b); or (iv) exercising any other rights and remedies available at Law or in equity. In addition, the failure to make such contributions shall constitute a Default by the Non-Contributing Member, and the other Members shall have the rights set forth in Article 9 with respect to such Default. (b) Subject and subordinate to the rights of any creditor of the Company under the Loan Documents, each Member grants to the Company, and to each Lending Member with respect to any loans made by the Lending Member to that Member as a Non-Contributing Member pursuant to Section 4.03(a)(ii), as security, equally and ratably, for the payment of all Capital Contributions that Member has agreed to make and the payment of all loans and interest accrued on them made by Lending Members to that Member as a Non-Contributing Member pursuant to Section 4.03(a)(ii), a security interest in and a general lien on its Membership Rights and the proceeds thereof, all under the Uniform Commercial Code. On any default in the payment of a Capital Contribution or in the payment of such a loan or interest accrued on it, the Company or the Lending Member, as applicable, is entitled to all the rights and remedies of a secured party under the Uniform Commercial Code with respect to the security interest granted in this Section 4.03(b). Each Member shall execute and deliver to the Company and the other Members all financing statements and other 16 17 instruments that the Lending Member may request to effectuate and carry out the preceding provisions of this Section 4.03(b). At the option of a Lending Member, this Agreement or a carbon, photographic, or other copy hereof may serve as a financing statement. 4.04 Loans. If the Company does not have sufficient cash to pay its obligations, any Member(s) that may agree to do so with the consent of the Management Committee may advance all or part of the needed funds to or on behalf of the Company. An advance described in this Section 4.04 constitutes a loan from the Member to the Company, bears interest at a rate determined by the Management Committee from the date of the advance until the date of payment, and is not a Capital Contribution. 4.05 Return of Contributions. Except as expressly provided herein, a Member is not entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is not a liability of the Company or of any Member. A Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return any Member's Capital Contributions. 4.06 Capital Accounts. A Capital Account shall be established and maintained for each Member. Each Member's Capital Account shall be increased by (a) the amount of money contributed by that Member to the Company, (b) the fair market value of property contributed by that Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code), and (c) allocations to that Member of Company income and gain (or items thereof), including income and gain exempt from tax and income and gain described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding income and gain described in Treasury Regulation Section 1.704-1(b)(4)(i), and shall be decreased by (d) the amount of money distributed to that Member by the Company, (e) the fair market value of property distributed to that Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code), (f) allocations to that Member of expenditures of the Company described (or treated as described) in Section 705(a)(2)(B) of the Code, and (g) allocations of Company loss and deduction (or items thereof), including loss and deduction described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding items described in (f) above and loss or deduction described in Treasury Regulation Section 1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii). The Members' Capital Accounts shall also be maintained and adjusted as permitted by the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f) and as required by the other provisions of Treasury Regulation Sections 1.704-1(b)(2)(iv) and 1.704-1(b)(4), including adjustments to reflect the allocations to the Members of depreciation, depletion, amortization, and gain or loss as computed for book purposes rather than the allocation of the corresponding items as computed for tax purposes, as required by Treasury Regulation Section 1.704-1(b)(2)(iv)(g). Thus, the Members' Capital Accounts shall be increased or decreased to reflect a revaluation of the Company's property on its books based on the fair market value of the Company's property on the date of adjustment immediately prior to (A) the contribution of money or other property to the Company by a new or existing Member as consideration for a Membership Interest or an increased Sharing Ratio, (B) the distribution of money or other property by the Company to a Member as consideration for a Membership Interest, or (C) the liquidation of the Company. A Member that has more than one Membership Interest shall have a single Capital Account that reflects all such Membership Interests, regardless of the class of Membership Interests owned by such Member and regardless of the time or manner in which such Membership Interests were acquired. Upon the Disposition of all or a portion of a Membership Interest, the Capital Account of the Disposing 17 18 Member that is attributable to such Membership Interest shall carry over to the Assignee in accordance with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(1). ARTICLE 5 DISTRIBUTIONS AND ALLOCATIONS 5.01 Distributions or Billings. Except as provided in the Loan Documents, distributions to the Members shall be made only to all simultaneously in proportion to their respective Sharing Ratios (at the time the amounts of such distributions are determined), and distributions shall be made only in such aggregate amounts and at such times as shall be determined by the Management Committee and as are permitted by the Loan Documents. When so permitted, the Management Committee shall endeavor to distribute to the Members, on or before the last day of each calendar month, or more often if approved by the Management Committee, the estimated amount of any cash available for such calendar month (net of any adjustments, if any, made to reflect the actual cash available for the preceding calendar month). 5.02 Distributions on Dissolution and Winding Up. Upon the dissolution and winding up of the Company, after adjusting the Capital Accounts for all distributions made under Section 5.01 and all allocations under Article 5, all available proceeds distributable to the Members as determined under Section 11.02 shall be distributed to all of the Members to the extent of the Members' positive Capital Account balances. 5.03 Allocations. (a) For purposes of maintaining the Capital Accounts pursuant to Section 4.06 and for income tax purposes, except as provided in Section 5.03(b), each item of income, gain, loss, deduction and credit of the Company shall be allocated to the Members in accordance with their Sharing Ratios. (b) For income tax purposes, income, gain, loss, and deduction with respect to property contributed to the Company by a Member or revalued pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall be allocated among the Members in a manner that takes into account the variation between the adjusted tax basis of such property and its book value, as required by Section 704(c) of the Code and Treasury Regulation Section 1.704-1(b)(4)(i), using the remedial allocation method permitted by Treasury Regulation Section 1.704-3(d). 5.04 Varying Interests. All items of income, gain, loss, deduction or credit shall be allocated, and all distributions shall be made, to the Persons shown on the records of the Company to have been Members as of the last calendar day of the period for which the allocation or distribution is to be made. Notwithstanding the foregoing, if during any taxable year there is a change in any Member's Sharing Ratio, the Members agree that their allocable shares of such items for the taxable year shall be determined on any method determined by the Management Committee to be permissible under Code Section 706 and the related Treasury Regulations to take account of the Members' varying Sharing Ratios. 18 19 ARTICLE 6 MANAGEMENT 6.01 Management by Members. Except as described below in Sections 6.03 and 6.05, the management of the Company is fully vested in the Members, acting exclusively in their membership capacities. To facilitate the orderly and efficient management of the Company, the Members shall act (a) collectively as a "committee of the whole" pursuant to Section 6.02, or (b) through the delegation from time to time of certain responsibility and authority to particular Members pursuant to Section 6.03. No Member has the right, power or authority to act for or on behalf of the Company, to do any act that would be binding on the Company, or to incur any expenditures on behalf of the Company, except in accordance with the immediately preceding sentence. Decisions or actions taken in accordance with the provisions of this Agreement shall constitute decisions or actions by the Company and shall be binding on each Member, Representative, Officer and employee of the Company. 6.02 Management Committee. All Members shall act collectively through meetings as a "committee of the whole" which is hereby named the "Management Committee." The Management Committee shall conduct its affairs in accordance with the following provisions and the other provisions of this Agreement: (a) Representatives. (i) Designation. To facilitate the orderly and efficient conduct of Management Committee meetings, each Member shall notify the other Members, from time to time, of the identity of two of its officers, employees or agents who will represent it at such meetings (each a "Representative"). In addition, each Member may (but shall have not obligation to) notify the other Members, from time to time, of the identity of other officers, employees or agents who will represent it at any meeting that the Member's Representatives are unable to attend (each an "Alternate Representative"). (The term "Representative" shall also refer to any Alternate Representative that is actually performing the duties of the applicable Representative.). The initial Representatives of each Member are set forth on Exhibit A. A Member may designate different Representatives or Alternate Representatives for any meeting of the Management Committee by notifying each of the other Members at least three Business Days prior to the scheduled date for such meeting; provided, however, that if giving such advance notice is not feasible, then such new Representatives or Alternate Representatives shall present written evidence of their authority at the commencement of such meeting. (ii) Authority. Each Representative shall have the full authority to act on behalf of the Member that designated such Representative; the action of a Representative at a meeting (or through a written consent) of the Management Committee shall bind the Member that designated such Representative: and the other Members shall be entitled to rely upon such action without further inquiry or investigation as to the actual authority (or lack thereof) of such Representative. In addition, the act of an Alternate Representative shall be deemed the act of the Representative for which such Alternate Representative is acting, without the need to produce evidence of the absence or unavailability of such Representative. 19 20 (iii) DISCLAIMER OF DUTIES; INDEMNIFICATION. EACH REPRESENTATIVE SHALL REPRESENT, AND OWE DUTIES TO, ONLY THE MEMBER THAT DESIGNATED SUCH REPRESENTATIVE (THE NATURE AND EXTENT OF SUCH DUTIES BEING AN INTERNAL CORPORATE AFFAIR OF SUCH MEMBER), AND NOT TO THE COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE, OR ANY OFFICER OR EMPLOYEE OF THE COMPANY. THE PROVISIONS OF SECTION 6.04 SHALL ALSO INURE TO THE BENEFIT OF EACH MEMBER'S REPRESENTATIVES. THE COMPANY SHALL INDEMNIFY, PROTECT, DEFEND, RELEASE AND HOLD HARMLESS EACH REPRESENTATIVE FROM AND AGAINST ANY CLAIMS ASSERTED BY OR ON BEHALF OF ANY PERSON (INCLUDING ANOTHER MEMBER), OTHER THAN THE MEMBER THAT DESIGNATED SUCH REPRESENTATIVE, THAT ARISE OUT OF, RELATE TO OR ARE OTHERWISE ATTRIBUTABLE TO, DIRECTLY OR INDIRECTLY, SUCH REPRESENTATIVE'S SERVICE ON THE MANAGEMENT COMMITTEE, OTHER THAN SUCH CLAIMS ARISING OUT OF THE FRAUD OR WILLFUL MISCONDUCT OF SUCH REPRESENTATIVE. (iv) Attendance. Each Member shall use all reasonable efforts to cause its Representatives or Alternate Representatives to attend each meeting of the Management Committee, unless its Representatives are unable to do so because of a "force majeure" event or other event beyond his reasonable control, in which event such Member shall use all reasonable efforts to cause its Representatives or Alternate Representatives to participate in the meeting by telephone pursuant to Section 6.02(h). (b) Chairman and Secretary. One of the Representatives will be designated as Chairman of the Management Committee, in accordance with this Section 6.02(b), to preside over meetings of the Management Committee. The Management Committee shall also designate a Secretary of the Management Committee, who need not be a Representative. (c) Procedures. The Secretary of the Management Committee shall maintain written minutes of each of its meetings, which shall be submitted for approval no later than the next regularly-scheduled meeting. The Management Committee may adopt whatever rules and procedures relating to its activities as it may deem appropriate, provided that such rules and procedures shall not be inconsistent with or violate the provisions of this Agreement. (d) Time and Place of Meetings. The Management Committee shall meet quarterly, subject to more or less frequent meetings upon approval of the Management Committee. Notice of, and an agenda for, all Management Committee meetings shall be provided by the Chairman to all Members at least ten Days prior to the date of each meeting, together with proposed minutes of the previous Management Committee meeting (if such minutes have not been previously ratified). Special meetings of the Management Committee may be called at such times, and in such manner, as any Member deems necessary. Any Member calling for any such special meeting shall notify the Chairman, who in turn shall notify all Members of the date and agenda for such meeting at least ten Days prior to the date of such meeting. Such ten-day period may be shortened by the Management Committee. 20 21 All meetings of the Management Committee shall be held at a location designated by the Chairman. Attendance of a Member at a meeting of the Management Committee shall constitute a waiver of notice of such meeting, except where such Member attends the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. (e) Quorum. The presence of one Representative designated by each Member shall constitute a quorum for the transaction of business at any meeting of the Management Committee. (f) Voting. Except as provided otherwise in this Agreement, (i) voting at any meeting of the Management Committee shall be according to the Members' respective Sharing Ratios, and (ii) the affirmative vote of Members holding a majority of the Sharing Ratios shall constitute the act of the Management Committee. (g) Action by Written Consent. Any action required or permitted to be taken at a meeting of the Management Committee may be taken without a meeting, without prior notice, and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by Members that could have taken the action at a meeting of the Management Committee at which all Members entitled to vote on the action were represented and voted. (h) Meetings by Telephone. Members may participate in and hold such meeting by means of conference telephone, video conference or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person at such meeting, except where a Member participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. (i) Subcommittees. The Management Committee may create such subcommittees, delegate to such subcommittees such authority and responsibility, and rescind any such delegations, as it may deem appropriate. (j) Officers. The Management Committee may designate one or more Persons to be Officers of the Company. Any Officers so designated shall have such titles and, subject to the other provisions of this Agreement, have such authority and perform such duties as the Management Committee may specifically delegate to them and shall serve at the pleasure of the Management Committee. 6.03 Delegation to Particular Member. The Management Committee may delegate to one or more Members such authority and duties as the Management Committee may deem advisable. Decisions or actions taken by any such Member in accordance with the provisions of this Agreement shall constitute decisions or actions by the Company and shall be binding on each Member, Representative, Officer and employee of the Company. Any delegation pursuant to this Section 6.03 may be revoked at any time by the Management Committee. With respect to duties discharged hereunder by a Member (a) such Member may discharge such duties through the personnel of a Affiliate of such Member, and (b) unless the Members otherwise agree, the Company shall compensate such Member (or its Affiliate, as applicable) for the performance of such duties in an amount equal to the man-hours expended by the personnel of such Member (or its Affiliate) 21 22 multiplied by the applicable rate(s) shown on Exhibit B (which rates each shall escalate on the first day of each calendar year during the term hereof by an amount which is 5% of the rate applicable during the prior calendar year), and shall reimburse such Member for all out of pocket costs incurred by such Member in discharging such duties. In addition, prior to performing any such duties, the performing Member shall provide to the other Member for approval an estimate of man-hours and types of personnel required to perform the delegated duties and a schedule for the performance of the delegated duties and for other costs associated therewith, and shall promptly inform the other Member of any variance from the budget or schedule. 6.04 Affiliate Agreements; Conflicts of Interest. Subject to any other agreement between the Members (and their respective Affiliates, as applicable), a Member or an Affiliate of a Member may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including ones in competition with the Company, with no obligation to offer to the Company, any other Member or any Affiliate of another Member the right to participate therein. The Company may transact business with any Member or Affiliate thereof, provided the terms of those transactions are approved by the Management Committee or expressly contemplated by this Agreement. Without limiting the generality of the foregoing, the Members recognize and agree that they and their respective Affiliates currently engage in certain activities involving the generation, transmission, distribution, marketing and trading of electricity and other energy products (including futures, options, swaps, exchanges of future positions for physical deliveries and commodity trading), and the gathering, processing, storage and transportation of such products, as well as other commercial activities related to such products, and that these and other activities by Members and their Affiliates may be made possible or more profitable by reason of the Company's activities (herein referred to as "Outside Activities"). The Members agree that (i) no Member or Affiliate of a Member shall be restricted in its right to conduct, individually or jointly with others, for its own account any Outside Activities, and (ii) no Member or its Affiliates shall have any duty or obligation, express or implied, to account to, or to share the results or profits of such Outside Activities with, the Company, any other Member or any Affiliate of any other Member, by reason of such Outside Activities. 6.05 Unanimous Consent Required for Certain Action. Any other provision of this Agreement to the contrary notwithstanding, the unanimous consent of the Members, and at least one Independent Member, shall be required to: (a) File a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to the Company, or take any action that would result in such an event occurring with respect to any Owner Entity. (b) Cause the dissolution, liquidation, consolidation, merger or sale of substantially all of the assets of the Company or any Owner Entity. (c) Cause or permit the Company to engage in any other activity other than those set forth in Section 2.04. (d) Amend this Agreement in any manner that would have a material adverse impact on any creditor of the Company. 6.06 Certain Actions Prohibited. So long as the Company has any indebtedness outstanding, (a) the Company shall not be dissolved, liquidated, consolidated or merged with any 22 23 other entity, nor shall this Agreement be amended in any manner that would have a material adverse impact on the holders of such indebtedness, and (b) notwithstanding the failure of the Members to continue the existence of the Company as provided in Section 2.06 during such period, no action shall be taken by the Company or any of the Members that shall cause any collateral for such indebtedness to be liquidated or that would adversely affect the rights of the holders of such indebtedness or their agents to exercise their rights under any security documents relating thereto or to retain such collateral until such indebtedness is paid in full or otherwise completely discharged. 6.07 Disclaimer of Duties and Liabilities. (a) NO MEMBER SHALL OWE ANY DUTY (INCLUDING ANY FIDUCIARY DUTY) TO THE OTHER MEMBERS OR TO THE COMPANY, OTHER THAN THE DUTIES THAT ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. (b) NO MEMBER SHALL BE LIABLE (WHETHER IN CONTRACT, TORT OR OTHERWISE) FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES. (c) THE OBLIGATIONS OF THE MEMBERS UNDER THIS AGREEMENT ARE OBLIGATIONS OF THE MEMBERS ONLY, AND NO RECOURSE SHALL BE AVAILABLE AGAINST ANY OFFICER, DIRECTOR OR AFFILIATE OF ANY MEMBER, EXCEPT AS PERMITTED UNDER APPLICABLE LAW. 6.08 Indemnification. Each Member shall indemnify, protect, defend, release and hold harmless each other Member, and such other Member's Representatives, Affiliates, and their respective directors, officers, employees and agents from and against any Claims asserted by or on behalf of any Person (including another Member) that arise out of, relate to or are otherwise attributable to, directly or indirectly, a breach by the indemnifying Member of this Agreement, or the negligence, gross negligence or willful misconduct of the indemnifying Member in connection with this Agreement; provided, however, that this Section 6.08 shall not apply to any Claim or other matter for which a Member (or its Representative) has no liability or duty, or is indemnified or released, pursuant to Section 6.02(a)(iii), 6.07 or 6.08. ARTICLE 7 TAXES 7.01 Tax Returns. The Tax Matters Member shall prepare and timely file (on behalf of the Company) all federal, state and local tax returns required to be filed by the Company. Each Member shall furnish to the Tax Matters Member all pertinent information in its possession relating to the Company's operations that is necessary to enable the Company's tax returns to be timely prepared and filed. The Company shall bear the costs of the preparation and filing of its returns. 7.02 Tax Elections. The Company shall make the following elections on the appropriate tax returns: (a) to adopt as the Company's fiscal year the calendar year; (b) to adopt the accrual method of accounting; 23 24 (c) if a distribution of the Company's property as described in Code Section 734 occurs or upon a transfer of Membership Interest as described in Code Section 743 occurs, on request by notice from any Member, to elect, pursuant to Code Section 754, to adjust the basis of the Company's properties; (d) to elect to amortize the organizational expenses of the Company ratably over a period of 60 months as permitted by Section 709(b) of the Code; and (e) any other election the Management Committee may deem appropriate. Neither the Company nor any Member shall make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law and no provision of this Agreement (including Section 2.07) shall be construed to sanction or approve such an election. 7.03 Tax Matters Member. (a) NRG Central shall be the "tax matters partner" of the Company pursuant to Section 6231(a)(7) of the Code (the "Tax Matters Member"). At the request of each other Member, the Tax Matters Member shall take such action as may be necessary to cause, to the extent possible, such other Member to become a "notice partner" within the meaning of Section 6223 of the Code. The Tax Matters Member shall inform each other Member of all significant matters that may come to its attention in its capacity as Tax Matters Member by giving notice thereof on or before the fifth Business Day after becoming aware thereof and, within that time, shall forward to each other Member copies of all significant written communications it may receive in that capacity. (b) The Tax Matters Member shall take no action without the authorization of the Management Committee, other than such action as may be required by Law. Any cost or expense incurred by the Tax Matters Member in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, shall be paid by the Company. (c) The Tax Matters Member shall not enter into any extension of the period of limitations for making assessments on behalf of the Members without first obtaining the consent of the Management Committee. The Tax Matters Member shall not bind any Member to a settlement agreement without obtaining the consent of such Member. Any Member that enters into a settlement agreement with respect to any Company item (as described in Code Section 6231(a)(3)) shall notify the other Members of such settlement agreement and its terms within 90 Days from the date of the settlement. (d) No Member shall file a request pursuant to Code Section 6227 for an administrative adjustment of Company items for any taxable year without first notifying the other Members. If the Management Committee consents to the requested adjustment, the Tax Matters Member shall file the request for the administrative adjustment on behalf of the Members. If such consent is not obtained within 30 Days from such notice, or within the period required to timely file the request for administrative adjustment, if shorter, any Member, including the Tax Matters Member, may file a request for administrative adjustment on its own behalf. Any Member intending to file a petition under Code Sections 24 25 6226, 6228 or other Code Section with respect to any item involving the Company shall notify the other Members of such intention and the nature of the contemplated proceeding. In the case where the Tax Matters Member is the Member intending to file such petition on behalf of the Company, such notice shall be given within a reasonable period of time to allow the other Members to participate in the choosing of the forum in which such petition will be filed. (e) If any Member intends to file a notice of inconsistent treatment under Code Section 6222(b), such Member shall give reasonable notice under the circumstances to the other Members of such intent and the manner in which the Member's intended treatment of an item is (or may be) inconsistent with the treatment of that item by the other Members. ARTICLE 8 BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS 8.01 Maintenance of Books. (a) The Management Committee shall keep or cause to be kept at the principal office of the Company or at such other location approved by the Management Committee complete and accurate books and records of the Company, supporting documentation of the transactions with respect to the conduct of the Company's business and minutes of the proceedings of its Members and the Management Committee, and any other books and records that are required to be maintained by applicable Law. (b) The books of account of the Company shall be (i) maintained on the basis of a fiscal year that is the calendar year, (ii) maintained on an accrual basis in accordance with generally accepted accounting principles, consistently applied, and (iii) audited by the Certified Public Accountants at the end of each calendar year. 8.02 Reports. (a) With respect to each calendar year, the Management Committee shall prepare and deliver to each Member: (i) Within 120 Days after the end of such calendar year, a profit and loss statement and a statement of cash flows for such year, a balance sheet and a statement of each Member's Capital Account as of the end of such year, together with a report thereon of the Certified Public Accountants; and (ii) Such federal, state and local income tax returns and such other accounting, tax information and schedules as shall be necessary for the preparation by each Member on or before July 15 following the end of each calendar year of its income tax return with respect to such year. (b) Within 15 Business Days after the end of each calendar month, the Management Committee shall cause to be prepared and delivered to each Member, with an appropriate certificate of the Person authorized to prepare the same (provided that the Management Committee may change the financial statements required by this Section 25 26 8.02(b) to a quarterly basis or may make such other change therein as it may deem appropriate): (i) A profit and loss statement and a statement of cash flows for such month (including sufficient information to permit the Members to calculate their tax accruals), for the portion of the calendar year then ended; (ii) A balance sheet and a statement of each Member's Capital Account as of the end of such month and the portion of the calendar year then ended; and (iii) A statement comparing the actual financial status and results of the Company as of the end of or for such month and the portion of the calendar year then ended with the budgeted or forecasted status and results as of the end of or for such respective periods. (c) The Management Committee shall also cause to be prepared and delivered to each Member such other reports, forecasts, studies, budgets and other information as the Management Committee may request from time to time. 8.03 Bank Accounts. Funds of the Company shall be deposited in such banks or other depositories as shall be designated from time to time by the Management Committee. All withdrawals from any such depository shall be made only as authorized by the Management Committee and shall be made only by check, wire transfer, debit memorandum or other written instruction. ARTICLE 9 BUYOUT OPTION 9.01 Buyout Events. This Article 9 shall apply to any of the following events (each a "Buyout Event"): (a) a Member shall dissolve or become Bankrupt; or (b) a Member shall commit a Default. In each case, the Member with respect to whom a Buyout Event has occurred is referred to herein as the "Affected Member." 9.02 Procedure. If a Buyout Event occurs and is not cured within 30 Business Days of the Affected Member's receipt of notice thereof from another Member (or such shorter period (not less than 10 Business Days) as may be reasonable under the circumstances and set forth in such notice), then each of the other Members shall have the option to acquire the Membership Interest of the Affected Member (or to cause it to be acquired by a third party designated by the other Members), in accordance with procedures that are substantively equivalent to those set forth in Section 3.03(b)(iii) (and with the Members exercising such preferential right also being referred to herein as "Purchasing Members"). 9.03 Purchase Price; Terms and Method of Payment. The purchase price for a Membership Interest being purchased pursuant to this Article 9 (the "Purchase Price") shall be 26 27 determined in the following manner. The Affected Member and the Purchasing Members shall attempt to agree upon the fair market value of the applicable Membership Interest and the terms and method of payment of such amount. If those Members do not reach such agreement on or before the 30th Day following the exercise of the option, any such Member, by notice to the others, may require the determination of fair market value and the terms and method of payment to be made by the Arbitrator pursuant to Article 10. 9.04 Closing. If an option to purchase is exercised in accordance with the other provisions of this Article 9, the closing of such purchase shall occur on the 30th Day after the determination of the Fair Market Value pursuant to Section 9.03 (or, if later, the fifth Business Day after the receipt of all applicable regulatory and governmental approvals to the purchase), and shall be conducted in a manner substantively equivalent to that set forth in Section 3.03. 9.05 Terminated Member. Upon the occurrence of a closing under Section 9.04, the following provisions shall apply to the Affected Member (now a "Terminated Member"): (a) The Terminated Member shall cease to be a Member immediately upon the occurrence of the closing. (b) As the Terminated Member is no longer a Member, it will no longer be entitled to receive any distributions (including liquidating distributions) or allocations from the Company, and neither it nor its Representative shall be entitled to exercise any voting or consent rights or to receive any further information (or access to information) from the Company. (c) The Terminated Member must pay to the Company all amounts owed to it by such Member. (d) The Terminated Member shall remain obligated for all liabilities it may have under this Agreement or otherwise with respect to the Company that accrue prior to the closing. (f) The Sharing Ratio of the Terminated Member shall be allocated among the purchasing Members in the proportion of the total Purchase Price paid by each. ARTICLE 10 DISPUTE RESOLUTION 10.01 Disputes. This Article 10 shall apply to any dispute arising under or related to this Agreement (whether arising in contract, tort or otherwise, and whether arising at law or in equity), including (a) any dispute regarding the construction, interpretation, performance, validity or enforceability of any provision of this Agreement or whether any Person is in compliance with, or breach of, any provisions of this Agreement, and (b) the applicability of this Article 10 to a particular dispute. Notwithstanding the foregoing, this Article 10 shall not apply to any matters that, pursuant to the provisions of this Agreement, are to be resolved by a vote of the Members (including through the Management Committee); provided, however, that if a vote, approval, consent, determination or other decision must, under the terms of this Agreement, be made (or withheld) in accordance with a standard other than Sole Discretion (such as a reasonableness standard), then the issue of whether such standard has been satisfied may be a dispute to which this Article 10 applies. 27 28 Any dispute to which this Article 10 applies is referred to herein as a "Dispute." With respect to a particular Dispute, each Member that is a party to such Dispute is referred to herein as a "Disputing Member." The provisions of this Article 10 shall be the exclusive method of resolving Disputes. 10.02 Negotiation to Resolve Disputes. If a Dispute arises, either Disputing Member may initiate the dispute-resolution procedures of this Article 10 by delivering a notice (a "Dispute Notice") to the other Disputing Members. Within 10 Days of delivery of a Dispute Notice, each Disputing Member shall designate a representative, and such representatives shall promptly meet (whether by phone or in person) in a good faith attempt to resolve the Dispute. If such representatives can resolve the Dispute, such resolution shall be reported in writing and shall be binding upon the Disputing Members. If such representatives are unable to resolve the Dispute within 30 Days following the delivery of the Dispute Notice (or such other period as such representatives may agree), or if a Disputing Member fails to appoint a representative within 10 Days of delivery following the delivery of the Dispute Notice, then any Disputing Member may take such Dispute to litigation. ARTICLE 11 DISSOLUTION, WINDING-UP AND TERMINATION 11.01 Dissolution. The Company shall dissolve and its affairs shall be wound up on the first to occur of the following events (each a "Dissolution Event"): (a) the unanimous consent of the Members; or (b) entry of a decree of judicial dissolution of the Company under Section 18-802 of the Act. 11.02 Winding-Up and Termination. (a) On the occurrence of a Dissolution Event, the Management Committee shall select one Member to act as liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act. The costs of winding up shall be borne as a Company expense. Until final distribution, the liquidator shall continue to operate the Company properties with all of the power and authority of the Members. The steps to be accomplished by the liquidator are as follows: (i) as promptly as possible after dissolution and again after final winding up, the liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company's assets, liabilities, and operations through the last calendar day of the month in which the dissolution occurs or the final winding up is completed, as applicable; (ii) the liquidator shall discharge from Company funds all of the Indebtedness and other debts, liabilities and obligations of the Company (including all expenses incurred in winding up and any loans described in Section 4.03) or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine); and 28 29 (iii) all remaining assets of the Company shall be distributed to the Members as follows: (A) the liquidator may sell any or all Company property, including to Members, and any resulting gain or loss from each sale shall be computed and allocated to the Capital Accounts of the Members in accordance with the provisions of Article 5; (B) with respect to all Company property that has not been sold, the fair market value of that property shall be determined and the Capital Accounts of the Members shall be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the Capital Accounts previously would be allocated among the Members if there were a taxable disposition of that property for the fair market value of that property on the date of distribution; and (C) Company property (including cash) shall be distributed among the Members in accordance with Section 5.02; and those distributions shall be made by the end of the taxable year of the Company during which the liquidation of the Company occurs (or, if later, 90 Days after the date of the liquidation). (b) The distribution of cash or property to a Member in accordance with the provisions of this Section 11.02 constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Membership Interest and all the Company's property and constitutes a compromise to which all Members have consented pursuant to Section 18-502(b) of the Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds. 11.03 Deficit Capital Accounts. No Member will be required to pay to the Company, to any other Member or to any third party any deficit balance that may exist from time to time in the Member's Capital Account. 11.04 Certificate of Cancellation. On completion of the distribution of Company assets as provided herein, the Members (or such other Person or Persons as the Act may require or permit) shall file a certificate of cancellation with the Secretary of State of Delaware, cancel any other filings made pursuant to Section 2.05, and take such other actions as may be necessary to terminate the existence of the Company. Upon the filing of such certificate of cancellation, the existence of the Company shall terminate (and the Term shall end), except as may be otherwise provided by the Act or other applicable Law. ARTICLE 12 GENERAL PROVISIONS 12.01 Offset. Whenever the Company is to pay any sum to any Member, any amounts that Member owes the Company may be deducted from that sum before payment. 12.02 Notices. Except as expressly set forth to the contrary in this Agreement, all notices, requests or consents provided for or permitted to be given under this Agreement must be in writing 29 30 and must be delivered to the recipient in person, by courier or mail or by facsimile or other electronic transmission. A notice, request or consent given under this Agreement is effective on receipt by the Member to receive it; provided, however, that a facsimile or other electronic transmission that is transmitted after the normal business hours of the recipient shall be deemed effective on the next Business Day. All notices, requests and consents to be sent to a Member must be sent to or made at the addresses given for that Member on Exhibit A or in the instrument described in Section 3.03(b)(iv)(A)(II) or 3.04, or such other address as that Member may specify by notice to the other Members. Any notice, request or consent to the Company must be given to all of the Members. Whenever any notice is required to be given by Law, the Delaware Certificate or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 12.03 Entire Agreement; Superseding Effect. This Agreement constitutes the entire agreement of the Members and their Affiliates relating to the Company and the transactions contemplated hereby and supersedes all provisions and concepts contained in all prior contracts or agreements between the Members or any of their Affiliates with respect to the Company and the transactions contemplated hereby, whether oral or written. 12.04 Press Releases. Each Member agrees that it shall not (and shall cause its Affiliates not to), without the other Members' consent, issue a press release or have any contact with or respond to the news media with any sensitive or Confidential Information, except as required by securities or similar laws applicable to a Member and its Affiliates. Any press release by a Member or its Affiliates with respect to any sensitive or Confidential Information shall be subject to review and approval by the other Party, which approval shall not be unreasonably withheld. 12.05 Effect of Waiver or Consent. Except as otherwise provided in this Agreement, a waiver or consent, express or implied, to or of any breach or default by any Member in the performance by that Member of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Member of the same or any other obligations of that Member with respect to the Company. Except as otherwise provided in this Agreement, failure on the part of a Member to complain of any act of any Member or to declare any Member in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Member of its rights with respect to that default until the applicable statute-of-limitations period has run. 12.06 Amendment or Restatement. This Agreement or the Delaware Certificate may be amended or restated only by a written instrument executed (or, in the case of the Delaware Certificate, approved) by all of the Members. 12.07 Binding Effect. Subject to the restrictions on Dispositions set forth in this Agreement, this Agreement is binding on and shall inure to the benefit of the Members and their respective successors and permitted assigns. 12.08 Governing Law; Severability. This Agreement is governed by and shall be construed in accordance with the Law of the State of Delaware, excluding any conflict-of-laws rule or principle that might refer the governance or the construction of this Agreement to the Law of another jurisdiction. In the event of a direct conflict between the provisions of this Agreement and any mandatory, non-waivable provision of the Act, such provision of the Act shall control. 30 31 NRG CENTRAL U.S. LLC By: /s/ Craig A. Mataczynski ----------------------------- Name: Craig A. Mataczynski ----------------------------- Title: President ----------------------------- SOUTH CENTRAL GENERATION HOLDING LLC By: /s/ Craig A. Mataczynski ----------------------------- Name: Craig A. Mataczynski ----------------------------- Title: President ----------------------------- 31 32 Exhibit A
- -------------------------------------------------------------------------------- Member Capital Contribution Number of Units Percentage Ownership - -------------------------------------------------------------------------------- NRG Central U.S. LLC $500.00 500 50.0% - -------------------------------------------------------------------------------- South Central Generation $500.00 500 50.0% Holding LLC - --------------------------------------------------------------------------------
EX-3.3 5 y57012ex3-3.txt CERTIFICATE OF FORMATION 1 Exhibit 3.3 State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF FORMATION OF "LOUISIANA GENERATING LLC", FILED IN THIS OFFICE ON THE FOURTEENTH DAY OF JUNE, A.D. 1996, AT 9 O'CLOCK A.M. /s/ Edward J. Freel [SEAL] ----------------------------------- Edward J. Freel, Secretary of State 2634227 8100 AUTHENTICATION: 0345187 DATE: 03-28-00 001156990 2 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 06/14/1996 960174120 - 2634227 CERTIFICATE OF FORMATION OF LOUISIANA GENERATING LLC The undersigned, being a natural person 18 years of age or older and for the purpose of forming a limited liability company for general business purposes under the Delaware Limited Liability Act, hereby adopts the following Certificate of Formation: 1. Name: the name of the limited liability company is Louisiana Generating ---- LLC. 2. Registered Office and Agent: The address of the registered office of --------------------------- the limited liability company is Corporation Service Company, 1013 Centre Road, in the City of Wilmington, County of New Castle, Delaware 19805. The name of its registered agent for service of process at such address is Corporation Service Company. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of Louisiana Generating LLC this 14th day of June, 1996. /s/ [illegible] ------------------------- Authorized Person 3 CERTIFICATE OF AMENDMENT OF LOUISIANA GENERATING LLC -------------------------------- 1. The name of the limited liability company is Louisiana Generating LLC. 2. The Certificate of Formation of the limited liability company is hereby amended as follows: The Registered Office and Agent should be changed as follows: The address of the registered office of the limited liability company is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment of Louisiana Generating LLC this 6th day of March, 2000. /s/ Craig A. Mataczynski --------------------------------------- Craig A. Mataczynski, Authorized Person EX-3.4 6 y57012ex3-4.txt LIMITED LIABILITY COMPANY AGREEMENT 1 Exhibit 3.4 THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF LOUISIANA GENERATING LLC dated as of March 22, 2000 2 TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS .................................................... 2 ARTICLE II FORMATION OF THE COMPANY ....................................... 4 2.1 Name ........................................................... 4 2.2 Principal Business Office ...................................... 4 2.3 Registered Office .............................................. 4 2.4 Registered Agent ............................................... 4 2.5 Purpose ........................................................ 4 2.6 Company Term ................................................... 5 2.7 Powers ......................................................... 5 2.8 Units; Certificates of Ownership Interest; Applicability of Article 8 of UCC ............................................... 5 ARTICLE III MEMBERS ........................................................ 5 3.1 Members ........................................................ 5 3.2 Other Business ................................................. 5 3.4 Admission of Additional Members ................................ 5 3.5 Member's Powers ................................................ 5 ARTICLE IV MANAGEMENT ..................................................... 6 4.1 Management ..................................................... 6 4.2 Officers ....................................................... 7 4.3 Limited Liability .............................................. 9 4.4. Exculpation and Indemnification ................................ 9 ARTICLE V CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS, DISTRIBUTIONS AND ALLOCATIONS ......................................................... 10 5.1 Capital Contributions .......................................... 10 - i - 3 Page ---- 5.2 Additional Contributions ...................................... 10 5.3 Capital Accounts .............................................. 10 5.4 Allocation of Profits and Losses .............................. 11 5.5 Distributions ................................................. 11 ARTICLE VI BANKING, ACCOUNTING, BOOKS AND RECORDS .......................... 11 6.1 Banking ....................................................... 11 6.2 Maintenance of Accounts and Accounting Method ................. 11 6.3 Company Tax Returns ........................................... 11 6.4 Fiscal Year ................................................... 11 ARTICLE VII REPORTS TO MEMBERS ............................................. 11 7.1 Records, Audits and Reports ................................... 11 7.2 Reports to Members ............................................ 12 ARTICLE VIII ASSIGNMENTS, DISSOLUTION AND TERMINATION OF THE COMPANY ................................................................ 13 8.1 Assignment .................................................... 13 8.2 Dissolution ................................................... 13 8.3 Time for Liquidation .......................................... 14 8.4 Termination ................................................... 14 ARTICLE IX MISCELLANEOUS ................................................... 14 9.1 Notices ....................................................... 14 9.2 Counterparts .................................................. 15 9.3 Severability .................................................. 15 9.4 Non-Waiver .................................................... 15 9.5 Applicable Law ................................................ 15 9.6 Entire Agreement .............................................. 15 9.7 Benefits of Agreement; No Third Party Rights .................. 16 - ii - 4 Page ---- 9.8 Amendments .................................................... 16 - iii - 5 THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF LOUISIANA GENERATING LLC THIS THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT has been entered into as of March 22,2000 by NRG South Central Generating LLC, a Delaware limited liability company ("South Central") for the purpose of providing for the operation of Louisiana Generating LLC (the "Company"). R E C I T A L S WHEREAS, NRG Central U.S. LLC ("Central") and South Central Generation Holding LLC ("Holdings") each own 50% of the ownership interest in South Central and NRG Energy, Inc., a Delaware corporation ("NRG") owns 100% of each of Central and Holdings; WHEREAS, Zenergy, Inc. ("Zenergy"), a wholly owned subsidiary of Zeigler Coal Holding Company, Inc., a Delaware corporation ("Zeigler") and NRG (the "Initial Members") caused a Certificate of Formation of the Company (the "Certificate of Formation") to be filed with the Delaware Secretary of State under the name Louisiana Generating LLC on June 14, 1996; WHEREAS, the Initial Members executed that certain Limited Liability Company Agreement of the Company, dated June 14, 1996 (the "Original LLC Agreement") as amended and restated by that certain Amended and Restated Limited Liability Company Agreement of the Company which added Southern Energy-Cajun, Inc. ("SEI") as a member of the Company, effective October 7, 1996 (the "First Amended LLC Agreement"); WHEREAS, the Company and, for certain provisions thereof NRG, has entered into the Fifth Amended and Restated Asset Purchase Agreement dated as of September 21, 1999 ("Asset Purchase Agreement") with Ralph R. Mabey, as Chapter 11 Trustee in Bankruptcy ("Trustee") of Cajun Electric Power Cooperative, Inc. ("Cajun Electric") for the acquisition by the Company (the "Acquisition") of substantially all of the non-nuclear assets of Cajun Electric (the "Assets"); WHEREAS, NRG, Zeigler and Southern Electric International, Inc. ("Southern Electric") or their Affiliates entered into that certain Joint Development Agreement dated as of September 29, 1996 pursuant to which NRG, Zeigler and Southern Electric agreed to pursue the acquisition and ownership of the Assets (the "Joint Development Agreement"); WHEREAS, SEI, NRG, Zeigler, Southern Electric and Zenergy entered into a Termination and Withdrawal Agreement by Zeigler Coal Holding Company dated March 12, 1999, pursuant to which Zenergy transferred 66 2/3% of its Ownership Interest in the Company to NRG and 33 1/3% of its Ownership Interest in the Company to SEI, resulting in NRG and SEI each holding 50% of the Ownership Interests of the Company; 6 WHEREAS, NRG has exercised its right under the Joint Development Agreement to purchase all of SEI's Ownership Interest in the Company and has consummated such transaction; WHEREAS, NRG has transferred 100% of its Ownership Interest in the Company to Central and Holdings, and Central and Holdings transferred 100% of such Ownership Interest in the Company to South Central; and WHEREAS, South Central as the sole member of the Company, by execution of this Agreement, hereby continues the Company as a limited liability company pursuant to and in accordance with the Delaware Limited Liability Company Act (6 Del.C. ss. 18-101, et seq.), as amended from time to time (the "Act") and this Agreement, hereby amends and restates in its entirety the Second Amended LLC Agreement. A G R E E M E N T NOW, THEREFORE, in consideration of the foregoing recitals and for the mutual agreements set forth herein, the Member, intending to be legally bound, hereby agrees as follows: ARTICLE I DEFINITIONS As used herein the following terms have the meanings set forth below: "Act" shall have the meaning set forth in the Recitals. "Acquisition" shall have the meaning set forth in the Recitals. "Affiliate" shall mean any Person which, directly or indirectly, controls, is controlled by or is under common control with another Person (whereby "control" means the ability to elect a majority of directors of otherwise direct the management of such Person through contract or otherwise). "Agreement" shall mean this Third Amended and Restated Limited Liability Company Agreement of Louisiana Generating LLC, as the same may be amended or restated from time to time. "Assets" shall have the meaning set forth in the Recitals. "Asset Purchase Agreement" shall have the meaning set forth in the Recitals. "Cajun Electric" shall have the meaning set forth in the Recitals. "Capital Account" shall have the meaning set forth in Section 5.3. 2 7 "Capital Contribution" shall mean, with respect to a particular Member, the amount of capital contributed or deemed to have been contributed by such Member to the Company pursuant to Article V. "Central" shall have the meaning set forth in the Recitals. "Certificate of Formation" shall have the meaning set forth in the Recitals. "Code" shall mean the Internal Revenue Code of 1986, as heretofore and hereafter amended from time to time (and/or any corresponding provision of any superseding revenue law). "Company" shall have the meaning set forth in the Preamble. "Covered Person" shall have the meaning set forth in Section 4.4(a). "Fair Market Value" shall mean the amount that an informed and willing purchaser under no compulsion to buy would pay to acquire the relevant interest(s) in the Company or property in an arm's-length transaction and which an informed and willing seller under no compulsion to sell would accept for such interest(s) or property in an arm's length transaction without taking into account any control premium, liquidity discount or the existence of any approval rights under this Agreement. "First Amended LLC Agreement" shall have the meaning set forth in the Recitals. "Fiscal Year" shall have the meaning set forth in Section 6.4. "GAAP" shall mean United States generally accepted accounting principles as in effect from time to time, consistently applied. "Holdings" shall have the meaning set forth in the Recitals. "Initial Members" shall have the meaning set forth in the Recitals. "Joint Development Agreement" shall have the meaning set forth in the Recitals. "Member" means NRG and any Person admitted as an additional member of the Company or a substitute member of the Company pursuant to the provisions of this Agreement. "NRG" shall have the meaning set forth in the Recitals. "Officers" shall have the meaning set forth in Section 4.2. "Original LLC Agreement" shall have the meaning set forth in the Recitals. "Ownership Interest" shall mean each Member's equity interest in the Company. The initial Ownership Interests of the Members are listed on Schedule 1 and may be revised from time to time as provided herein. 3 8 "Person" shall mean any individual, entity, firm, corporation, partnership, association, limited liability company, joint-stock company, trust, or unincorporated organization. "Regulations" shall include proposed, temporary and final regulations promulgated under the Code as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). "South Central" shall have the meaning set forth in the Preamble. "Southern Electric" shall have the meaning set forth in the Recitals. "Trustee" shall have the meaning set forth in the Recitals. "Zeigler" shall have the meaning set forth in the Recitals. "Zenergy" shall have the meaning set forth in the Recitals. ARTICLE II FORMATION OF THE COMPANY 2.1 Name. The name of the limited liability company heretofore formed and continued hereby is Louisiana Generating LLC. 2.2 Principal Business Office. The principal business office of the Company shall be located at 10719 Airline Highway, Baton Rouge, Louisiana 70895 or such other location as may hereafter be determined by the Member. 2.3 Registered Office. The address of the registered office of the Company in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. 2.4 Registered Agent. The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. 2.5 Purpose. The purpose of the Company is to: (a) consummate the Acquisition including participating in the financing of such Acquisition; (b) own and operate the Assets; and (c) engage in any lawful business permitted by the Act or the laws of any jurisdiction in which 4 9 the Company may do business. The Company shall have the authority to do all things necessary or convenient to accomplish its purposes and operate its business as described in this Section 2.5. 2.6 Company Term. The term of the Company commenced on the date of the filing of the Certificate of Formation in the office of the Secretary of State of the State of Delaware and shall continue until the Company's dissolution in accordance with the provisions of Article VIII of this Agreement. 2.7 Powers. The Company (i) shall have and exercise all powers necessary, convenient or incidental to accomplish its purposes as set forth in Section 2.5 and (ii) shall have and exercise all of the powers and rights conferred upon limited liability companies formed pursuant to the Act 2.8 Units; Certificates of Ownership Interest; Applicability of Article 8 of UCC. Ownership Interests shall be represented by units ("Units"). The number of authorized Units shall be one thousand (1,000). All Ownership Interests shall be represented by certificates in such form as the Board of Directors shall from time to time approve, shall be recorded in a register thereof maintained by the Company, and shall be subject to such rules for the issuance thereof as the Board of Directors may from time to time determine. Ownership Interests shall be subject to the provisions of Article 8 of the Uniform Commercial Code as may be applicable from time to time. ARTICLE III MEMBERS 3.1 Members. a. The name and the mailing address of the Member are set forth on Schedule 1 attached hereto. b. The Member may act by written consent. 3.3 Other Business. The Member and any Affiliate of the Member may engage in or possess an interest in other business ventures (unconnected with the Company) of every kind and description, independently or with others. The Company shall not have any rights in or to such independent ventures or the income or profits therefrom by virtue of this Agreement. 3.4 Admission of Additional Members. One or more additional members of the Company may be admitted to the Company with the written consent of the Member. 3.5 Member's Powers. Until the Directors are appointed, the Member shall manage the business and affairs of the Company and shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise. The Member has the authority to bind the Company. 5 10 ARTICLE IV MANAGEMENT 4.1 Management. a. Board of Directors. Subject to Section 3.5, the business and affairs of the Company shall be managed by or under the direction of a Board of one or more Directors. The Member may determine at any time in its sole and absolute discretion the number of Directors to constitute the Board. The authorized number of Directors may be increased or decreased by the Member at any time in its sole and absolute discretion. The initial number of Directors shall be three. Each Director elected, designated or appointed shall hold office until a successor is elected and qualified or until such Director's earlier death, resignation or removal. Directors need not be Members. b. Powers. The Board of Directors shall have the power to do any and all acts necessary, convenient or incidental to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise. The Board of Directors has the authority to bind the Company. c. Meeting of the Board of Directors. The Board of Directors of the Company may hold meetings, both regular and special, within or outside the State of Delaware. Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board. Special meetings of the Board may be called by the President on not less than one day's notice to each Director by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President or Secretary in like manner and with like notice upon the written request of any one or more of the Directors. d. Quorum; Acts of the Board. At all meetings of the Board, a majority of the Directors shall constitute a quorum for the transaction of business and, except as otherwise provided in any other provision of this Agreement, the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board. If a quorum shall not be present at any meeting of the Board, the Directors present at such meeting may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. e. Electronic Communications. The Directors, or any committee designated by the Board, may participate in meetings of the Board, or any committee, by means of telephone conference or similar communications equipment that allows all persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in person at the meeting. If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company. 6 11 f. Committees of Directors. (i) The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the Directors of the Company. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. (ii) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. (iii) Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. g. Compensation of Directors; Expenses. The Board shall have the authority to fix the compensation of Directors. The Directors may be paid their expenses, if any, of attendance at meetings of the Board, which may be a fixed sum for attendance at each meeting of the Board or a stated salary as Director. No such payment shall preclude any Director from serving the Company in any other capacity and receiving compensation therefore. Members of special or standing committees may be allowed like compensation for attending committee meetings. h. Removal of Directors. Unless otherwise restricted by law, any Director or the entire Board of Directors may be removed, with or without cause, by the Member, and any vacancy caused by any such removal may be filled by action of the Member. i. Directors as Agents. To the extent of their powers set forth in this Agreement, the Directors are agents of the Company for the purpose of the Company's business, and the actions of the Directors taken in accordance with such powers set forth in this Agreement shall bind the Company. 4.2 Officers. a. Officers. The Officers of the Company shall be chosen by the Board and shall consist of at least a President, a Secretary and a Treasurer. The Board of Directors may also choose one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers. Any number of offices may be held by the same person. The Board may appoint such other Officers and agents as it shall deem necessary or advisable who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. The salaries of all Officers and agents of the Company shall be fixed by or in the manner prescribed by the Board. The Officers of the Company shall hold office until their 7 12 successors are chosen and qualified. Any Officer elected or appointed by the Board may be removed at any time, with or without cause, by the affirmative vote of a majority of the Board. Any vacancy occurring in any office of the Company shall be filled by the Board. b. President. The President shall be the chief executive officer of the Company, shall preside at all meetings of the Members, if any, and the Board, shall be responsible for the general and active management of the business of the Company and shall see that all orders and resolutions of the Board are carried into effect. The President shall execute all bonds, mortgages and other contracts, except: (i) where required or permitted by law or this Agreement to be otherwise signed and executed; (ii) where signing and execution thereof shall be expressly delegated by the Board to some other Officer or agent of the Company; and (iii) as otherwise permitted in Section 4.2(c). c. Vice President. In the absence of the President or in the event of the President's inability to act, the Vice President, if any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Directors, or in the absence of any designation, then in the order of their election), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents, if any, shall perform such other duties and have such other powers as the Board may from time to time prescribe. d. Secretary and Assistant Secretary. The Secretary shall be responsible for filing legal documents and maintaining records for the Company. The Secretary shall attend all meetings of the Board and all meetings of the Members, if any, and record all the proceedings of the meetings of the Company and of the Board in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the Members, if any, and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board or the President, under whose supervision the Secretary shall serve. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board (or if there be no such determination, then in order of their election), shall, in the absence of the Secretary or in the event of the Secretary's inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe. e. Treasurer and Assistant Treasurer. The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Board. The Treasurer shall disburse the funds of the Company as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and to the Board, at its regular meetings or when the Board so requires, an account of all of the Treasurer's transactions and of the financial condition of the Company. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of the Treasurer's inability to act, perform the duties and 8 13 exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board may from time to time prescribe. f. Officers as Agents. The Officers, to the extent of their powers set forth in this Agreement or otherwise vested in them by action of the Board not inconsistent with this Agreement, are agents of the Company for the purpose of the Company's business, and the actions of the Officers taken in accordance with such powers shall bind the Company. g. Duties of Board and Officers. Except to the extent otherwise provided herein, each Director and Officer shall have a fiduciary duty of loyalty and care similar to that of directors and officers of business corporations organized under the General Corporation Law of the State of Delaware. 4.3 Limited Liability. Except as otherwise expressly provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be the debts, obligations and liabilities solely of the Company, and neither any Member nor any Director shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or Director of the Company. 4.4. Exculpation and Indemnification. a. No Member, Officer, Director, employee or agent of the Company and no employee, representative, agent or Affiliate of the Member (collectively, the "Covered Persons") shall be liable to the Company or any other Person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's gross negligence or willful misconduct b. To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person's gross negligence or willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 4.4 shall be provided out of and to the extent of Company assets only, and no Member shall have personal liability on account thereof. c. To the fullest extent permitted by applicable law, expenses (including legal fees) incurred by a Covered Person defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined that the Covered Person is not entitled to be indemnified as authorized in this Section 4.4. 9 14 d. A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, or any other facts pertinent to the existence and amount of assets from which distributions to the Member might properly be paid. e. To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement or any approval or authorization granted by the Company or any other Covered Person. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of a Covered Person otherwise existing at law or in equity, are agreed by the Member to replace such other duties and liabilities of such Covered Person. f. The foregoing provisions of this Section 4.4 shall survive any termination of this Agreement. ARTICLE V CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS, DISTRIBUTIONS AND ALLOCATIONS 5.1 Capital Contributions. The Member has contributed, or will contribute, to the Company the amount listed on Schedule 1 attached hereto. 5.2 Additional Contributions. The Member is not required to make any additional capital contribution to the Company. However, a Member may make additional capital contributions to the Company at any time upon the written consent of such Member. To the extent that the Member makes an additional capital contribution to the Company, the Member shall revise Schedule 1 of this Agreement. The provisions of this Agreement, including this Section 5.2, are intended solely to benefit the Member and, to the fullest extent permitted by law, shall not be construed as conferring any benefit upon any creditor of the Company (and no such creditor of the Company shall be a third-party beneficiary of this Agreement) and no Member shall have any duty or obligation to any creditor of the Company to make any contribution to the Company or to issue any call for capital pursuant to this Agreement. 5.3 Capital Accounts. Each Member shall have a capital account (a "Capital Account") which account shall be (a) increased by the amount of cash and the Fair Market Value of any property (net of liabilities assumed by the Company and liabilities to which the property is subject) contributed by such Member to the Company, plus all items of income and gain of the Company allocated to such Member and (b) decreased by the amount of cash and the Fair Market Value of any property (net of liabilities assumed by the Member and liabilities to which the property is subject) distributed by the Company to such Member, plus all items of loss and deduction of the Company allocated to such Member. The Capital Accounts shall be maintained 10 15 in good faith, in accordance with the principles embodied in Sections 704(b) and (c) of the Code and the Regulations. 5.4 Allocation of Profits and Losses. The net profits and net losses of the Company for each Fiscal Year shall be allocated to the Member. 5.5 Distributions. Distributions shall be made to the Member at the times and in the aggregate amounts determined by the Board. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not be required to make a distribution to the Member on account of its interest in the Company if such distribution would violate Section 18-607 of the Act. ARTICLE VI BANKING, ACCOUNTING, BOOKS AND RECORDS 6.1 Banking. All funds of the Company shall be deposited in such bank or money market accounts as shall be established by the President with the approval of the Member. Withdrawals from and checks drawn on, any such account shall be made upon the signature of the President or such other individuals as may be designated by the Member. 6.2 Maintenance of Accounts and Accounting Method. The Company shall keep or cause to be kept at the office of the Company full and accurate accounts of the transactions of the Company in proper books of account. Such books and records shall be kept in accordance with GAAP. 6.3 Company Tax Returns. The Company shall cause to be prepared and timely filed all tax returns required to be filed for the Company in the jurisdictions in which the Company is required to file tax returns for all applicable tax years, and shall furnish within a reasonable period after the end of each Fiscal Year (but in no event later than ninety (90) days after the end of such Fiscal Year) a statement of each Member's distributive share of income, gains, losses, deductions and credits for such Fiscal Year and such other information necessary for such Member to complete its applicable federal, state, local and foreign tax returns. The Officers may make, or refrain from making, any income or other tax elections for the Company which they deem necessary or advisable, including an election pursuant to Section 754 of the Code. 6.4 Fiscal Year. Unless otherwise required by applicable law, the taxable and fiscal accounting year of the Company (the "Fiscal Year") shall end on the 31st day of December each year or such other date as agreed to in writing by the Members and as permitted by applicable law. ARTICLE VII REPORTS TO MEMBERS 7.1 Records, Audits and Reports. Complete books and records accurately reflecting the accounts, business, transactions and Members of the Company shall be maintained by the 11 16 Company at the Company's principal place of business. The books and records of the Company shall be open at reasonable business hours for inspection and copying by any Member or its duly authorized agents or representatives. The Company, and the Board on behalf of the Company, shall not have the right to keep confidential from the Member any information that the Board would otherwise be permitted to keep confidential from the Member pursuant to Section 18-305(c) of the Act. The books of account and records of the Company shall be audited as of the end of each Fiscal Year by any nationally recognized accounting firm as shall have been selected by the Member. 7.2 Reports to Members. 7.2.1 The Company shall cause to be prepared and mailed to each Member: (a) as soon as practicable and in any event within thirty (30) days after the end of every quarterly accounting period of each Fiscal Year, an unaudited balance sheet of the Company as of the last day of such semi-annual period and the related statement of income, shareholders' equity and cash flows and reports of all distributions made to Members for such semi-annual periods and for the portion of the Fiscal Year ending with the last day of such quarter, setting forth in each case in comparative form corresponding unaudited figures from the preceding Fiscal Year (if applicable), prepared in all such cases in accordance with GAAP, (b) as soon as practicable and in any event within ninety (90) days after the end of each Fiscal Year, a balance sheet of the Company as of the end of such year and the related statements of income, shareholders' equity and cash flows, setting forth in comparative form corresponding figures from the preceding Fiscal Year, prepared in all such cases in accordance with GAAP, and accompanied by an audit report thereon of a nationally recognized accounting firm specified in Section 7.1; (c) an audit opinion of the Company's independent auditors selected pursuant to Sections 7.1 hereof relating to the financial statements described in clauses (a) and (b) hereof to the effect that such financial statements (except for the comparison to budget) have been prepared in conformity with GAAP applied on a basis consistent with prior years (except as otherwise specified in such report) and that the audit of such consolidated financial statements has been performed in accordance with GAAP; (d) such Member's closing Capital Account as of the end of such Fiscal Year; and (e) a report indicating such Member's share of all items of income, gain, loss, deduction and credit of the Company for such Fiscal Year on a GAAP basis for financial reporting purposes. 7.2.2 Within thirty (30) days after the end of each quarter, the Company shall cause to be prepared and mailed to each Member a financial report setting forth such Member's closing Capital Account as of the end of such quarter and the manner of the calculation thereof. 12 17 7.2.3 At such time, the Company shall deliver at the Company's sole expense to each Member an estimate of such Member's share of all items of income, gain, loss, deduction and credit of the Company for such quarter and for the Fiscal Year to date for federal income tax purposes. 7.2.4 The above financial statements shall be accompanied by a certificate of the principal accounting or financial officer of the Company to the effect that such financial statements have been prepared under such officer's supervision and that, although such financial statements do not contain the footnotes and other disclosure required to be presented in interim financial statements by GAAP, such financial statements, in such officer's judgment, fairly present the financial condition and results of operations of the Company as of the date and for the periods indicated, subject to normal recurring year-end audit adjustments. 7.2.5 Each financial report delivered to the Members pursuant to this Section 7.2 shall (i) be prepared in accordance with GAAP, and (ii) include comparisons with the corresponding amounts of the immediately prior Fiscal Year. ARTICLE VIII ASSIGNMENTS, DISSOLUTION AND TERMINATION OF THE COMPANY 8.1 Assignment. The Member may assign in whole or in part its Ownership Interest in the Company. If the Member transfers all of its Ownership Interest in the Company pursuant to this Section 8.1, the transferee shall be admitted to the Company as a Member of the Company upon its execution of an instrument signifying its agreement to be bound by the terms and conditions of this Agreement, which instrument may be a counterpart signature page to this Agreement. Such admission shall be deemed effective immediately prior to the transfer, and, immediately following such admission, the transferor Member shall cease to be a member of the Company. Notwithstanding anything in this Agreement to the contrary, any successor to a Member by merger or consolidation shall, without further act, be a Member hereunder, and such merger or consolidation shall not constitute an assignment for purposes of this Agreement. 8.2 Dissolution. a. The Company shall be dissolved, and its affairs shall be wound up upon the first to occur of the following: (i) the retirement, resignation or dissolution of the Member or the occurrence of any other event which terminates the continued membership of the Member in the Company unless the business of the Company is continued in a manner permitted by the Act or (ii) the entry of a decree of judicial dissolution under Section 18-802 of the Act. b. The bankruptcy (as defined in Section 18-101(1) of the Act) of the Member shall not cause the Member to cease to be a member of the Company and upon the occurrence of such an event, the business of the Company shall continue without dissolution. c. In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an 13 18 orderly manner), and the assets of the Company shall be applied in the manner, and in the order of priority, set forth in Section 18-804 of the Act. 8.3 Time for Liquidation. A reasonable time period shall be allowed for the orderly liquidation of the assets of the Company and the discharge of liabilities to creditors so as to enable the Members to minimize the losses attendant upon such liquidation; provided, that, if reasonably practicable, the Company will make any liquidating distributions to the Members by the end of the Fiscal Year in which the liquidation occurs (or, if later, within ninety (90) days after the date of such liquidation). 8.4 Termination. Upon compliance with the foregoing distribution plan, the Company shall cease to be such and the Member shall execute, acknowledge and cause to be filed with the Secretary of State of the State of Delaware a certificate of cancellation of the Company. ARTICLE IX MISCELLANEOUS 9.1 Notices. All notices to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given: (i) upon delivery if delivered in person; (ii) upon delivery if delivered by registered first class mail, return receipt requested; (iii) upon delivery if delivered by facsimile, telegram, or cable (if the day of receipt is a business day or if not on the next succeeding business day, and if written confirmation is immediately sent by reputable overnight delivery service); or (iv) on the first business day after sending by reputable overnight delivery service, to the addresses set forth below or to such other address as the Member may give notice of to the Company: (a) if to the Company: Louisiana Generating, LLC 10719 Airline Highway Baton Rouge, Louisiana 70895 With a copy to the Member. With a copy to: Gibson, Dunn & Crutcher, LLP 200 Park Avenue New York, New York 10166 Attention: Steven P. Buffone Facsimile: (212) 351-4035 14 19 (b) if to South Central: NRG South Central Generating LLC 1221 Nicollet Mall, Suite 700 Minneapolis, Minnesota 55403-2445 Attention: Craig A. Mataczynski Facsimile: (612) 373-5430 With a copy to: NRG Energy, Inc. 1221 Nicollet Mall, Suite 700 Minneapolis, Minnesota 55403-2445 Attention: Vice President and General Counsel Facsimile: (612) 373-5392 9.2 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be considered an original. 9.3 Severability. Every provision of this Agreement is intended to be severable. If any term or provision hereof is illegal or invalid for any reason whatsoever such term or provision will be enforced to the maximum extent permitted by law and, in any event, such illegality or invalidity shall not affect the validity of the remainder of the Agreement. 9.4 Non-Waiver. (a) The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act, that would have originally constituted a violation, from having the effect of an original violation. (b) The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the Member may have by law, statute, ordinance or otherwise. 9.5 Applicable Law. This Agreement and the rights and obligations of the parties hereto shall be interpreted and enforced in accordance with and governed by the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by said laws. 9.6 Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior or contemporaneous oral or written agreements. 15 20 9.7 Benefits of Agreement; No Third Party Rights. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of the Member. Nothing in this Agreement shall be deemed to create any right in any Person (other than Covered Persons) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person. 9.8 Amendments. This Agreement may not be modified, altered, supplemented or amended except pursuant to a written agreement executed and delivered by the Member. 16 21 IN WITNESS WHEREOF, the undersigned has duly executed this Third Amended and Restated Limited Liability Company Agreement of LOUISIANA GENERATING LLC, as of the day and year first above written. NRG SOUTH CENTRAL GENERATING LLC By: NRG Central U.S. LLC By: NRG Energy, Inc. /s/ Craig A. Mataczynski ---------------------------------------- Name: Craig A. Mataczynski Title: Senior Vice President By: South Central Generation Holding LLC By: NRG Energy, Inc. /s/ Craig A. Mataczynski ---------------------------------------- Name: Craig A. Mataczynski Title: Senior Vice President 17 22 SCHEDULE I
Amount of Capital Member's Name and Address Ownership Interests Contribution - ------------------------- ------------------- ------------ NRG South Central Generating, LLC 100% $1,000 1221 Nicollet Mall, Suite 700 Minneapolis, Minnesota 55403-2445
EX-3.5 7 y57012ex3-5.txt CERTIFICATE OF FORMATION 1 Exhibit 3.5 State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF "NRG NEW ROADS HOLDINGS LLC" AS RECEIVED AND FILED IN THIS OFFICE. THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED: CERTIFICATE OF FORMATION, FILED THE SEVENTH DAY OF MARCH, A.D. 2000, AT 10 O'CLOCK A.M. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID LIMITED LIABILITY COMPANY. /s/ Edward J. Freel [SEAL] ------------------------------------ Edward J. Freel, Secretary of State 3189229 8100H AUTHENTICATION: 0736043 001520071 DATE: 10-16-00 2 CERTIFICATE OF FORMATION OF NRG NEW ROADS HOLDINGS LLC The undersigned, being a natural person 18 years of age or older and for the purpose of forming a limited liability company for general business purposes under the Delaware Limited Liability Act, hereby adopts the following Certificate of Formation: 1. Name: The name of the limited liability company is NRG New Roads Holdings LLC. 2. Registered Office: The address of the registered office of the limited liability company is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. Organizer: The name and address of the sole organizer of the limited liability company is Craig A. Mataczynski, NRG Energy, Inc., 1221 Nicollet Mall, Suite 700, Minneapolis, Minnesota 55403-2445. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of NRG New Roads Holdings LLC this 6th day of March, 2000. /s/ Craig A. Mataczynski --------------------------------------- Craig A. Mataczynski Authorized Person STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 10:00 AM 03/07/2000 001115017 - 3189229 EX-3.6 8 y57012ex3-6.txt LIMITED LIABILITY COMPANY AGREEMENT 1 Exhibit 3.6 LIMITED LIABILITY COMPANY AGREEMENT OF NRG NEW ROADS HOLDINGS LLC A Delaware Limited Liability Company THIS LIMITED LIABILITY COMPANY AGREEMENT OF NRG NEW ROADS HOLDINGS LLC (this "Agreement"), dated as of March 7, 2000 (the "Effective Date "), is adopted, executed and agreed to, for good and valuable consideration, by the Members (as defined below). RECITALS 1. NRG South Central Generating LLC, a Delaware limited liability company ("South Central"), has agreed to become the Sole Member of the Company (as defined below), which was formed for the purpose of taking title to and holding certain assets to be acquired from Cajun Electric Power Cooperative, Inc. ("Cajun") by Louisiana Generating LLC ("Louisiana Generating"), an Affiliate of the Company. 2. South Central desires to enter into this Agreement to agree upon various matters relating to the Company. ARTICLE 1 DEFINITIONS 1.01 Definitions. As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Sections referred to below: Acquisition - Louisiana Generating's acquisition of the non-nuclear electric generating assets and other specified assets from Cajun pursuant to the Purchase Agreement. Acquisition Date -- the Closing Date, as defined in the Purchase Agreement. Act - the Delaware Limited Liability Company Act. Affected Member - Section 9.01. Affiliate - with respect to any Person, (a) each entity that such Person Controls; (b) each Person that Controls such Person, including, in the case of a Member, such Member's Parent; and (c) each entity that is under common Control with such Person, including, in the case of a Member, each entity that is Controlled by such Member's Parent. Agreement - introductory paragraph. Alternate Representative - Section 6.02(a)(i). Assignee - any Person that acquires a Membership Interest or any portion thereof through a Disposition; provided, however, that, an Assignee shall have no right to be admitted to the Company as a Member except in accordance with Section 3.03(b)(iii). 2 Bankruptcy or Bankrupt - with respect to any Person, that (a) such Person (i) makes a general assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceedings; (iv) files a petition or answer seeking for such Person a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Law; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties; or (b) against such Person, a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Law has been commenced and 60 Days have expired without dismissal thereof or with respect to which, without such Person's consent or acquiescence, a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties has been appointed and 60 Days have expired without the appointment's having been vacated or stayed, or 60 Days have expired after the date of expiration of a stay, if the appointment has not previously been vacated. Business Day - any day other than a Saturday, a Sunday, or a holiday on which national banking associations in Minnesota, Louisiana or New York are not open for business. Buyout Event - Section 9.01. Capital Account - the account to be maintained by the Company for each Member in accordance with Section 4.06. Capital Contribution - with respect to any Member, the amount of money and the net agreed value of any property (other than money) contributed to the Company by the Member. Any reference in this Agreement to the Capital Contribution of a Member shall include a Capital Contribution of its predecessors in interest. Certified Public Accountants - a firm of independent public accountants selected from time to time by the Management Committee. Change of Member Control - with respect to any Member, an event (such as a Disposition of voting securities) that causes such Member to cease to be Controlled by such Member's Parent; provided, however, that an event that causes any of such Member's Parents to be Controlled by another Person shall not constitute a Change of Member Control. Claim - any and all judgments, claims, causes of action, demands, lawsuits, suits, proceedings, Governmental investigations or audits, losses, assessments, fines, penalties, administrative orders, obligations, costs, expenses, liabilities and damages (whether actual, consequential or punitive), including interest, penalties, reasonable attorney's fees, disbursements and costs of investigations, deficiencies, levies, duties and imposts. Code - the Internal Revenue Code of 1986, as amended. Company - NRG New Roads Holdings LLC, a Delaware limited liability company. 2 3 Confidential Information - information and data (including all copies thereof) that is furnished or submitted by any of the Members or their Affiliates, whether oral (and if oral, reduced to writing and marked "confidential" within 10 days of disclosure), written, or electronic, on a confidential basis to the other Members or their Affiliates in connection with the Company, and any and all of the activities and studies performed pursuant to this Agreement or any Project Agreement, and the resulting information and data obtained from those studies. Notwithstanding the foregoing, the term "Confidential Information" shall not include any information that: (a) is in the public domain at the time of its disclosure or thereafter (other than as a result of a disclosure directly or indirectly by a Member or its Affiliates in contravention of this Agreement or any Project Agreement); (b) as to any Member, was in the possession of such Member or its Affiliates prior to the execution of this Agreement; or (c) is engineering information (for example, heat balance and capital cost information) that has been independently acquired or developed by a Member or its Affiliates without violating any of the obligations of such Member or its Affiliates under this Agreement. Control - the possession, directly or indirectly of either of the following: (a) (i) in the case of a corporation, more than 50% of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, more than 50% of the beneficial interest therein; and (iv) in the case of any other entity, more than 50% of the economic or beneficial interest therein; or (b) in the case of any entity, the power or authority, through ownership of voting securities, by contract or otherwise, to exercise a controlling influence over the management of the entity. Day - a calendar day; provided, however, that if any period of Days referred to in this Agreement shall end on a Day that is not a Business Day, then the expiration of such period shall be automatically extended until the end of the first succeeding Business Day. Default - the failure of a Member to comply in any material respect with any of its material agreements, covenants or obligations under this Agreement; the failure of any representation or warranty made by a Member in this Agreement to have been true and correct in all material respects at the time it was made; or the failure of a Member, without justified cause, to take any action materially necessary for the progress of the Project consistent with or required by the terms of this Agreement (including participating in meetings or decisions). Default Rate - a rate per annum equal to the lesser of (a) a varying rate per annum equal to the sum of (i) the prime rate as published in The Wall Street Journal, with 3 4 adjustments in that varying rate to be made on the same date as any change in that rate is so published, plus (ii) 3% per annum, and (b) the maximum rate permitted by Law. Delaware Certificate - Section 2.01. Dispose, Disposing or Disposition - with respect to any asset (including a Membership Interest or any portion thereof), a sale, assignment, transfer, conveyance, gift, exchange or other disposition (other than the pledge or assignment to any creditor of the Company, South Central or NRG, or any collateral agent for such creditor, of any Membership Interest as security for the indebtedness to such creditor) of such asset, whether such disposition be voluntary, involuntary or by operation of Law, including the following: (a) in the case of an asset owned by a natural person, a transfer of such asset upon the death of its owner, whether by will, intestate succession or otherwise; (b) in the case of an asset owned by an entity, (i) a merger or consolidation of such entity (other than where such entity is the survivor thereof), (ii) a conversion of such entity into another type of entity, or (iii) a distribution of such asset, including in connection with the dissolution, liquidation, winding-up or termination of such entity (unless, in the case of dissolution, such entity's business is continued without the commencement of liquidation or winding-up); and (c) a disposition in connection with, or in lieu of, a foreclosure of an Encumbrance; but such terms shall not include the creation of an Encumbrance. Dispute - Section 10.01. Dispute Notice - Section 10.02. Disputing Member - Section 10.01. Dissolution Event - Section 11.01(a). Effective Date - introductory paragraph. Encumber, Encumbering, or Encumbrance - the creation of a security interest, lien, pledge, mortgage or other encumbrance, whether such encumbrance be voluntary, involuntary or by operation of Law; provided, however, that the pledge or assignment to any creditor of the Company, South Central or NRG, or any collateral agent for such creditor, of any Membership Interest as security for the indebtedness to such creditor shall not be deemed to be an Encumbrance thereof Fair Market Value - Section 9.03. Governmental Authority (or Governmental) - a federal, state, local or foreign governmental authority; a state, province, commonwealth, territory or district thereof; a county or parish; a city, town, township, village or other municipality; a district, ward or other subdivision of any of the foregoing; any executive, legislative or other governing body of any of the foregoing; any agency, authority, board, department, system, service, office, commission, committee, council or other administrative body of any of the foregoing; any court or other judicial body; and any officer, official or other representative of any of the foregoing. 4 5 including - including, without limitation. Independent Member - means a natural person who is not an officer, director, agent, employee or representative of the Company, NRG, South Central, or any Affiliate of any of the foregoing. Law - any applicable constitutional provision, statute, act, code (including the Code), law, regulation, rule, ordinance, order, decree, ruling, proclamation, resolution, judgment, decision, declaration, or interpretative or advisory opinion or letter of a Governmental Authority having valid jurisdiction. Lending Member - Section 4.03(a)(ii). Loan Documents - any and all documents relating to money borrowed by the Company, South Central or NRG including money borrowed through public or private sales of its debt securities, as the same may be amended or restated from time to time. Management Committee - Section 6.02. Member - any Person executing this Agreement as of the date of this Agreement as a member or hereafter admitted to the Company as a member as provided in this Agreement, but such term does not include any Person who has ceased to be a member in the Company. Membership Interest - with respect to any Member, (a) that Member's status as a Member; (b) that Member's share of the income, gain, loss, deduction and credits of, and the right to receive distributions from, the Company; (c) all other rights, benefits and privileges enjoyed by that Member (under the Act, this Agreement, or otherwise) in its capacity as a Member, including that Member's rights to vote, consent and approve and otherwise to participate in the management of the Company, including through the Management Committee; and (d) all obligations, duties and liabilities imposed on that Member (under the Act, this Agreement or otherwise) in its capacity as a Member, including any obligations to make Capital Contributions. Non-Contributing Member - Section 4.03(a). NRG-NRG Energy, Inc., a Delaware corporation. Officer - any Person designated as an officer of the Company as provided in Section 6.02(j), but such term does not include any Person who has ceased to be an officer of the Company. Outside Activities - Section 6.04. Parent - if applicable to a Member, the company or companies set forth opposite the name of such Member on Exhibit A. Permits - all permits, licenses, approvals or other actions of Governmental Authorities that are required for the ownership and operation of the Project, as contemplated by this Agreement. 5 6 Person - the meaning assigned that term in Section 18-101(11) of the Act and also includes a Governmental Authority and any other entity. Project -certain real and personal property to be acquired from Cajun by Louisiana Generating that will be conveyed to the Company by Louisiana Generating on the Acquisition Date. Project Agreements - the Purchase Agreement and any other agreements required in connection with the acquisition and ownership of the Project. Purchase Agreement - that certain Fifth Amended and Restated Asset Purchase and Reorganization Agreement, dated as of September 21, 1999 by and between Ralph R. Mabey as Chapter 11 Trustee of Cajun, Louisiana Generating, and, as to certain sections only, NRG. Purchase Price - Section 9.03. Representative - Section 6.02(a)(i). Securities Act - the Securities Act of 1933. Sharing Ratio - subject in each case to adjustments in accordance with this Agreement or in connection with Dispositions of Membership Interests, (a) in the case of a Member executing this Agreement as of the date of this Agreement or a Person acquiring such Member's Membership Interest, the percentage specified for that Member as its Sharing Ratio on Exhibit A, and (b) in the case of Membership Interest issued pursuant to Section 3.04, the Sharing Ratio established pursuant thereto; provided however, that the total of all Sharing Ratios shall always equal 100%. Sole Discretion - a Member's sole and absolute discretion, with or without cause, and subject to whatever limitations or qualifications the Member may impose. Tax Matters Member - Section 7.03(a). Term - Section 2.06. Terminated Member - Section 9.05. Treasury Regulations - the regulations (including temporary regulations) promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code. All references herein to sections of the Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar or substitute, temporary or final Treasury Regulations. Uniform Commercial Code - means the Uniform Commercial Code as in effect from time to time in the State of Delaware. Other terms defined herein have the meanings so given them. 6 7 1.02 Construction. Unless the context requires otherwise: (a) the gender (or lack of gender) of all words used in this Agreement includes the masculine, feminine, and neuter; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (d) references to Laws refer to such Laws as they may be amended from time to time, and references to particular provisions of a Law include any corresponding provisions of any succeeding Law; and (e) references to money refer to legal currency of the United States of America. ARTICLE 2 ORGANIZATION 2.01 Formation. The Company has been organized as a Delaware limited liability company by the filing of a Certificate of Formation, dated as of the Effective Date (the "Delaware Certificate"), with the Secretary of State of Delaware pursuant to the Act. 2.02 Name. The name of the Company is "NRG New Roads Holdings LLC" and all Company business must be conducted in that name or such other names that comply with Law as the Management Committee may select. 2.03 Registered Office; Registered Agent; Principal Office in the United States; Other Offices. The registered office of the Company required by the Act to be maintained in the State of Delaware shall be the office of the initial registered agent named in the Delaware Certificate or such other office (which need not be a place of business of the Company) as the Management Committee may designate in the manner provided by Law. The registered agent of the Company in the State of Delaware shall be the initial registered agent named in the Delaware Certificate or such other Person or Persons as the Management Committee may designate in the manner provided by Law. The principal office of the Company in the United States shall be at such place as the Management Committee may designate, which need not be in the State of Delaware, and the Company shall maintain records there or such other place as the Management Committee shall designate and shall keep the street address of such principal office at the registered office of the Company in the State of Delaware. The Company may have such other offices as the Management Committee may designate. 2.04 Purposes. The purposes of the Company are to take title to and hold certain real and personal property to be acquired from Cajun by Louisiana Generating on the Acquisition Date; to enter into and perform its obligations under the Project Agreements; and to engage in any lawful activities directly or indirectly relating thereto, including obtaining financing for the foregoing. 2.05 Foreign Qualification. Prior to the Company's conducting business in any jurisdiction other than Delaware, the Management Committee shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Management Committee, with all requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. At the request of the Management Committee, each Member shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to qualify, continue, and terminate the Company as a foreign limited liability company in all such jurisdictions in which the Company may conduct business. 7 8 2.06 Term. The period of existence of the Company (the "Term ") commenced on the Effective Date and shall end at such time as a certificate of cancellation is filed with the Secretary of State of Delaware in accordance with Section 11.04. Such period may be extended from time to time by Members holding a majority of the Membership Interests. 2.07 No State-Law Partnership. The Members intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member, for any purposes other than federal and state tax purposes, and this Agreement may not be construed to suggest otherwise. 2.08 Certificates of Membership Interest; Applicability of Article 8 of UCC. All Membership Interests shall be represented by certificates in such form as the Management Committee shall from time to time approve, shall be recorded in a register thereof maintained by the Company, and shall be subject to such rules for the issuance thereof as the Management Committee may from time to time determine. Membership Interests shall be subject to the provisions of Article 8 of the Uniform Commercial Code as may be applicable from time to time. ARTICLE 3 MEMBERSHIP; DISPOSITIONS OF INTERESTS 3.01 Initial Members. The initial Member of the Company is South Central, which is admitted to the Company as a Member effective contemporaneously with the execution by it of this Agreement. 3.02 Representations, Warranties and Covenants. Each Member hereby represents, warrants and covenants to the Company and each other Member that the following statements are true and correct as of the Effective Date and shall be true and correct at all times that such Member is a Member: (a) that Member is duly incorporated, organized or formed (as applicable), validly existing, and (if applicable) in good standing under the Law of the jurisdiction of its incorporation, organization or formation; if required by applicable Law, that Member is duly qualified and in good standing in the jurisdiction of its principal place of business, if different from its jurisdiction of incorporation, organization or formation; and that Member has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all necessary actions by the board of directors, shareholders, members, partners, trustees, beneficiaries, or other applicable Persons necessary for the due authorization, execution, delivery, and performance of this Agreement by that Member have been duly taken; (b) that Member has duly executed and delivered this Agreement and the other documents contemplated herein, and they constitute the legal, valid and binding obligation of that Member enforceable against it in accordance with their terms (except as may be limited by bankruptcy, insolvency or similar Laws of general application and by the effect of general principles of equity, regardless of whether considered at law or in equity); and (c) that Member's authorization, execution, delivery, and performance of this Agreement does not and will not (i) conflict with, or result in a breach, default or violation of, (A) the organizational documents of such Member, (B) any contract or agreement to 8 9 which that Member is a party or is otherwise subject, or (C) any Law, order, judgment, decree, writ, injunction or arbitral award to which that Member is subject; or (ii) require any consent, approval or authorization from, filing or registration with, or notice to, any Governmental Authority or other Person, unless such requirement has already been satisfied. 3.03 Dispositions and Encumbrances of Membership Interests. (a) General Restriction. A Member may not Dispose of or Encumber all or any portion of its Membership Interest except in strict accordance with this Section 3.03. (References in this Section 3.03 to Dispositions or Encumbrances of a "Membership Interest" shall also refer to Dispositions or Encumbrances of a portion of a Membership Interest.) Any attempted Disposition or Encumbrance of a Membership Interest, other than in strict accordance with this Section 3.03, shall be, and is hereby declared, null and void ab initio. The Members agree that a breach of the provisions of this Section 3.03 may cause irreparable injury to the Company and to the other Members for which monetary damages (or other remedy at law) are inadequate in view of (i) the complexities and uncertainties in measuring the actual damages that would be sustained by reason of the failure of a Member to comply with such provision and (ii) the uniqueness of the Company business and the relationship among the Members. Accordingly, the Members agree that the provisions of this Section 3.03 may be enforced by specific performance. (b) Dispositions of Membership Interests. (i) General Restriction. A Member may not Dispose of all or any portion of its Membership Interest except by complying with all of the following requirements: (A) such Member must receive the unanimous consent of the non-Disposing Members, which consent shall not be unreasonably withheld by each of such other Members; provided, however, that such consent need not be obtained if (I) the proposed Assignee is a Wholly-Owned Affiliate of the Disposing Member and (II) such proposed Assignee demonstrates to the reasonable satisfaction of the other Members that it has the ability to meet the financial and contractual commitments and other obligations of the Disposing Member; and (B) such Member must comply with the requirements of Section 3.03(b)(iii) and, if the Assignee is to be admitted as a Member, Section 3.03(b)(ii). (ii) Admission of Assignee as a Member. An Assignee has the right to be admitted to the Company as a Member, with the Membership Interest (and attendant Sharing Ratio) so transferred to such Assignee, only if (A) the Disposing Member making the Disposition has granted the Assignee either (I) the Disposing Member's entire Membership Interest or (II) the express right to be so admitted; and (B) such Disposition is effected in strict compliance with this Section 3.03. (iii) Requirements Applicable to All Dispositions and Admissions. In addition to the requirements set forth in Sections 3.03(b)(i) and 3.03(b)(ii), any 9 10 Disposition of a Membership Interest and any admission of an Assignee as a Member shall also be subject to the following requirements, and such Disposition (and admission, if applicable) shall not be effective unless such requirements are complied with; provided, however, that the Management Committee, in its sole and absolute discretion, may waive any of the following requirements: (A) Disposition Documents. The following documents must be delivered to the Management Committee and must be satisfactory, in form and substance, to the Management Committee: (I) Disposition Instrument. A copy of the instrument pursuant to which the Disposition is effected. (II) Ratification of this Agreement. An instrument, executed by the Disposing Member and its Assignee, containing the following information and agreements, to the extent they are not contained in the instrument described in Section 3.03(b)(iii)(A)(I): (1) the notice address of the Assignee; (2) if applicable, the Parent of the Assignee; (3) the Sharing Ratios after the Disposition of the Disposing Member and its Assignee (which together must total the Sharing Ratio of the Disposing Member before the Disposition); (4) the Assignee's ratification of this Agreement and agreement to be bound by it, and its confirmation that the representations and warranties in Section 3.02 are true and correct with respect to it; (5) the Assignee's ratification of all of the Project Agreements and agreement by be bound by them, to the same extent that the Disposing Member was bound by them prior to the Disposition; and (6) representations and warranties by the Disposing Member and its Assignee (aa) that the Disposition and admission is being made in accordance with all applicable Laws, and (bb) that the matters set forth in Sections 3.03(b)(iii)(A)(III) and (IV) are true and correct. (III) Securities Law Opinion. Unless the Membership Interest subject to the Disposition is registered under the Securities Act and any applicable state securities Law, or the proposed Assignee is a Wholly-Owned Affiliate as described in 3.03(b)(i)(A) above, a favorable opinion of the Company's legal counsel, or of other legal counsel acceptable to the Management Committee, to the effect that the Disposition and admission is being made pursuant to a valid exemption from registration under those Laws and in accordance with those Laws. (IV) Tax Opinion. A favorable opinion of the Certified Public Accountants, or of other certified public accountants acceptable to the Management Committee, to the effect that the Disposition would not result in the Company's being considered to have terminated within the meaning of Code Section 708. 10 11 (B) Payment of Expenses. The Disposing Member and its Assignee shall pay, or reimburse the Company for, all reasonable costs and expenses incurred by the Company in connection with the Disposition and admission, including the legal fees incurred in connection with the legal opinions referred to in Sections 3.03(b)(iii)(A)(III) and (IV), on or before the tenth Day after the receipt by that Person of the Company's invoice for the amount due. (C) No Release. No Disposition of a Membership Interest shall effect a release of the Disposing Member from any liabilities to the Company or the other Members arising from events occurring prior to the Disposition. (iv) Change of Member Control. A Change of Member Control must also comply with the requirements of this Section 3.03. (c) Encumbrances of Membership Interest. A Member may Encumber its Membership Interest if the instrument creating such Encumbrance provides that any foreclosure of such Encumbrance (or Disposition in lieu of such foreclosure) must comply with the requirements of Section 3.03(b). (d) Right of First Refusal. Except as otherwise expressly permitted by this Agreement, this Section 3.03(d) shall apply to any proposed voluntary Disposition of a Membership Interest to any purchaser (other than a majority owned Affiliate of the disposing party) for consideration in the form of cash or promissory notes or other obligations to pay sums certain. The Member proposing to make such a Distribution shall provide written notice (a "Disposition Notice ") to the remaining Members at least 90 days prior to the proposed Disposition. The Disposition Notice must set forth the identity of the proposed transferee, the sale price, and all other material terms and conditions of the proposed Disposition. In the Case of a Change of member Control, the Disposition notice must set forth the portion, if less than 100%, of the total purchase price that is applicable to such Member's Membership Interest. Upon receipt of a Disposition Notice, the remaining Members shall have the option for a period of 30 days to purchase all, but not less than all, of such Membership Interest. Such Membership Interest shall be allocated to the Members exercising their option under this Section 3.03(d) pro rata in accordance with their Membership Interests. The purchase pursuant to the exercise of this option shall be at the price and pursuant to the terms and conditions of the proposed Disposition. If no Member exercises such option, the Member proposing such Disposition shall be free, for a period of 60 days after the expiration of the remaining Members' options, to Dispose of the Membership Interests that were the subject of the Disposition Notice, but only to the party, and for the price and on the terms and conditions, set forth in the Disposition Notice. If the proposed disposition does not occur within 60 days after the expiration of the remaining Members' options, the Membership Interest may not be Disposed of pursuant to this Section 30.3(d) unless the Member again complies with the terms of this Agreement. (e) Rights In Membership Interests Pledged as Collateral. Any other provision of this Agreement to the contrary notwithstanding, by executing and delivering this Agreement, each Member shall be deemed to have consented to (i) the pledge, assignment, hypothecation and transfer to any creditor of the Company, South Central or NRG or its 11 12 agents, successors or assigns of, and the grant to such creditor or other Person of a lien on and security interest in, as security for the indebtedness of the Company, South Central or NRG to such creditor, all of such Member's right, title and interest in, to and under its Membership Interest and any other collateral securing such indebtedness, (ii) the exercise by any such creditor or other Person of the rights and remedies under any security document related to such collateral, including, without limitation, the right to exercise the voting and consensual rights and other powers of each Member to the extent provided in any such security document, and the right to foreclose upon or exercise a power of sale with respect to the Membership Interest of each Member and any other collateral subject to such security documents and to cause the agent or designee of such creditor or any third party purchaser of such Membership Interest to become an additional or substitute Member, and (iii) all other provisions of the loan and security documents relating to such indebtedness or collateral, the issuance of new or substituted Membership Interests, or the ownership of Membership Interests. 3.04 Creation of Additional Membership Interest. Additional Membership Interests may be created and issued to existing Members or to other Persons, and such other Persons may be admitted to the Company as Members, with the unanimous consent of the existing Members, on such terms and conditions as the existing Members may unanimously determine at the time of admission. The terms of admission or issuance must specify the Sharing Ratios applicable thereto and may provide for the creation of different classes or groups of Members having different rights, powers, and duties. The Management Committee may reflect the creation of any new class or group in an amendment to this Agreement indicating the different rights, powers, and duties. Any such admission is effective only after the new Member has executed and delivered to the Members an instrument containing the notice address of the new Member, the Assignee's ratification of this Agreement and agreement to be bound by it, and its confirmation that the representations and warranties in Section 3.02 are true and correct with respect to it. The provisions of this Section 3.04 shall not apply to Dispositions of Membership Interests or admissions of Assignees in connection therewith, such matters being governed by Section 3.03. 3.05 Access to Information. Each Member shall be entitled to receive any information that it may request concerning the Company; provided, however, that this Section 3.05 shall not obligate the Company or the Management Committee to create any information that does not already exist at the time of such request (other than to convert existing information from one medium to another, such as providing a printout of information that is stored in a computer database). Each Member shall also have the right, upon reasonable notice, and at all reasonable times during usual business hours to inspect the properties of the Company and to audit, examine and make copies of the books of account and other records of the Company. Such right may be exercised through any agent or employee of such Member designated in writing by it or by an independent public accountant, engineer, attorney or other consultant so designated. The Member making the request shall bear all costs and expenses incurred in any inspection, examination or audit made on such Member's behalf. Confidential Information obtained pursuant to this Section 3.05 shall be subject to the provisions of Section 3.06. 3.06 Confidential Information. (a) Except as permitted by Section 3.06(b), 12 13 (i) each Member shall keep confidential all Confidential Information and shall not disclose any Confidential Information to any Person, including any of its Affiliates, and (ii) each Member shall use the Confidential Information only in connection with the Company. (b) Notwithstanding Section 3.06(a), but subject to the other provisions of this Section 3.06, a Member may make the following disclosures and uses of Confidential Information: (i) disclosures to another Member in connection with the Company; (ii) disclosures and uses that are approved by the Management Committee; (iii) disclosures to an Affiliate of such Member on a "need to know" basis in connection with the Company, if such Affiliate has agreed to abide by the terms of this Section 3.06; (iv) disclosures to a Person that is not a Member or an Affiliate of a Member, if such Person has been retained to provide services by the Member in connection with the Company or such Member's Membership Interest and has agreed to abide by the terms of this Section 3.06; (v) disclosures to lenders, potential lenders or other Persons providing financing to the Company and potential purchasers of equity interests in the Company, so long as such Persons have agreed to abide by the terms of this Section 3.06; (vi) disclosures to Governmental Authorities that are necessary to own the Project consistent with the Project Agreements; (vii) disclosures that a Member is legally compelled to make by deposition, interrogatory, request for documents, subpoena, civil investigative demand, order of a court of competent jurisdiction, or similar process, or otherwise by Law or securities exchange requirements; provided, however, that, prior to any such disclosure, such Member shall, to the extent legally permissible: (A) provide the Management Committee with prompt notice of such requirements so that one or more of the Members may seek a protective order or other appropriate remedy or waive compliance with the terms of this Section 3.06(b)(vii); (B) consult with the Management Committee on the advisability of taking steps to resist or narrow such disclosure; and (C) cooperate with the Management Committee and with the other Members in any attempt one or more of them may make to obtain a 13 14 protective order or other appropriate remedy or assurance that confidential treatment will be afforded the Confidential Information; and in the event such protective order or other remedy is not obtained, or the other Members waive compliance with the provisions hereof, such Member agrees (I) to furnish only that portion of the Confidential Information that the other Members are advised by counsel to the disclosing Member is legally required and (II) to exercise all reasonable efforts to obtain assurance that confidential treatment will be accorded such Confidential Information. (c) Each Member shall take such precautionary measures as may be required to ensure (and such Member shall be responsible for) compliance with this Section 3.06 by any of its Affiliates, and its and their directors, officers, employees and agents, and other Persons to which it may disclose Confidential Information in accordance with this Section 3.06. (d) A Terminated Member shall promptly destroy (and provide a certificate of destruction to the Company with respect to) or return to the Company, as directed by the Management Committee, all Confidential Information in its possession. Notwithstanding the immediately-preceding sentence, a Terminated Member may, subject to the other provisions of this Section 3.06, retain and use Confidential Information for the limited purpose of preparing such Terminated Member's tax returns and defending audits, investigations and proceedings relating thereto. (e) The Members agree that no adequate remedy at law exists for a breach or threatened breach of any of the provisions of this Section 3.06, the continuation of which unremedied will cause the Company and the other Members to suffer irreparable harm. Accordingly, the Members agree that the Company and the other Members shall be entitled, in addition to other remedies that may be available to them, to immediate injunctive relief from any breach of any of the provisions of this Section 3.06 and to specific performance of their rights hereunder, as well as to any other remedies available at law or in equity. (f) The obligations of the Members under this Section 3.06 shall terminate on the third anniversary of the end of the Term. 3.07 Liability to Third Parties. No Member shall be liable for the debts, obligations or liabilities of the Company. 3.08 Withdrawal. A Member may not withdraw or resign from the Company. ARTICLE 4 CAPITAL CONTRIBUTIONS 4.01 Initial Capital Contributions. Contemporaneously with the execution by such Member of this Agreement, each Member shall make the Capital Contributions described for that Member in Exhibit A. 4.02 Subsequent Capital Contributions. Without creating any rights in favor of any third party, each Member shall contribute to the Company, in cash, on or before the date specified as hereinafter described, that Member's Sharing Ratio of all monies that in the unanimous judgment of the Management Committee are necessary to enable the Company to properly maintain its assets and 14 15 to discharge its costs, expenses, obligations, and liabilities. The Management Committee shall notify each other Member of the need for Capital Contributions pursuant to this Section 4.02 when appropriate, which notice must include a statement in reasonable detail of the proposed uses of the Capital Contributions and a date (which date may be no earlier than the fifth Business Day following each Member's receipt of its notice) before which the Capital Contributions must be made. Notices for Capital Contributions must be made to all Members in accordance with their Sharing Ratios. 4.03 Failure to Contribute. (a) If a Member does not contribute, within 10 Days of the date required, all or any portion of a Capital Contribution that Member is required to make as provided in this Agreement, the other Members may cause the Company to exercise, on notice to that Member (the "Non-Contributing Member"), one or more of the following remedies: (i) taking such action (including court proceedings) as the other Members may deem appropriate to obtain payment by the Non-Contributing Member of the portion of the Non-Contributing Member's Capital Contribution that is in default, together with interest thereon at the Default Rate from the date that the Capital Contribution was due until the date that it is made, all at the cost and expense of the Non-Contributing Member; (ii) permitting the other Members in proportion to their Sharing Ratios or in such other percentages as they may agree (the "Lending Member," whether one or more), to advance the portion of the Non-Contributing Member's Capital Contribution that is in default, with the following results: (A) the sum advanced constitutes a loan from the Lending Member to the Non-Contributing Member and a Capital Contribution of that sum to the Company by the Non-Contributing Member pursuant to the applicable provisions of this Agreement, (B) the principal balance of the loan and all accrued unpaid interest thereon is due and payable in whole on the tenth Day after written demand therefor by the Lending Member to the Non-Contributing Member, (C) the amount lent bears interest at the Default Rate from the Day that the advance is deemed made until the date that the loan, together with all interest accrued on it, is repaid to the Lending Member, (D) all distributions from the Company that otherwise would be made to the Non-Contributing Member (whether before or after dissolution of the Company) instead shall be paid to the Lending Member until the loan and all interest accrued on it have been paid in full to the Lending Member (with payments being applied first to accrued and unpaid interest and then to principal), (E) the payment of the loan and interest accrued on it is secured by a security interest in the Non-Contributing Member's Membership Interest, as more fully set forth in Section 4.03(b), and 15 16 (F) the Lending Member has the right, in addition to the other rights and remedies granted to it pursuant to this Agreement or available to it at Law or in equity, to take any action (including court proceedings) that the Lending Member may deem appropriate to obtain payment by the Non-Contributing Member of the loan and all accrued and unpaid interest on it, at the cost and expense of the Non-Contributing Member; (iii) exercising the rights of a secured party under the Uniform Commercial Code, as more fully set forth in Section 4.03(b); or (iv) exercising any other rights and remedies available at Law or in equity. In addition, the failure to make such contributions shall constitute a Default by the Non-Contributing Member, and the other Members shall have the rights set forth in Article 9 with respect to such Default. (b) Each Member grants to the Company, and to each Lending Member with respect to any loans made by the Lending Member to that Member as a Non-Contributing Member pursuant to Section 4.03(a)(ii), as security, equally and ratably, for the payment of all Capital Contributions that Member has agreed to make and the payment of all loans and interest accrued on them made by Lending Members to that Member as a Non-Contributing Member pursuant to Section 4.03(a)(ii), a security interest in and a general lien on its Membership Rights and the proceeds thereof, all under the Uniform Commercial Code. On any default in the payment of a Capital Contribution or in the payment of such a loan or interest accrued on it, the Company or the Lending Member, as applicable, is entitled to all the rights and remedies of a secured party under the Uniform Commercial Code with respect to the security interest granted in this Section 4.03(b). Each Member shall execute and deliver to the Company and the other Members all financing statements and other instruments that the Lending Member may request to effectuate and carry out the preceding provisions of this Section 4.03(b). At the option of a Lending Member, this Agreement or a carbon, photographic, or other copy hereof may serve as a financing statement. 4.04 Loans. If the Company does not have sufficient cash to pay its obligations, any Member(s) that may agree to do so with the consent of the Management Committee may advance all or part of the needed funds to or on behalf of the Company. An advance described in this Section 4.04 constitutes a loan from the Member to the Company, bears interest at a rate determined by the Management Committee from the date of the advance until the date of payment, and is not a Capital Contribution. 4.05 Return of Contributions. Except as expressly provided herein, a Member is not entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is not a liability of the Company or of any Member. A Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return any Member's Capital Contributions. 4.06 Capital Accounts. A Capital Account shall be established and maintained for each Member. Each Member's Capital Account shall be increased by (a) the amount of money 16 17 contributed by that Member to the Company, (b) the fair market value of property contributed by that Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code), and (c) allocations to that Member of Company income and gain (or items thereof), including income and gain exempt from tax and income and gain described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding income and gain described in Treasury Regulation Section 1.704-1(b)(4)(i), and shall be decreased by (d) the amount of money distributed to that Member by the Company, (e) the fair market value of property distributed to that Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code), (f) allocations to that Member of expenditures of the Company described (or treated as described) in Section 705(a)(2)(B) of the Code, and (g) allocations of Company loss and deduction (or items thereof), including loss and deduction described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding items described in (f) above and loss or deduction described in Treasury Regulation Section 1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii). The Members' Capital Accounts shall also be maintained and adjusted as permitted by the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f) and as required by the other provisions of Treasury Regulation Sections 1.704-1(b)(2)(iv) and 1.704-1(b)(4), including adjustments to reflect the allocations to the Members of depreciation, depletion, amortization, and gain or loss as computed for book purposes rather than the allocation of the corresponding items as computed for tax purposes, as required by Treasury Regulation Section 1.704-1(b)(2)(iv)(g). Thus, the Members' Capital Accounts shall be increased or decreased to reflect a revaluation of the Company's property on its books based on the fair market value of the Company's property on the date of adjustment immediately prior to (A) the contribution of money or other property to the Company by a new or existing Member as consideration for a Membership Interest or an increased Sharing Ratio, (B) the distribution of money or other property by the Company to a Member as consideration for a Membership Interest, or (C) the liquidation of the Company. A Member that has more than one Membership Interest shall have a single Capital Account that reflects all such Membership Interests, regardless of the class of Membership Interests owned by such Member and regardless of the time or manner in which such Membership Interests were acquired. Upon the Disposition of all or a portion of a Membership Interest, the Capital Account of the Disposing Member that is attributable to such Membership Interest shall carry over to the Assignee in accordance with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(1). ARTICLE 5 DISTRIBUTIONS AND ALLOCATIONS 5.01 Distributions or Billings. Distributions to the Members shall be made only to all simultaneously in proportion to their respective Sharing Ratios (at the time the amounts of such distributions are determined), and distributions shall be made only in such aggregate amounts and at such times as shall be determined by the Management Committee and as are permitted by the Loan Documents. When so permitted, the Management Committee shall endeavor to distribute to the Members, on or before the last day of each calendar month, or more often if approved by the Management Committee, the estimated amount of any cash available for such calendar month (net of any adjustments, if any, made to reflect the actual cash available for the preceding calendar month). 5.02 Distributions on Dissolution and Winding Up. Upon the dissolution and winding up of the Company, after adjusting the Capital Accounts for all distributions made under Section 5.01 and all allocations under Article 5, all available proceeds distributable to the Members as determined 17 18 under Section 11.02 shall be distributed to all of the Members to the extent of the Members' positive Capital Account balances. 5.03 Allocations. (a) For purposes of maintaining the Capital Accounts pursuant to Section 4.06 and for income tax purposes, except as provided in Section 5.03(b), each item of income, gain, loss, deduction and credit of the Company shall be allocated to the Members in accordance with their Sharing Ratios. (b) For income tax purposes, income, gain, loss, and deduction with respect to property contributed to the Company by a Member or revalued pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall be allocated among the Members in a manner that takes into account the variation between the adjusted tax basis of such property and its book value, as required by Section 704(c) of the Code and Treasury Regulation Section 1.704-1(b)(4)(i), using the remedial allocation method permitted by Treasury Regulation Section 1.704-3(d). 5.04 Varying Interests. All items of income, gain, loss, deduction or credit shall be allocated, and all distributions shall be made, to the Persons shown on the records of the Company to have been Members as of the last calendar day of the period for which the allocation or distribution is to be made. Notwithstanding the foregoing, if during any taxable year there is a change in any Member's Sharing Ratio, the Members agree that their allocable shares of such items for the taxable year shall be determined on any method determined by the Management Committee to be permissible under Code Section 706 and the related Treasury Regulations to take account of the Members' varying Sharing Ratios. ARTICLE 6 MANAGEMENT 6.01 Management by Members. Except as described below in Sections 6.03 and 6.05, the management of the Company is fully vested in the Members, acting exclusively in their membership capacities. To facilitate the orderly and efficient management of the Company, the Members shall act (a) collectively as a "committee of the whole" pursuant to Section 6.02, or (b) through the delegation from time to time of certain responsibility and authority to particular Members pursuant to Section 6.03. No Member has the right, power or authority to act for or on behalf of the Company, to do any act that would be binding on the Company, or to incur any expenditures on behalf of the Company, except in accordance with the immediately preceding sentence. Decisions or actions taken in accordance with the provisions of this Agreement shall constitute decisions or actions by the Company and shall be binding on each Member, Representative, Officer and employee of the Company. 6.02 Management Committee. All Members shall act collectively through meetings as a "committee of the whole" which is hereby named the "Management Committee." The Management Committee shall conduct its affairs in accordance with the following provisions and the other provisions of this Agreement: (a) Representatives. 18 19 (i) Designation. To facilitate the orderly and efficient conduct of Management Committee meetings, each Member shall notify the other Members, from time to time, of the identity of two of its officers, employees or agents who will represent it at such meetings (each a "Representative "). In addition, each Member may (but shall have not obligation to) notify the other Members, from time to time, of the identity of other officers, employees or agents who will represent it at any meeting that the Member's Representatives are unable to attend (each an "Alternate Representative "). (The term "Representative" shall also refer to any Alternate Representative that is actually performing the duties of the applicable Representative.). The initial Representatives of each Member are set forth on Exhibit A. A Member may designate different Representatives or Alternate Representatives for any meeting of the Management Committee by notifying each of the other Members at least three Business Days prior to the scheduled date for such meeting; provided, however, that if giving such advance notice is not feasible, then such new Representatives or Alternate Representatives shall present written evidence of their authority at the commencement of such meeting. (ii) Authority. Each Representative shall have the full authority to act on behalf of the Member that designated such Representative; the action of a Representative at a meeting (or through a written consent) of the Management Committee shall bind the Member that designated such Representative; and the other Members shall be entitled to rely upon such action without further inquiry or investigation as to the actual authority (or lack thereof) of such Representative. In addition, the act of an Alternate Representative shall be deemed the act of the Representative for which such Alternate Representative is acting, without the need to produce evidence of the absence or unavailability of such Representative. (iii) DISCLAIMER OF DUTIES; INDEMNIFICATION. EACH REPRESENTATIVE SHALL REPRESENT, AND OWE DUTIES TO, ONLY THE MEMBER THAT DESIGNATED SUCH REPRESENTATIVE (THE NATURE AND EXTENT OF SUCH DUTIES BEING AN INTERNAL CORPORATE AFFAIR OF SUCH MEMBER), AND NOT TO THE COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE, OR ANY OFFICER OR EMPLOYEE OF THE COMPANY. THE PROVISIONS OF SECTION 6.04 SHALL ALSO INURE TO THE BENEFIT OF EACH MEMBER'S REPRESENTATIVES. THE COMPANY SHALL INDEMNIFY, PROTECT, DEFEND, RELEASE AND HOLD HARMLESS EACH REPRESENTATIVE FROM AND AGAINST ANY CLAIMS ASSERTED BY OR ON BEHALF OF ANY PERSON (INCLUDING ANOTHER MEMBER), OTHER THAN THE MEMBER THAT DESIGNATED SUCH REPRESENTATIVE, THAT ARISE OUT OF, RELATE TO OR ARE OTHERWISE ATTRIBUTABLE TO, DIRECTLY OR INDIRECTLY, SUCH REPRESENTATIVE'S SERVICE ON THE MANAGEMENT COMMITTEE, OTHER THAN SUCH CLAIMS ARISING OUT OF THE FRAUD OR WILLFUL MISCONDUCT OF SUCH REPRESENTATIVE. (iv) Attendance. Each Member shall use all reasonable efforts to cause its Representatives or Alternate Representatives to attend each meeting of the Management Committee, unless its Representatives are unable to do so because of a "force majeure" event or other event beyond his reasonable control, in which event 19 20 such Member shall use all reasonable efforts to cause its Representatives or Alternate Representatives to participate in the meeting by telephone pursuant to Section 6.02(h). (b) Chairman and Secretary. One of the Representatives will be designated as Chairman of the Management Committee, in accordance with this Section 6.02(b), to preside over meetings of the Management Committee. The Management Committee shall also designate a Secretary of the Management Committee, who need not be a Representative. (c) Procedures. The Secretary of the Management Committee shall maintain written minutes of each of its meetings, which shall be submitted for approval no later than the next regularly-scheduled meeting. The Management Committee may adopt whatever rules and procedures relating to its activities as it may deem appropriate, provided that such rules and procedures shall not be inconsistent with or violate the provisions of this Agreement. (d) Time and Place of Meetings. The Management Committee shall meet quarterly, subject to more or less frequent meetings upon approval of the Management Committee. Notice of, and an agenda for, all Management Committee meetings shall be provided by the Chairman to all Members at least ten Days prior to the date of each meeting, together with proposed minutes of the previous Management Committee meeting (if such minutes have not been previously ratified). Special meetings of the Management Committee may be called at such times, and in such manner, as any Member deems necessary. Any Member calling for any such special meeting shall notify the Chairman, who in turn shall notify all Members of the date and agenda for such meeting at least ten Days prior to the date of such meeting. Such ten-day period may be shortened by the Management Committee. All meetings of the Management Committee shall be held at a location designated by the Chairman. Attendance of a Member at a meeting of the Management Committee shall constitute a waiver of notice of such meeting, except where such Member attends the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. (e) Quorum. The presence of one Representative designated by each Member shall constitute a quorum for the transaction of business at any meeting of the Management Committee. (f) Voting. Except as provided otherwise in this Agreement, (i) voting at any meeting of the Management Committee shall be according to the Members' respective Sharing Ratios, and (ii) the affirmative vote of Members holding a majority of the Sharing Ratios shall constitute the act of the Management Committee. (g) Action by Written Consent. Any action required or permitted to be taken at a meeting of the Management Committee may be taken without a meeting, without prior notice, and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by Members that could have taken the action at a meeting of the Management Committee at which all Members entitled to vote on the action were represented and voted. 20 21 (h) Meetings by Telephone. Members may participate in and hold such meeting by means of conference telephone, video conference or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person at such meeting, except where a Member participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. (i) Subcommittees. The Management Committee may create such subcommittees, delegate to such subcommittees such authority and responsibility, and rescind any such delegations, as it may deem appropriate. (j) Officers. The Management Committee may designate one or more Persons to be Officers of the Company. Any Officers so designated shall have such titles and, subject to the other provisions of this Agreement, have such authority and perform such duties as the Management Committee may specifically delegate to them and shall serve at the pleasure of the Management Committee. 6.03 Delegation to Particular Member. The Management Committee may delegate to one or more Members such authority and duties as the Management Committee may deem advisable. Decisions or actions taken by any such Member in accordance with the provisions of this Agreement shall constitute decisions or actions by the Company and shall be binding on each Member, Representative, Officer and employee of the Company. Any delegation pursuant to this Section 6.03 may be revoked at any time by the Management Committee. With respect to duties discharged hereunder by a Member (a) such Member may discharge such duties through the personnel of a Affiliate of such Member, and (b) unless the Members otherwise agree, the Company shall compensate such Member (or its Affiliate, as applicable) for the performance of such duties in an amount equal to the man-hours expended by the personnel of such Member (or its Affiliate) multiplied by the applicable rate(s) shown on Exhibit B (which rates each shall escalate on the first day of each calendar year during the term hereof by an amount which is 5% of the rate applicable during the prior calendar year), and shall reimburse such Member for all out of pocket costs incurred by such Member in discharging such duties. In addition, prior to performing any such duties, the performing Member shall provide to the other Member for approval an estimate of man-hours and types of personnel required to perform the delegated duties and a schedule for the performance of the delegated duties and for other costs associated therewith, and shall promptly inform the other Member of any variance from the budget or schedule. 6.04 Affiliate Agreements; Conflicts of Interest. Subject to any other agreement between the Members (and their respective Affiliates, as applicable), a Member or an Affiliate of a Member may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including ones in competition with the Company, with no obligation to offer to the Company, any other Member or any Affiliate of another Member the right to participate therein. The Company may transact business with any Member or Affiliate thereof, provided the terms of those transactions are approved by the Management Committee or expressly contemplated by this Agreement. Without limiting the generality of the foregoing, the Members recognize and agree that they and their respective Affiliates currently engage in certain activities involving the generation, transmission, distribution, marketing and trading of electricity and other energy products (including futures, options, swaps, exchanges of future positions for physical deliveries and commodity trading), and the gathering, processing, storage and transportation of such products, as well as other commercial activities related to such products, and that these and other activities by 21 22 Members and their Affiliates may be made possible or more profitable by reason of the Company's activities (herein referred to as "Outside Activities'). The Members agree that (i) no Member or Affiliate of a Member shall be restricted in its right to conduct, individually or jointly with others, for its own account any Outside Activities, and (ii) no Member or its Affiliates shall have any duty or obligation, express or implied, to account to, or to share the results or profits of such Outside Activities with, the Company, any other Member or any Affiliate of any other Member, by reason of such Outside Activities. 6.05 Unanimous Consent Required for Certain Action. Any other provision of this Agreement to the contrary notwithstanding, the unanimous consent of the Members, and at least one Independent Member, shall be required to: (a) File a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to the Company. (b) Cause the dissolution, liquidation, consolidation, merger or sale of substantially all of the assets of the Company. (c) Cause or permit the Company to engage in any other activity other than those set forth in Section 2.04. (d) Amend this Agreement in any manner that would have a material adverse impact on any creditor of the Company. 6.06 Certain Actions Prohibited. So long as the Company has any indebtedness outstanding, (a) the Company shall not be dissolved, liquidated, consolidated or merged with any other entity, nor shall this Agreement be amended in any manner that would have a material adverse impact on the holders of such indebtedness, and (b) notwithstanding the failure of the Members to continue the existence of the Company as provided in Section 2.06 during such period, no action shall be taken by the Company or any of the Members that shall cause any collateral for such indebtedness to be liquidated or that would adversely affect the rights of the holders of such indebtedness or their agents to exercise their rights under any security documents relating thereto or to retain such collateral until such indebtedness is paid in full or otherwise completely discharged. 6.07 Disclaimer of Duties and Liabilities. (a) NO MEMBER SHALL OWE ANY DUTY (INCLUDING ANY FIDUCIARY DUTY) TO THE OTHER MEMBERS OR TO THE COMPANY, OTHER THAN THE DUTIES THAT ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. (b) NO MEMBER SHALL BE LIABLE (WHETHER IN CONTRACT, TORT OR OTHERWISE) FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES. (c) THE OBLIGATIONS OF THE MEMBERS UNDER THIS AGREEMENT ARE OBLIGATIONS OF THE MEMBERS ONLY, AND NO RECOURSE SHALL BE AVAILABLE AGAINST ANY OFFICER, DIRECTOR OR AFFILIATE OF ANY MEMBER, EXCEPT AS PERMITTED UNDER APPLICABLE LAW. 22 23 6.08 Indemnification. Each Member shall indemnify, protect, defend, release and hold harmless each other Member, and such other Member's Representatives, Affiliates, and their respective directors, officers, employees and agents from and against any Claims asserted by or on behalf of any Person (including another Member) that arise out of, relate to or are otherwise attributable to, directly or indirectly, a breach by the indemnifying Member of this Agreement, or the negligence, gross negligence or willful misconduct of the indemnifying Member in connection with this Agreement; provided, however, that this Section 6.08 shall not apply to any Claim or other matter for which a Member (or its Representative) has no liability or duty, or is indemnified or released, pursuant to Section 6.02(a)(iii), or 6.07. ARTICLE 7 TAXES 7.01 Tax Returns. The Tax Matters Member shall prepare and timely file (on behalf of the Company) all federal, state and local tax returns required to be filed by the Company. Each Member shall furnish to the Tax Matters Member all pertinent information in its possession relating to the Company's operations that is necessary to enable the Company's tax returns to be timely prepared and filed. The Company shall bear the costs of the preparation and filing of its returns. 7.02 Tax Elections. The Company shall make the following elections on the appropriate tax returns: (a) to adopt as the Company's fiscal year the calendar year; (b) to adopt the accrual method of accounting; (c) if a distribution of the Company's property as described in Code Section 734 occurs or upon a transfer of Membership Interest as described in Code Section 743 occurs, on request by notice from any Member, to elect, pursuant to Code Section 754, to adjust the basis of the Company's properties; (d) to elect to amortize the organizational expenses of the Company ratably over a period of 60 months as permitted by Section 709(b) of the Code; and (e) any other election the Management Committee may deem appropriate. Neither the Company nor any Member shall make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law and no provision of this Agreement (including Section 2.07) shall be construed to sanction or approve such an election. 7.03 Tax Matters Member. (a) NRG shall be the "tax matters partner" of the Company pursuant to Section 6231 (a)(7) of the Code (the "Tax Matters Member"). At the request of each other Member, the Tax Matters Member shall take such action as may be necessary to cause, to the extent possible, such other Member to become a "notice partner" within the meaning of Section 6223 of the Code. The Tax Matters Member shall inform each other Member of all significant matters that may come to its attention in its capacity as Tax Matters Member by 23 24 giving notice thereof on or before the fifth Business Day after becoming aware thereof and, within that time, shall forward to each other Member copies of all significant written communications it may receive in that capacity. (b) The Tax Matters Member shall take no action without the authorization of the Management Committee, other than such action as may be required by Law. Any cost or expense incurred by the Tax Matters Member in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, shall be paid by the Company. (c) The Tax Matters Member shall not enter into any extension of the period of limitations for making assessments on behalf of the Members without first obtaining the consent of the Management Committee. The Tax Matters Member shall not bind any Member to a settlement agreement without obtaining the consent of such Member. Any Member that enters into a settlement agreement with respect to any Company item (as described in Code Section 6231(a)(3)) shall notify the other Members of such settlement agreement and its terms within 90 Days from the date of the settlement. (d) No Member shall file a request pursuant to Code Section 6227 for an administrative adjustment of Company items for any taxable year without first notifying the other Members. If the Management Committee consents to the requested adjustment, the Tax Matters Member shall file the request for the administrative adjustment on behalf of the Members. If such consent is not obtained within 30 Days from such notice, or within the period required to timely file the request for administrative adjustment, if shorter, any Member, including the Tax Matters Member, may file a request for administrative adjustment on its own behalf. Any Member intending to file a petition under Code Sections 6226, 6228 or other Code Section with respect to any item involving the Company shall notify the other Members of such intention and the nature of the contemplated proceeding. In the case where the Tax Matters Member is the Member intending to file such petition on behalf of the Company, such notice shall be given within a reasonable period of time to allow the other Members to participate in the choosing of the forum in which such petition will be filed. (e) If any Member intends to file a notice of inconsistent treatment under Code Section 6222(b), such Member shall give reasonable notice under the circumstances to the other Members of such intent and the manner in which the Member's intended treatment of an item is (or may be) inconsistent with the treatment of that item by the other Members. ARTICLE 8 BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS 8.01 Maintenance of Books. (a) The Management Committee shall keep or cause to be kept at the principal office of the Company or at such other location approved by the Management Committee complete and accurate books and records of the Company, supporting documentation of the transactions with respect to the conduct of the Company's business and minutes of the proceedings of its Members and the Management Committee, and any other books and records that are required to be maintained by applicable Law. 24 25 (b) The books of account of the Company shall be (i) maintained on the basis of a fiscal year that is the calendar year, (ii) maintained on an accrual basis in accordance with generally accepted accounting principles, consistently applied, and (iii) audited by the Certified Public Accountants at the end of each calendar year. 8.02 Reports. (a) With respect to each calendar year, the Management Committee shall prepare and deliver to each Member: (i) Within 120 Days after the end of such calendar year, a profit and loss statement and a statement of cash flows for such year, a balance sheet and a statement of each Member's Capital Account as of the end of such year, together with a report thereon of the Certified Public Accountants; and (ii) Such federal, state and local income tax returns and such other accounting, tax information and schedules as shall be necessary for the preparation by each Member on or before July 15 following the end of each calendar year of its income tax return with respect to such year. (b) Within 15 Business Days after the end of each calendar month, the Management Committee shall cause to be prepared and delivered to each Member, with an appropriate certificate of the Person authorized to prepare the same (provided that the Management Committee may change the financial statements required by this Section 8.02(b) to a quarterly basis or may make such other change therein as it may deem appropriate): (i) A profit and loss statement and a statement of cash flows for such month (including sufficient information to permit the Members to calculate their tax accruals), for the portion of the calendar year then ended; (ii) A balance sheet and a statement of each Member's Capital Account as of the end of such month and the portion of the calendar year then ended; and (iii) A statement comparing the actual financial status and results of the Company as of the end of or for such month and the portion of the calendar year then ended with the budgeted or forecasted status and results as of the end of or for such respective periods. (c) The Management Committee shall also cause to be prepared and delivered to each Member such other reports, forecasts, studies, budgets and other information as the Management Committee may request from time to time. 8.03 Bank Accounts. Funds of the Company shall be deposited in such banks or other depositories as shall be designated from time to time by the Management Committee. All withdrawals from any such depository shall be made only as authorized by the Management Committee and shall be made only by check, wire transfer, debit memorandum or other written instruction. 25 26 ARTICLE 9 BUYOUT OPTION 9.01 Buyout Events. This Article 9 shall apply to any of the following events (each a "Buyout Event"): (a) a Member shall dissolve or become Bankrupt; or (b) a Member shall commit a Default. In each case, the Member with respect to whom a Buyout Event has occurred is referred to herein as the "Affected Member" 9.02 Procedure. If a Buyout Event occurs and is not cured within 30 Business Days of the Affected Member's receipt of notice thereof from another Member (or such shorter period (not less than 10 Business Days) as may be reasonable under the circumstances and set forth in such notice), then each of the other Members shall have the option to acquire the Membership Interest of the Affected Member (or to cause it to be acquired by a third party designated by the other Members), in accordance with procedures that are substantively equivalent to those set forth in Section 3.03(b)(iii) (and with the Members exercising such preferential right also being referred to herein as "Purchasing Members"). 9.03 Purchase Price; Terms and Method of Payment. The purchase price for a Membership Interest being purchased pursuant to this Article 9 (the "Purchase Price ") shall be determined in the following manner. The Affected Member and the Purchasing Members shall attempt to agree upon the fair market value of the applicable Membership Interest and the terms and method of payment of such amount. If those Members do not reach such agreement on or before the 30th Day following the exercise of the option, any such Member, by notice to the others, may require the determination of fair market value and the terms and method of payment to be made by the Arbitrator pursuant to Article 10. 9.04 Closing. If an option to purchase is exercised in accordance with the other provisions of this Article 9, the closing of such purchase shall occur on the 30th Day after the determination of the Fair Market Value pursuant to Section 9.03 (or, if later, the fifth Business Day after the receipt of all applicable regulatory and governmental approvals to the purchase), and shall be conducted in a manner substantively equivalent to that set forth in Section 3.03. 9.05 Terminated Member. Upon the occurrence of a closing under Section 9.04, the following provisions shall apply to the Affected Member (now a "Terminated Member"): (a) The Terminated Member shall cease to be a Member immediately upon the occurrence of the closing. (b) As the Terminated Member is no longer a Member, it will no longer be entitled to receive any distributions (including liquidating distributions) or allocations from the Company, and neither it nor its Representative shall be entitled to exercise any voting or consent rights or to receive any further information (or access to information) from the Company. 26 27 (c) The Terminated Member must pay to the Company all amounts owed to it by such Member. (d) The Terminated Member shall remain obligated for all liabilities it may have under this Agreement or otherwise with respect to the Company that accrue prior to the closing. (f) The Sharing Ratio of the Terminated Member shall be allocated among the purchasing Members in the proportion of the total Purchase Price paid by each. ARTICLE 10 DISPUTE RESOLUTION 10.01 Disputes. This Article 10 shall apply to any dispute arising under or related to this Agreement (whether arising in contract, tort or otherwise, and whether arising at law or in equity), including (a) any dispute regarding the construction, interpretation, performance, validity or enforceability of any provision of this Agreement or whether any Person is in compliance with, or breach of, any provisions of this Agreement, and (b) the applicability of this Article 10 to a particular dispute. Notwithstanding the foregoing, this Article 10 shall not apply to any matters that, pursuant to the provisions of this Agreement, are to be resolved by a vote of the Members (including through the Management Committee); provided, however, that if a vote, approval, consent, determination or other decision must, under the terms of this Agreement, be made (or withheld) in accordance with a standard other than Sole Discretion (such as a reasonableness standard), then the issue of whether such standard has been satisfied may be a dispute to which this Article 10 applies. Any dispute to which this Article 10 applies is referred to herein as a "Dispute." With respect to a particular Dispute, each Member that is a party to such Dispute is referred to herein as a "Disputing Member." The provisions of this Article 10 shall be the exclusive method of resolving Disputes. 10.02 Negotiation to Resolve Disputes. If a Dispute arises, either Disputing Member may initiate the dispute-resolution procedures of this Article 10 by delivering a notice (a "Dispute Notice") to the other Disputing Members. Within 10 Days of delivery of a Dispute Notice, each Disputing Member shall designate a representative, and such representatives shall promptly meet (whether by phone or in person) in a good faith attempt to resolve the Dispute. If such representatives can resolve the Dispute, such resolution shall be reported in writing and shall be binding upon the Disputing Members. If such representatives are unable to resolve the Dispute within 30 Days following the delivery of the Dispute Notice (or such other period as such representatives may agree), or if a Disputing Member fails to appoint a representative within 10 Days of delivery following the delivery of the Dispute Notice, then any Disputing Member may take such Dispute to litigation. 27 28 ARTICLE 11 DISSOLUTION, WINDING-UP AND TERMINATION 11.01 Dissolution. The Company shall dissolve and its affairs shall be wound up on the first to occur of the following events (each a "Dissolution Event"): (a) the unanimous consent of the Members; or (b) entry of a decree of judicial dissolution of the Company under Section 18-802 of the Act. 11.02 Winding-Up and Termination. (a) On the occurrence of a Dissolution Event, the Management Committee shall select one Member to act as liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act. The costs of winding up shall be borne as a Company expense. Until final distribution, the liquidator shall continue to operate the Company properties with all of the power and authority of the Members. The steps to be accomplished by the liquidator are as follows: (i) as promptly as possible after dissolution and again after final winding up, the liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company's assets, liabilities, and operations through the last calendar day of the month in which the dissolution occurs or the final winding up is completed, as applicable; (ii) the liquidator shall discharge from Company funds all of the Indebtedness and other debts, liabilities and obligations of the Company (including all expenses incurred in winding up and any loans described in Section 4.03) or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine); and (iii) all remaining assets of the Company shall be distributed to the Members as follows: (A) the liquidator may sell any or all Company property, including to Members, and any resulting gain or loss from each sale shall be computed and allocated to the Capital Accounts of the Members in accordance with the provisions of Article 5; (B) with respect to all Company property that has not been sold, the fair market value of that property shall be determined and the Capital Accounts of the Members shall be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the Capital Accounts previously would be allocated among the Members if there were a taxable disposition of that property for the fair market value of that property on the date of distribution; and 28 29 (C) Company property (including cash) shall be distributed among the Members in accordance with Section 5.02; and those distributions shall be made by the end of the taxable year of the Company during which the liquidation of the Company occurs (or, if later, 90 Days after the date of the liquidation). (b) The distribution of cash or property to a Member in accordance with the provisions of this Section 11.02 constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Membership Interest and all the Company's property and constitutes a compromise to which all Members have consented pursuant to Section 18-502(b) of the Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds. 11.03 Deficit Capital Accounts. No Member will be required to pay to the Company, to any other Member or to any third party any deficit balance that may exist from time to time in the Member's Capital Account. 11.04 Certificate of Cancellation. On completion of the distribution of Company assets as provided herein, the Members (or such other Person or Persons as the Act may require or permit) shall file a certificate of cancellation with the Secretary of State of Delaware, cancel any other filings made pursuant to Section 2.05, and take such other actions as may be necessary to terminate the existence of the Company. Upon the filing of such certificate of cancellation, the existence of the Company shall terminate (and the Term shall end), except as may be otherwise provided by the Act or other applicable Law. ARTICLE 12 GENERAL PROVISIONS 12.01 Offset. Whenever the Company is to pay any sum to any Member, any amounts that Member owes the Company may be deducted from that sum before payment. 12.02 Notices. Except as expressly set forth to the contrary in this Agreement, all notices, requests or consents provided for or permitted to be given under this Agreement must be in writing and must be delivered to the recipient in person, by courier or mail or by facsimile or other electronic transmission. A notice, request or consent given under this Agreement is effective on receipt by the Member to receive it; provided, however, that a facsimile or other electronic transmission that is transmitted after the normal business hours of the recipient shall be deemed effective on the next Business Day. All notices, requests and consents to be sent to a Member must be sent to or made at the addresses given for that Member on Exhibit A or in the instrument described in Section 3.03(b)(iv)(A)(II) or 3.04, or such other address as that Member may specify by notice to the other Members. Any notice, request or consent to the Company must be given to all of the Members. Whenever any notice is required to be given by Law, the Delaware Certificate or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 12.03 Entire Agreement; Superseding Effect. This Agreement constitutes the entire agreement of the Members and their Affiliates relating to the Company and the transactions contemplated hereby and supersedes all provisions and concepts contained in all prior contracts or 29 30 agreements between the Members or any of their Affiliates with respect to the Company and the transactions contemplated hereby, whether oral or written. 12.04 Press Releases. Each Member agrees that it shall not (and shall cause its Affiliates not to), without the other Members' consent, issue a press release or have any contact with or respond to the news media with any sensitive or Confidential Information, except as required by securities or similar laws applicable to a Member and its Affiliates. Any press release by a Member or its Affiliates with respect to any sensitive or Confidential Information shall be subject to review and approval by the other Party, which approval shall not be unreasonably withheld. 12.05 Effect of Waiver or Consent. Except as otherwise provided in this Agreement, a waiver or consent, express or implied, to or of any breach or default by any Member in the performance by that Member of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Member of the same or any other obligations of that Member with respect to the Company. Except as otherwise provided in this Agreement, failure on the part of a Member to complain of any act of any Member or to declare any Member in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Member of its rights with respect to that default until the applicable statute-of-limitations period has run. 12.06 Amendment or Restatement. This Agreement or the Delaware Certificate may be amended or restated only by a written instrument executed (or, in the case of the Delaware Certificate, approved) by all of the Members. 12.07 Binding Effect. Subject to the restrictions on Dispositions set forth in this Agreement, this Agreement is binding on and shall inure to the benefit of the Members and their respective successors and permitted assigns. 12.08 Governing Law; Severability. This Agreement is governed by and shall be construed in accordance with the Law of the State of Delaware, excluding any conflict-of-laws rule or principle that might refer the governance or the construction of this Agreement to the Law of another jurisdiction. In the event of a direct conflict between the provisions of this Agreement and any mandatory, non-waivable provision of the Act, such provision of the Act shall control. NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Mataczynski --------------------------------- Name: Craig A. Mataczynski --------------------------------- Title: President --------------------------------- 30 31 Exhibit A
Members Membership Interest - ------- ------------------- NRG South Central Generating LLC 100%
EX-3.7 9 y57012ex3-7.txt CERTIFICATE OF FORMATION 1 Exhibit 3.7 State of Delaware PAGE 1 Office of the Secretary of State -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF "NRG STERLINGTON POWER LLC" AS RECEIVED AND FILED IN THIS OFFICE. THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED: CERTIFICATE OF FORMATION, FILED THE THIRTEENTH DAY OF NOVEMBER, A.D. 1998, AT 1 O'CLOCK P.M. CERTIFICATE OF AMENDMENT, CHANGING ITS NAME FROM "KOCH POWER LOUISIANA, L.L.C." TO "NRG STERLINGTON POWER LLC", FILED THE THIRTY-FIRST DAY OF AUGUST, A.D. 2000, AT 4:15 O'CLOCK P.M. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID LIMITED LIABILITY COMPANY. /s/ Edward J. Freel [SEAL] ------------------------------------- Edward J. Freel, Secretary of State 2965895 8100H AUTHENTICATION: 0736191 001520070 DATE: 10-16-00 2 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 01:00 PM 11/13/1998 981437628 - 2965895 CERTIFICATE OF FORMATION OF KOCH POWER LOUISIANA, L.L.C. 1. The name of the limited liability company is Koch Power Louisiana, L.L.C. 2. The address of its registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. This Certificate of Formation shall be effective upon its filing with the Secretary of State of the State of Delaware. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of Koch Power Louisiana, L.L.C. this 12th day of November, 1998. KOCH POWER LOUISIANA, L.L.C. /s/ H. Allan Caldwell -------------------------------- H. Allan Caldwell Authorized Person 3 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 04:15 PM 08/31/2000 001443735 - 2965895 CERTIFICATE OF AMENDMENT OF KOCH POWER LOUISIANA, L.L.C. 1. The name of the limited liability company is Koch Power Louisiana, L.L.C. 2. The Certificate of Formation of the limited liability company is hereby amended as follows: The name of the limited liability company is NRG Sterlington Power LLC. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment of Koch Power Louisiana, L.L.C. this 31st day of August, 2000 /s/ Craig A. Mataczynski ------------------------------ Craig A. Mataczynski Manager EX-3.8 10 y57012ex3-8.txt LIMITED LIABILITY COMPANY AGREEMENT 1 Exhibit 3.8 LIMITED LIABILITY COMPANY AGREEMENT OF NRG STERLINGTON POWER LLC A Delaware Limited Liability Company THIS LIMITED LIABILITY COMPANY AGREEMENT OF NRG STERLINGTON POWER LLC (this "Agreement"), dated as of August 17, 2000 (the "Effective Date"), is adopted, executed and agreed to, for good and valuable consideration, by the Members (as defined below). RECITALS 1. NRG South Central Generating LLC, a Delaware limited liability company ("South Central"), has agreed to become the Sole Member of the Company (as defined below). 2. South Central desires to enter into this Agreement to agree upon various matters relating to the Company. ARTICLE 1 DEFINITIONS 1.01 DEFINITIONS. As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Sections referred to below: ACT - the Delaware Limited Liability Company Act. AFFECTED MEMBER - Section 9.01. AFFILIATE - with respect to any Person, (a) each entity that such Person Controls; (b) each Person that Controls such Person, including, in the case of a Member, such Member's Parent; and (c) each entity that is under common Control with such Person, including, in the case of a Member, each entity that is Controlled by such Member's Parent. AGREEMENT - introductory paragraph. ALTERNATE REPRESENTATIVE - Section 6.02(a)(i). ASSIGNEE - any Person that acquires a Membership Interest or any portion thereof through a Disposition; provided, however, that, an Assignee shall have no right to be admitted to the Company as a Member except in accordance with Section 3.03(b)(iii). BANKRUPTCY OR BANKRUPT - with respect to any Person, that (a) such Person (i) makes a general assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceedings; (iv) files a petition or answer seeking for such Person a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Law; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or 2 acquiesces in the appointment of a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties; or (b) against such Person, a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Law has been commenced and 60 Days have expired without dismissal thereof or with respect to which, without such Person's consent or acquiescence, a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties has been appointed and 60 Days have expired without the appointment's having been vacated or stayed, or 60 Days have expired after the date of expiration of a stay, if the appointment has not previously been vacated. BUSINESS DAY - any day other than a Saturday, a Sunday, or a holiday on which national banking associations in Minnesota, Illinois or New York are not open for business. BUYOUT EVENT - Section 9.01. CAPITAL ACCOUNT - the account to be maintained by the Company for each Member in accordance with Section 4.06. CAPITAL CONTRIBUTION - with respect to any Member, the amount of money and the net agreed value of any property (other than money) contributed to the Company by the Member. Any reference in this Agreement to the Capital Contribution of a Member shall include a Capital Contribution of its predecessors in interest. CERTIFIED PUBLIC ACCOUNTANTS - a firm of independent public accountants selected from time to time by the Management Committee. CHANGE OF MEMBER CONTROL - with respect to any Member, an event (such as a Disposition of voting securities) that causes such Member to cease to be Controlled by such Member's Parent; provided, however, that an event that causes any of such Member's Parents to be Controlled by another Person shall not constitute a Change of Member Control. CLAIM - any and all judgments, claims, causes of action, demands, lawsuits, suits, proceedings, Governmental investigations or audits, losses, assessments, fines, penalties, administrative orders, obligations, costs, expenses, liabilities and damages (whether actual, consequential or punitive), including interest, penalties, reasonable attorney's fees, disbursements and costs of investigations, deficiencies, levies, duties and imposts. CODE - the Internal Revenue Code of 1986, as amended. COMPANY - NRG Sterlington Power LLC. CONFIDENTIAL INFORMATION - information and data (including all copies thereof) that is furnished or submitted by any of the Members or their Affiliates, whether oral (and if oral, reduced to writing and marked "confidential" within 10 days of disclosure), written, or electronic, on a confidential basis to the other Members or their Affiliates in connection with the Company, and any and all of the activities and studies performed pursuant to this Agreement and the resulting information and data obtained from those studies. Notwithstanding the foregoing, the term "Confidential Information" shall not include any information that: 2 3 (a) is in the public domain at the time of its disclosure or thereafter (other than as a result of a disclosure directly or indirectly by a Member or its Affiliates in contravention of this Agreement); (b) as to any Member, was in the possession of such Member or its Affiliates prior to the execution of this Agreement; or (c) is engineering information (for example, heat balance and capital cost information) that has been independently acquired or developed by a Member or its Affiliates without violating any of the obligations of such Member or its Affiliates under this Agreement. CONTROL - the possession, directly or indirectly of either of the following: (a) (i) in the case of a corporation, more than 50% of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, more than 50% of the beneficial interest therein; and (iv) in the case of any other entity, more than 50% of the economic or beneficial interest therein; or (b) in the case of any entity, the power or authority, through ownership of voting securities, by contract or otherwise, to exercise a controlling influence over the management of the entity. DAY - a calendar day; provided, however, that if any period of Days referred to in this Agreement shall end on a Day that is not a Business Day, then the expiration of such period shall be automatically extended until the end of the first succeeding Business Day. DEFAULT - the failure of a Member to comply in any material respect with any of its material agreements, covenants or obligations under this Agreement; the failure of any representation or warranty made by a Member in this Agreement to have been true and correct in all material respects at the time it was made; or the failure of a Member, without justified cause, to take any action materially necessary for the progress of the business of South Central consistent with or required by the terms of this Agreement (including participating in meetings or decisions). DEFAULT RATE - a rate per annum equal to the lesser of (a) a varying rate per annum equal to the sum of (i) the prime rate as published in The Wall Street Journal, with adjustments in that varying rate to be made on the same date as any change in that rate is so published, plus (ii) 3% per annum, and (b) the maximum rate permitted by Law. DELAWARE CERTIFICATE - Section 2.01. DISPOSE, DISPOSING OR DISPOSITION - with respect to any asset (including a Membership Interest or any portion thereof), a sale, assignment, transfer, conveyance, gift, exchange or other disposition (other than the pledge or assignment to any creditor of the Company or any collateral agent for such creditor, of any Membership Interest as security 3 4 for the indebtedness to such creditor) of such asset, whether such disposition be voluntary, involuntary or by operation of Law, including the following: (a) in the case of an asset owned by a natural person, a transfer of such asset upon the death of its owner, whether by will, intestate succession or otherwise; (b) in the case of an asset owned by an entity, (i) a merger or consolidation of such entity (other than where such entity is the survivor thereof), (ii) a conversion of such entity into another type of entity, or (iii) a distribution of such asset, including in connection with the dissolution, liquidation, winding-up or termination of such entity (unless, in the case of dissolution, such entity's business is continued without the commencement of liquidation or winding-up); and (c) a disposition in connection with, or in lieu of, a foreclosure of an Encumbrance; but such terms shall not include the creation of an Encumbrance. DISPUTE - Section 10.01. DISPUTE NOTICE - Section 10.02. DISPUTING MEMBER - Section 10.01. DISSOLUTION EVENT - Section 11.01(a). EFFECTIVE DATE - introductory paragraph. ENCUMBER, ENCUMBERING, OR ENCUMBRANCE - the creation of a security interest, lien, pledge, mortgage or other encumbrance, whether such encumbrance be voluntary, involuntary or by operation of Law; provided, however, that the pledge or assignment to any creditor of the Company or any collateral agent for such creditor, of any Membership Interest as security for the indebtedness to such creditor shall not be deemed to be an Encumbrance thereof. FAIR MARKET VALUE - Section 9.03. GOVERNMENTAL AUTHORITY (OR GOVERNMENTAL) - a federal, state, local or foreign governmental authority; a state, province, commonwealth, territory or district thereof; a county or parish; a city, town, township, village or other municipality; a district, ward or other subdivision of any of the foregoing; any executive, legislative or other governing body of any of the foregoing; any agency, authority, board, department, system, service, office, commission, committee, council or other administrative body of any of the foregoing; any court or other judicial body; and any officer, official or other representative of any of the foregoing. INCLUDING - including, without limitation. INDEPENDENT MEMBER - means a natural person who is not an officer, director, agent, employee or representative of the Company, NRG, South Central, or any Affiliate of any of the foregoing. LAW - any applicable constitutional provision, statute, act, code (including the Code), law, regulation, rule, ordinance, order, decree, ruling, proclamation, resolution, judgment, 4 5 decision, declaration, or interpretative or advisory opinion or letter of a Governmental Authority having valid jurisdiction. LENDING MEMBER - Section 4.03(a)(ii). LOAN DOCUMENTS - any and all documents relating to money borrowed by the Company or South Central including money borrowed through public or private sales of its debt securities, as the same may be amended or restated from time to time. MANAGEMENT COMMITTEE - Section 6.02. MEMBER - any Person executing this Agreement as of the date of this Agreement as a member or hereafter admitted to the Company as a member as provided in this Agreement, but such term does not include any Person who has ceased to be a member in the Company. MEMBERSHIP INTEREST - with respect to any Member, (a) that Member's status as a Member; (b) that Member's share of the income, gain, loss, deduction and credits of, and the right to receive distributions from, the Company; (c) all other rights, benefits and privileges enjoyed by that Member (under the Act, this Agreement, or otherwise) in its capacity as a Member, including that Member's rights to vote, consent and approve and otherwise to participate in the management of the Company, including through the Management Committee; and (d) all obligations, duties and liabilities imposed on that Member (under the Act, this Agreement or otherwise) in its capacity as a Member, including any obligations to make Capital Contributions. NON-CONTRIBUTING MEMBER - Section 4.03(a). OFFICER - any Person designated as an officer of the Company as provided in Section 6.02(j), but such term does not include any Person who has ceased to be an officer of the Company. OUTSIDE ACTIVITIES - Section 6.04. PARENT - if applicable to a Member, the company or companies set forth opposite the name of such Member on Exhibit A. PERMITS - all permits, licenses, approvals or other actions of Governmental Authorities that are required for the ownership and operation of the businesses of South Central, as contemplated by this Agreement. PERSON - the meaning assigned that term in Section 18-101(11) of the Act and also includes a Governmental Authority and any other entity. PURCHASE PRICE - Section 9.03. REPRESENTATIVE - Section 6.02(a)(i). SECURITIES ACT - the Securities Act of 1933. 5 6 SHARING RATIO - subject in each case to adjustments in accordance with this Agreement or in connection with Dispositions of Membership Interests, (a) in the case of a Member executing this Agreement as of the date of this Agreement or a Person acquiring such Member's Membership Interest, the percentage specified for that Member as its Sharing Ratio on Exhibit A, and (b) in the case of Membership Interest issued pursuant to Section 3.04, the Sharing Ratio established pursuant thereto; provided, however, that the total of all Sharing Ratios shall always equal 100%. SOLE DISCRETION - a Member's sole and absolute discretion, with or without cause, and subject to whatever limitations or qualifications the Member may impose. TAX MATTERS MEMBER - Section 7.03(a). TERM - Section 2.06. TERMINATED MEMBER - Section 9.05. TREASURY REGULATIONS - the regulations (including temporary regulations) promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code. All references herein to sections of the Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar or substitute, temporary or final Treasury Regulations. UNIFORM COMMERCIAL CODE - means the Uniform Commercial Code as in effect from time to time in the State of New York. Other terms defined herein have the meanings so given them. 1.02 CONSTRUCTION. Unless the context requires otherwise: (a) the gender (or lack of gender) of all words used in this Agreement includes the masculine, feminine, and neuter; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (d) references to Laws refer to such Laws as they may be amended from time to time, and references to particular provisions of a Law include any corresponding provisions of any succeeding Law; and (e) references to money refer to legal currency of the United States of America. ARTICLE 2 ORGANIZATION 2.01 FORMATION. The Company was organized as Koch Power Louisiana, L.L.C. by the filing of a Certificate of Formation, dated November 13, 1998 (the "Delaware Certificate"), with the Secretary of State of Delaware pursuant to the Act, and its name was changed to NRG Sterlington Power LLC as of the Effective Date. 2.02 NAME. The name of the Company is "NRG Sterlington Power LLC" and all Company business must be conducted in that name or such other names that comply with Law as the Management Committee may select. 6 7 2.03 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE IN THE UNITED STATES; OTHER OFFICES. The registered office of the Company required by the Act to be maintained in the State of Delaware shall be the office (which need not be a place of business of the Company) as the Management Committee may designate in the manner provided by Law. The registered agent of the Company in the State of Delaware shall be such Person or Persons as the Management Committee may designate in the manner provided by Law. The principal office of the Company in the United States shall be at such place as the Management Committee may designate, which need not be in the State of Delaware, and the Company shall maintain records there or such other place as the Management Committee shall designate and shall keep the street address of such principal office at the registered office of the Company in the State of Delaware. The Company may have such other offices as the Management Committee may designate. 2.04 PURPOSE. The purpose of the Company shall be the ownership and operation of power generation facilities. 2.05 FOREIGN QUALIFICATION. Prior to the Company's conducting business in any jurisdiction other than Delaware, the Management Committee shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Management Committee, with all requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. At the request of the Management Committee, each Member shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to qualify, continue, and terminate the Company as a foreign limited liability company in all such jurisdictions in which the Company may conduct business. 2.06 TERM. The period of existence of the Company (the "Term") commenced on the Effective Date and shall end at such time as a certificate of cancellation is filed with the Secretary of State of Delaware in accordance with Section 11.04. Such period may be extended from time to time by Members holding a majority of the Membership Interests. 2.07 NO STATE-LAW PARTNERSHIP. The Members intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member, for any purposes other than federal and state tax purposes, and this Agreement may not be construed to suggest otherwise. 2.08 CERTIFICATES OF MEMBERSHIP INTEREST; APPLICABILITY OF ARTICLE 8 OF UCC. All Membership Interests shall be represented by certificates in such form as the Management Committee shall from time to time approve, shall be recorded in a register thereof maintained by the Company, and shall be subject to such rules for the issuance thereof as the Management Committee may from time to time determine. Membership Interests shall be subject to the provisions of Article 8 of the Uniform Commercial Code as may be applicable from time to time. ARTICLE 3 MEMBERSHIP; DISPOSITIONS OF INTERESTS 3.01 INITIAL MEMBERS. The initial Member of the Company is South Central, which is admitted to the Company as a Member effective contemporaneously with the execution by it of this Agreement. 7 8 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Member hereby represents, warrants and covenants to the Company and each other Member that the following statements are true and correct as of the Effective Date and shall be true and correct at all times that such Member is a Member: (a) that Member is duly incorporated, organized or formed (as applicable), validly existing, and (if applicable) in good standing under the Law of the jurisdiction of its incorporation, organization or formation; if required by applicable Law, that Member is duly qualified and in good standing in the jurisdiction of its principal place of business, if different from its jurisdiction of incorporation, organization or formation; and that Member has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all necessary actions by the board of directors, shareholders, members, partners, trustees, beneficiaries, or other applicable Persons necessary for the due authorization, execution, delivery, and performance of this Agreement by that Member have been duly taken; (b) that Member has duly executed and delivered this Agreement and the other documents contemplated herein, and they constitute the legal, valid and binding obligation of that Member enforceable against it in accordance with their terms (except as may be limited by bankruptcy, insolvency or similar Laws of general application and by the effect of general principles of equity, regardless of whether considered at law or in equity); and (c) that Member's authorization, execution, delivery, and performance of this Agreement does not and will not (i) conflict with, or result in a breach, default or violation of, (A) the organizational documents of such Member, (B) any contract or agreement to which that Member is a party or is otherwise subject, or (C) any Law, order, judgment, decree, writ, injunction or arbitral award to which that Member is subject; or (ii) require any consent, approval or authorization from, filing or registration with, or notice to, any Governmental Authority or other Person, unless such requirement has already been satisfied. 3.03 DISPOSITIONS AND ENCUMBRANCES OF MEMBERSHIP INTERESTS. (a) GENERAL RESTRICTION. A Member may not Dispose of or Encumber all or any portion of its Membership Interest except in strict accordance with this Section 3.03. (References in this Section 3.03 to Dispositions or Encumbrances of a "Membership Interest" shall also refer to Dispositions or Encumbrances of a portion of a Membership Interest.) Any attempted Disposition or Encumbrance of a Membership Interest, other than in strict accordance with this Section 3.03, shall be, and is hereby declared, null and void ab initio. The Members agree that a breach of the provisions of this Section 3.03 may cause irreparable injury to the Company and to the other Members for which monetary damages (or other remedy at law) are inadequate in view of (i) the complexities and uncertainties in measuring the actual damages that would be sustained by reason of the failure of a Member to comply with such provision and (ii) the uniqueness of the Company business and the relationship among the Members. Accordingly, the Members agree that the provisions of this Section 3.03 may be enforced by specific performance. 8 9 (b) DISPOSITIONS OF MEMBERSHIP INTERESTS. (i) GENERAL RESTRICTION. A Member may not Dispose of all or any portion of its Membership Interest except by complying with all of the following requirements: (A) such Member must receive the unanimous consent of the non-Disposing Members, which consent shall not be unreasonably withheld by each of such other Members; provided, however, that such consent need not be obtained if (I) the proposed Assignee is a Wholly-Owned Affiliate of the Disposing Member and (II) such proposed Assignee demonstrates to the reasonable satisfaction of the other Members that it has the ability to meet the financial and contractual commitments and other obligations of the Disposing Member; and (B) such Member must comply with the requirements of Section 3.03(b)(iii) and, if the Assignee is to be admitted as a Member, Section 3.03(b)(ii). (ii) ADMISSION OF ASSIGNEE AS A MEMBER. An Assignee has the right to be admitted to the Company as a Member, with the Membership Interest (and attendant Sharing Ratio) so transferred to such Assignee, only if (A) the Disposing Member making the Disposition has granted the Assignee either (I) the Disposing Member's entire Membership Interest or (II) the express right to be so admitted; and (B) such Disposition is effected in strict compliance with this Section 3.03. (iii) REQUIREMENTS APPLICABLE TO ALL DISPOSITIONS AND ADMISSIONS. In addition to the requirements set forth in Sections 3.03(b)(i) and 3.03(b)(ii), any Disposition of a Membership Interest and any admission of an Assignee as a Member shall also be subject to the following requirements, and such Disposition (and admission, if applicable) shall not be effective unless such requirements are complied with; provided, however, that the Management Committee, in its sole and absolute discretion, may waive any of the following requirements: (A) DISPOSITION DOCUMENTS. The following documents must be delivered to the Management Committee and must be satisfactory, in form and substance, to the Management Committee: (I) DISPOSITION INSTRUMENT. A copy of the instrument pursuant to which the Disposition is effected. (II) RATIFICATION OF THIS AGREEMENT. An instrument, executed by the Disposing Member and its Assignee, containing the following information and agreements, to the extent they are not contained in the instrument described in Section 3.03(b)(iii)(A)(I): (1) the notice address of the Assignee; (2) if applicable, the Parent of the Assignee; (3) the Sharing Ratios after the Disposition of the Disposing Member and its Assignee (which 9 10 together must total the Sharing Ratio of the Disposing Member before the Disposition); (4) the Assignee's ratification of this Agreement and agreement to be bound by it, and its confirmation that the representations and warranties in Section 3.02 are true and correct with respect to it; (5) the Assignee's ratification of all of the Company's Agreements and agreement by be bound by them, to the same extent that the Disposing Member was bound by them prior to the Disposition; and (6) representations and warranties by the Disposing Member and its Assignee (aa) that the Disposition and admission is being made in accordance with all applicable Laws, and (bb) that the matters set forth in Sections 3.03(b)(iii)(A)(III) and (IV) are true and correct. (III) SECURITIES LAW OPINION. Unless the Membership Interest subject to the Disposition is registered under the Securities Act and any applicable state securities Law, or the proposed Assignee is a Wholly-Owned Affiliate as described in 3.03(b)(i)(A) above, a favorable opinion of the Company's legal counsel, or of other legal counsel acceptable to the Management Committee, to the effect that the Disposition and admission is being made pursuant to a valid exemption from registration under those Laws and in accordance with those Laws. (IV) TAX OPINION. A favorable opinion of the Certified Public Accountants, or of other certified public accountants acceptable to the Management Committee, to the effect that the Disposition would not result in the Company's being considered to have terminated within the meaning of Code Section 708. (B) PAYMENT OF EXPENSES. The Disposing Member and its Assignee shall pay, or reimburse the Company for, all reasonable costs and expenses incurred by the Company in connection with the Disposition and admission, including the legal fees incurred in connection with the legal opinions referred to in Sections 3.03(b)(iii)(A)(III) and (IV), on or before the tenth Day after the receipt by that Person of the Company's invoice for the amount due. (C) NO RELEASE. No Disposition of a Membership Interest shall effect a release of the Disposing Member from any liabilities to the Company or the other Members arising from events occurring prior to the Disposition. (iv) CHANGE OF MEMBER CONTROL. A Change of Member Control must also comply with the requirements of this Section 3.03. (c) ENCUMBRANCES OF MEMBERSHIP INTEREST. A Member may Encumber its Membership Interest if (i) the instrument creating such Encumbrance provides that any foreclosure of such Encumbrance (or Disposition in lieu of such foreclosure) must comply 10 11 with the requirements of Section 3.03(b), and (ii) any such Encumbrance is not prohibited by the Loan Documents. (d) RIGHT OF FIRST REFUSAL. Except as otherwise expressly permitted by this Agreement, this Section 3.03(d) shall apply to any proposed voluntary Disposition of a Membership Interest to any purchaser (other than a majority owned Affiliate of the disposing party) for consideration in the form of cash or promissory notes or other obligations to pay sums certain. The Member proposing to make such a Distribution shall provide written notice (a "Disposition Notice") to the remaining Members at least 90 days prior to the proposed Disposition. The Disposition Notice must set forth the identity of the proposed transferee, the sale price, and all other material terms and conditions of the proposed Disposition. In the Case of a Change of member Control, the Disposition notice must set forth the portion, if less than 100%, of the total purchase price that is applicable to such Member's Membership Interest. Upon receipt of a Disposition Notice, the remaining Members shall have the option for a period of 30 days to purchase all, but not less than all, of such Membership Interest. Such Membership Interest shall be allocated to the Members exercising their option under this Section 3.03(d) pro rata in accordance with their Membership Interests. The purchase pursuant to the exercise of this option shall be at the price and pursuant to the terms and conditions of the proposed Disposition. If no Member exercises such option, the Member proposing such Disposition shall be free, for a period of 60 days after the expiration of the remaining Members' options, to Dispose of the Membership Interests that were the subject of the Disposition Notice, but only to the party, and for the price and on the terms and conditions, set forth in the Disposition Notice. If the proposed disposition does not occur within 60 days after the expiration of the remaining Members' options, the Membership Interest may not be Disposed of pursuant to this Section 30.3(d) unless the Member again complies with the terms of this Agreement. (e) RIGHTS IN MEMBERSHIP INTERESTS PLEDGED AS COLLATERAL. Any other provision of this Agreement to the contrary notwithstanding, by executing and delivering this Agreement, each Member shall be deemed to have consented to (i) the pledge, assignment, hypothecation and transfer to any creditor of the Company or South Central or its agents, successors or assigns of, and the grant to such creditor or other Person of a lien on and security interest in, as security for the indebtedness of the Company or South Central to such creditor, all of such Member's right, title and interest in, to and under its Membership Interest and any other collateral securing such indebtedness, (ii) the exercise by any such creditor or other Person of the rights and remedies under any security document related to such collateral, including, without limitation, the right to exercise the voting and consensual rights and other powers of each Member to the extent provided in any such security document, and the right to foreclose upon or exercise a power of sale with respect to the Membership Interest of each Member and any other collateral subject to such security documents and to cause the agent or designee of such creditor or any third party purchaser of such Membership Interest to become an additional or substitute Member, and (iii) all other provisions of the loan and security documents relating to such indebtedness or collateral, the issuance of new or substituted Membership Interests, or the ownership of Membership Interests. 3.04 CREATION OF ADDITIONAL MEMBERSHIP INTEREST. Additional Membership Interests may be created and issued to existing Members or to other Persons, and such other Persons may be admitted to the Company as Members, with the unanimous consent of the existing Members, on such 11 12 terms and conditions as the existing Members may unanimously determine at the time of admission. The terms of admission or issuance must specify the Sharing Ratios applicable thereto and may provide for the creation of different classes or groups of Members having different rights, powers, and duties. The Management Committee may reflect the creation of any new class or group in an amendment to this Agreement indicating the different rights, powers, and duties. Any such admission is effective only after the new Member has executed and delivered to the Members an instrument containing the notice address of the new Member, the Assignee's ratification of this Agreement and agreement to be bound by it, and its confirmation that the representations and warranties in Section 3.02 are true and correct with respect to it. The provisions of this Section 3.04 shall not apply to Dispositions of Membership Interests or admissions of Assignees in connection therewith, such matters being governed by Section 3.03. 3.05 ACCESS TO INFORMATION. Each Member shall be entitled to receive any information that it may request concerning the Company; provided, however, that this Section 3.05 shall not obligate the Company or the Management Committee to create any information that does not already exist at the time of such request (other than to convert existing information from one medium to another, such as providing a printout of information that is stored in a computer database). Each Member shall also have the right, upon reasonable notice, and at all reasonable times during usual business hours to inspect the properties of the Company and to audit, examine and make copies of the books of account and other records of the Company. Such right may be exercised through any agent or employee of such Member designated in writing by it or by an independent public accountant, engineer, attorney or other consultant so designated. The Member making the request shall bear all costs and expenses incurred in any inspection, examination or audit made on such Member's behalf. Confidential Information obtained pursuant to this Section 3.05 shall be subject to the provisions of Section 3.06. 3.06 CONFIDENTIAL INFORMATION. (a) Except as permitted by Section 3.06(b), (i) each Member shall keep confidential all Confidential Information and shall not disclose any Confidential Information to any Person, including any of its Affiliates, and (ii) each Member shall use the Confidential Information only in connection with the Company. (b) Notwithstanding Section 3.06(a), but subject to the other provisions of this Section 3.06, a Member may make the following disclosures and uses of Confidential Information: (i) disclosures to another Member in connection with the Company; (ii) disclosures and uses that are approved by the Management Committee; (iii) disclosures to an Affiliate of such Member on a "need to know" basis in connection with the Company, if such Affiliate has agreed to abide by the terms of this Section 3.06; 12 13 (iv) disclosures to a Person that is not a Member or an Affiliate of a Member, if such Person has been retained to provide services by the Member in connection with the Company or such Member's Membership Interest and has agreed to abide by the terms of this Section 3.06; (v) disclosures to lenders, potential lenders or other Persons providing financing to the Company and potential purchasers of equity interests in the Company, so long as such Persons have agreed to abide by the terms of this Section 3.06; (vi) disclosures to any independent system operator or its consultants and representatives in connection with the conduct of the businesses of South Central; (vii) disclosures to Governmental Authorities that are necessary to operate the businesses of South Central; (viii) disclosures that a Member is legally compelled to make by deposition, interrogatory, request for documents, subpoena, civil investigative demand, order of a court of competent jurisdiction, or similar process, or otherwise by Law or securities exchange requirements; provided, however, that, prior to any such disclosure, such Member shall, to the extent legally permissible: (A) provide the Management Committee with prompt notice of such requirements so that one or more of the Members may seek a protective order or other appropriate remedy or waive compliance with the terms of this Section 3.06(b)(vii); (B) consult with the Management Committee on the advisability of taking steps to resist or narrow such disclosure; and (C) cooperate with the Management Committee and with the other Members in any attempt one or more of them may make to obtain a protective order or other appropriate remedy or assurance that confidential treatment will be afforded the Confidential Information; and in the event such protective order or other remedy is not obtained, or the other Members waive compliance with the provisions hereof, such Member agrees (I) to furnish only that portion of the Confidential Information that the other Members are advised by counsel to the disclosing Member is legally required and (II) to exercise all reasonable efforts to obtain assurance that confidential treatment will be accorded such Confidential Information. (c) Each Member shall take such precautionary measures as may be required to ensure (and such Member shall be responsible for) compliance with this Section 3.06 by any of its Affiliates, and its and their directors, officers, employees and agents, and other Persons to which it may disclose Confidential Information in accordance with this Section 3.06. (d) A Terminated Member shall promptly destroy (and provide a certificate of destruction to the Company with respect to) or return to the Company, as directed by the 13 14 Management Committee, all Confidential Information in its possession. Notwithstanding the immediately-preceding sentence, a Terminated Member may, subject to the other provisions of this Section 3.06, retain and use Confidential Information for the limited purpose of preparing such Terminated Member's tax returns and defending audits, investigations and proceedings relating thereto. (e) The Members agree that no adequate remedy at law exists for a breach or threatened breach of any of the provisions of this Section 3.06, the continuation of which unremedied will cause the Company and the other Members to suffer irreparable harm. Accordingly, the Members agree that the Company and the other Members shall be entitled, in addition to other remedies that may be available to them, to immediate injunctive relief from any breach of any of the provisions of this Section 3.06 and to specific performance of their rights hereunder, as well as to any other remedies available at law or in equity. (f) The obligations of the Members under this Section 3.06 shall terminate on the third anniversary of the end of the Term. 3.07 LIABILITY TO THIRD PARTIES. No Member shall be liable for the debts, obligations or liabilities of the Company. 3.08 WITHDRAWAL. A Member may not withdraw or resign from the Company. ARTICLE 4 CAPITAL CONTRIBUTIONS 4.01 INITIAL CAPITAL CONTRIBUTIONS. Contemporaneously with the execution by such Member of this Agreement, each Member shall make the Capital Contributions described for that Member in Exhibit A. 4.02 SUBSEQUENT CAPITAL CONTRIBUTIONS. Without creating any rights in favor of any third party, each Member shall contribute to the Company, in cash, on or before the date specified as hereinafter described, that Member's Sharing Ratio of all monies that in the unanimous judgment of the Management Committee are necessary to enable the Company to acquire additional businesses for South Central and to cause the existing businesses of South Central to be properly operated and maintained and to pay and perform their respective costs, expenses, obligations, and liabilities. The Management Committee shall notify each other Member of the need for Capital Contributions pursuant to this Section 4.02 when appropriate, which notice must include a statement in reasonable detail of the proposed uses of the Capital Contributions and a date (which date may be no earlier than the fifth Business Day following each Member's receipt of its notice) before which the Capital Contributions must be made. Notices for Capital Contributions must be made to all Members in accordance with their Sharing Ratios. 4.03 FAILURE TO CONTRIBUTE. (a) If a Member does not contribute, within 10 Days of the date required, all or any portion of a Capital Contribution that Member is required to make as provided in this Agreement, the other Members may cause the Company to exercise, on notice to that Member (the "Non-Contributing Member"), one or more of the following remedies: (i) taking such action (including court proceedings) as the other Members may deem appropriate to obtain payment by the Non-Contributing Member 14 15 of the portion of the Non-Contributing Member's Capital Contribution that is in default, together with interest thereon at the Default Rate from the date that the Capital Contribution was due until the date that it is made, all at the cost and expense of the Non-Contributing Member; (ii) permitting the other Members in proportion to their Sharing Ratios or in such other percentages as they may agree (the "Lending Member," whether one or more), to advance the portion of the Non-Contributing Member's Capital Contribution that is in default, with the following results: (A) the sum advanced constitutes a loan from the Lending Member to the Non-Contributing Member and a Capital Contribution of that sum to the Company by the Non-Contributing Member pursuant to the applicable provisions of this Agreement, (B) the principal balance of the loan and all accrued unpaid interest thereon is due and payable in whole on the tenth Day after written demand therefor by the Lending Member to the Non-Contributing Member, (C) the amount lent bears interest at the Default Rate from the Day that the advance is deemed made until the date that the loan, together with all interest accrued on it, is repaid to the Lending Member, (D) all distributions from the Company that otherwise would be made to the Non-Contributing Member (whether before or after dissolution of the Company) instead shall be paid to the Lending Member until the loan and all interest accrued on it have been paid in full to the Lending Member (with payments being applied first to accrued and unpaid interest and then to principal), (E) the payment of the loan and interest accrued on it is secured by a security interest in the Non-Contributing Member's Membership Interest, as more fully set forth in Section 4.03(b), and (F) the Lending Member has the right, in addition to the other rights and remedies granted to it pursuant to this Agreement or available to it at Law or in equity, to take any action (including court proceedings) that the Lending Member may deem appropriate to obtain payment by the Non-Contributing Member of the loan and all accrued and unpaid interest on it, at the cost and expense of the Non-Contributing Member; (iii) exercising the rights of a secured party under the Uniform Commercial Code, as more fully set forth in Section 4.03(b); or (iv) exercising any other rights and remedies available at Law or in equity. 15 16 In addition, the failure to make such contributions shall constitute a Default by the Non-Contributing Member, and the other Members shall have the rights set forth in Article 9 with respect to such Default. (b) Each Member grants to the Company, and to each Lending Member with respect to any loans made by the Lending Member to that Member as a Non-Contributing Member pursuant to Section 4.03(a)(ii), as security, equally and ratably, for the payment of all Capital Contributions that Member has agreed to make and the payment of all loans and interest accrued on them made by Lending Members to that Member as a Non-Contributing Member pursuant to Section 4.03(a)(ii), a security interest in and a general lien on its Membership Rights and the proceeds thereof, all under the Uniform Commercial Code. On any default in the payment of a Capital Contribution or in the payment of such a loan or interest accrued on it, the Company or the Lending Member, as applicable, is entitled to all the rights and remedies of a secured party under the Uniform Commercial Code with respect to the security interest granted in this Section 4.03(b). Each Member shall execute and deliver to the Company and the other Members all financing statements and other instruments that the Lending Member may request to effectuate and carry out the preceding provisions of this Section 4.03(b). At the option of a Lending Member, this Agreement or a carbon, photographic, or other copy hereof may serve as a financing statement. 4.04 LOANS. If the Company does not have sufficient cash to pay its obligations, any Member(s) that may agree to do so with the consent of the Management Committee may advance all or part of the needed funds to or on behalf of the Company. An advance described in this Section 4.04 constitutes a loan from the Member to the Company, bears interest at a rate determined by the Management Committee from the date of the advance until the date of payment, and is not a Capital Contribution. 4.05 RETURN OF CONTRIBUTIONS. Except as expressly provided herein, a Member is not entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is not a liability of the Company or of any Member. A Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return any Member's Capital Contributions. 4.06 CAPITAL ACCOUNTS. A Capital Account shall be established and maintained for each Member. Each Member's Capital Account shall be increased by (a) the amount of money contributed by that Member to the Company, (b) the fair market value of property contributed by that Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code), and (c) allocations to that Member of Company income and gain (or items thereof), including income and gain exempt from tax and income and gain described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding income and gain described in Treasury Regulation Section 1.704-1(b)(4)(i), and shall be decreased by (d) the amount of money distributed to that Member by the Company, (e) the fair market value of property distributed to that Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code), (f) allocations to that Member of expenditures of the Company described (or treated as described) in Section 705(a)(2)(B) of the Code, and (g) allocations of Company loss and deduction (or items thereof), including loss and deduction described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding items described in (f) above and loss or deduction described in Treasury Regulation Section 1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii). 16 17 The Members' Capital Accounts shall also be maintained and adjusted as permitted by the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f) and as required by the other provisions of Treasury Regulation Sections 1.704-1(b)(2)(iv) and 1.704-1(b)(4), including adjustments to reflect the allocations to the Members of depreciation, depletion, amortization, and gain or loss as computed for book purposes rather than the allocation of the corresponding items as computed for tax purposes, as required by Treasury Regulation Section 1.704-1(b)(2)(iv)(g). Thus, the Members' Capital Accounts shall be increased or decreased to reflect a revaluation of the Company's property on its books based on the fair market value of the Company's property on the date of adjustment immediately prior to (A) the contribution of money or other property to the Company by a new or existing Member as consideration for a Membership Interest or an increased Sharing Ratio, (B) the distribution of money or other property by the Company to a Member as consideration for a Membership Interest, or (C) the liquidation of the Company. A Member that has more than one Membership Interest shall have a single Capital Account that reflects all such Membership Interests, regardless of the class of Membership Interests owned by such Member and regardless of the time or manner in which such Membership Interests were acquired. Upon the Disposition of all or a portion of a Membership Interest, the Capital Account of the Disposing Member that is attributable to such Membership Interest shall carry over to the Assignee in accordance with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(l). ARTICLE 5 DISTRIBUTIONS AND ALLOCATIONS 5.01 DISTRIBUTIONS OR BILLINGS. Distributions to the Members shall be made only to all simultaneously in proportion to their respective Sharing Ratios (at the time the amounts of such distributions are determined), and distributions shall be made only in such aggregate amounts and at such times as shall be determined by the Management Committee and as are permitted by the Loan Documents. When so permitted, the Management Committee shall endeavor to distribute to the Members, on or before the last day of each calendar month, or more often if approved by the Management Committee, the estimated amount of any cash available for such calendar month (net of any adjustments, if any, made to reflect the actual cash available for the preceding calendar month). 5.02 DISTRIBUTIONS ON DISSOLUTION AND WINDING UP. Upon the dissolution and winding up of the Company, after adjusting the Capital Accounts for all distributions made under Section 5.01 and all allocations under Article 5, all available proceeds distributable to the Members as determined under Section 11.02 shall be distributed to all of the Members to the extent of the Members' positive Capital Account balances. 5.03 ALLOCATIONS. (a) For purposes of maintaining the Capital Accounts pursuant to Section 4.06 and for income tax purposes, except as provided in Section 5.03(b), each item of income, gain, loss, deduction and credit of the Company shall be allocated to the Members in accordance with their Sharing Ratios. (b) For income tax purposes, income, gain, loss, and deduction with respect to property contributed to the Company by a Member or revalued pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall be allocated among the Members in a manner that takes into account the variation between the adjusted tax basis of such property and its book value, as required by Section 704(c) of the Code and Treasury Regulation Section 17 18 1.704-1(b)(4)(i), using the remedial allocation method permitted by Treasury Regulation Section 1.704-3(d). 5.04 VARYING INTERESTS. All items of income, gain, loss, deduction or credit shall be allocated, and all distributions shall be made, to the Persons shown on the records of the Company to have been Members as of the last calendar day of the period for which the allocation or distribution is to be made. Notwithstanding the foregoing, if during any taxable year there is a change in any Member's Sharing Ratio, the Members agree that their allocable shares of such items for the taxable year shall be determined on any method determined by the Management Committee to be permissible under Code Section 706 and the related Treasury Regulations to take account of the Members' varying Sharing Ratios. ARTICLE 6 MANAGEMENT 6.01 MANAGEMENT BY MEMBERS. Except as described below in Sections 6.03 and 6.05, the management of the Company is fully vested in the Members, acting exclusively in their membership capacities. To facilitate the orderly and efficient management of the Company, the Members shall act (a) collectively as a "committee of the whole" pursuant to Section 6.02, or (b) through the delegation from time to time of certain responsibility and authority to particular Members pursuant to Section 6.03. No Member has the right, power or authority to act for or on behalf of the Company, to do any act that would be binding on the Company, or to incur any expenditures on behalf of the Company, except in accordance with the immediately preceding sentence. Decisions or actions taken in accordance with the provisions of this Agreement shall constitute decisions or actions by the Company and shall be binding on each Member, Representative, Officer and employee of the Company. 6.02 MANAGEMENT COMMITTEE. All Members shall act collectively through meetings as a "committee of the whole" which is hereby named the "Management Committee." The Management Committee shall conduct its affairs in accordance with the following provisions and the other provisions of this Agreement: (a) REPRESENTATIVES. (i) DESIGNATION. To facilitate the orderly and efficient conduct of Management Committee meetings, each Member shall notify the other Members, from time to time, of the identity of two of its officers, employees or agents who will represent it at such meetings (each a "Representative"). In addition, each Member may (but shall have not obligation to) notify the other Members, from time to time, of the identity of other officers, employees or agents who will represent it at any meeting that the Member's Representatives are unable to attend (each an "Alternate Representative"). (The term "Representative" shall also refer to any Alternate Representative that is actually performing the duties of the applicable Representative.). The initial Representatives of each Member are set forth on Exhibit A. A Member may designate different Representatives or Alternate Representatives for any meeting of the Management Committee by notifying each of the other Members at least three Business Days prior to the scheduled date for such meeting; provided, however, that if giving such advance notice is not feasible, then 18 19 such new Representatives or Alternate Representatives shall present written evidence of their authority at the commencement of such meeting. (ii) AUTHORITY. Each Representative shall have the full authority to act on behalf of the Member that designated such Representative; the action of a Representative at a meeting (or through a written consent) of the Management Committee shall bind the Member that designated such Representative; and the other Members shall be entitled to rely upon such action without further inquiry or investigation as to the actual authority (or lack thereof) of such Representative. In addition, the act of an Alternate Representative shall be deemed the act of the Representative for which such Alternate Representative is acting, without the need to produce evidence of the absence or unavailability of such Representative. (iii) DISCLAIMER OF DUTIES; INDEMNIFICATION. EACH REPRESENTATIVE SHALL REPRESENT, AND OWE DUTIES TO, ONLY THE MEMBER THAT DESIGNATED SUCH REPRESENTATIVE (THE NATURE AND EXTENT OF SUCH DUTIES BEING AN INTERNAL CORPORATE AFFAIR OF SUCH MEMBER), AND NOT TO THE COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE, OR ANY OFFICER OR EMPLOYEE OF THE COMPANY. THE PROVISIONS OF SECTION 6.04 SHALL ALSO INURE TO THE BENEFIT OF EACH MEMBER'S REPRESENTATIVES. THE COMPANY SHALL INDEMNIFY, PROTECT, DEFEND, RELEASE AND HOLD HARMLESS EACH REPRESENTATIVE FROM AND AGAINST ANY CLAIMS ASSERTED BY OR ON BEHALF OF ANY PERSON (INCLUDING ANOTHER MEMBER), OTHER THAN THE MEMBER THAT DESIGNATED SUCH REPRESENTATIVE, THAT ARISE OUT OF, RELATE TO OR ARE OTHERWISE ATTRIBUTABLE TO, DIRECTLY OR INDIRECTLY, SUCH REPRESENTATIVE'S SERVICE ON THE MANAGEMENT COMMITTEE, OTHER THAN SUCH CLAIMS ARISING OUT OF THE FRAUD OR WILLFUL MISCONDUCT OF SUCH REPRESENTATIVE. (iv) ATTENDANCE. Each Member shall use all reasonable efforts to cause its Representatives or Alternate Representatives to attend each meeting of the Management Committee, unless its Representatives are unable to do so because of a "force majeure" event or other event beyond his reasonable control, in which event such Member shall use all reasonable efforts to cause its Representatives or Alternate Representatives to participate in the meeting by telephone pursuant to Section 6.02(h). (b) CHAIRMAN AND SECRETARY. One of the Representatives will be designated as Chairman of the Management Committee, in accordance with this Section 6.02(b), to preside over meetings of the Management Committee. The Management Committee shall also designate a Secretary of the Management Committee, who need not be a Representative. (c) PROCEDURES. The Secretary of the Management Committee shall maintain written minutes of each of its meetings, which shall be submitted for approval no later than the next regularly-scheduled meeting. The Management Committee may adopt whatever rules and procedures relating to its activities as it may deem appropriate, provided that such 19 20 rules and procedures shall not be inconsistent with or violate the provisions of this Agreement. (d) TIME AND PLACE OF MEETINGS. The Management Committee shall meet quarterly, subject to more or less frequent meetings upon approval of the Management Committee. Notice of, and an agenda for, all Management Committee meetings shall be provided by the Chairman to all Members at least ten Days prior to the date of each meeting, together with proposed minutes of the previous Management Committee meeting (if such minutes have not been previously ratified). Special meetings of the Management Committee may be called at such times, and in such manner, as any Member deems necessary. Any Member calling for any such special meeting shall notify the Chairman, who in turn shall notify all Members of the date and agenda for such meeting at least ten Days prior to the date of such meeting. Such ten-day period may be shortened by the Management Committee. All meetings of the Management Committee shall be held at a location designated by the Chairman. Attendance of a Member at a meeting of the Management Committee shall constitute a waiver of notice of such meeting, except where such Member attends the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. (e) QUORUM. The presence of one Representative designated by each Member shall constitute a quorum for the transaction of business at any meeting of the Management Committee. (f) VOTING. Except as provided otherwise in this Agreement, (i) voting at any meeting of the Management Committee shall be according to the Members' respective Sharing Ratios, and (ii) the affirmative vote of Members holding a majority of the Sharing Ratios shall constitute the act of the Management Committee. (g) ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at a meeting of the Management Committee may be taken without a meeting, without prior notice, and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by Members that could have taken the action at a meeting of the Management Committee at which all Members entitled to vote on the action were represented and voted. (h) MEETINGS BY TELEPHONE. Members may participate in and hold such meeting by means of conference telephone, video conference or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person at such meeting, except where a Member participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. (i) SUBCOMMITTEES. The Management Committee may create such subcommittees, delegate to such subcommittees such authority and responsibility, and rescind any such delegations, as it may deem appropriate. (j) OFFICERS. The Management Committee may designate one or more Persons to be Officers of the Company. Any Officers so designated shall have such titles and, subject to the other provisions of this Agreement, have such authority and 20 21 perform such duties as the Management Committee may specifically delegate to them and shall serve at the pleasure of the Management Committee. 6.03 DELEGATION TO PARTICULAR MEMBER. The Management Committee may delegate to one or more Members such authority and duties as the Management Committee may deem advisable. Decisions or actions taken by any such Member in accordance with the provisions of this Agreement shall constitute decisions or actions by the Company and shall be binding on each Member, Representative, Officer and employee of the Company. Any delegation pursuant to this Section 6.03 may be revoked at any time by the Management Committee. With respect to duties discharged hereunder by a Member (a) such Member may discharge such duties through the personnel of a Affiliate of such Member, and (b) unless the Members otherwise agree, the Company shall compensate such Member (or its Affiliate, as applicable) for the performance of such duties in an amount equal to the man-hours expended by the personnel of such Member (or its Affiliate) multiplied by the applicable rate(s) shown on Exhibit B (which rates each shall escalate on the first day of each calendar year during the term hereof by an amount which is 5% of the rate applicable during the prior calendar year), and shall reimburse such Member for all out of pocket costs incurred by such Member in discharging such duties. In addition, prior to performing any such duties, the performing Member shall provide to the other Member for approval an estimate of man-hours and types of personnel required to perform the delegated duties and a schedule for the performance of the delegated duties and for other costs associated therewith, and shall promptly inform the other Member of any variance from the budget or schedule. 6.04 AFFILIATE AGREEMENTS; CONFLICTS OF INTEREST. Subject to any other agreement between the Members (and their respective Affiliates, as applicable), a Member or an Affiliate of a Member may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including ones in competition with the Company, with no obligation to offer to the Company, any other Member or any Affiliate of another Member the right to participate therein. The Company may transact business with any Member or Affiliate thereof, provided the terms of those transactions are approved by the Management Committee or expressly contemplated by this Agreement. Without limiting the generality of the foregoing, the Members recognize and agree that they and their respective Affiliates currently engage in certain activities involving the generation, transmission, distribution, marketing and trading of electricity and other energy products (including futures, options, swaps, exchanges of future positions for physical deliveries and commodity trading), and the gathering, processing, storage and transportation of such products, as well as other commercial activities related to such products, and that these and other activities by Members and their Affiliates may be made possible or more profitable by reason of the Company's activities (herein referred to as "Outside Activities"). The Members agree that (i) no Member or Affiliate of a Member shall be restricted in its right to conduct, individually or jointly with others, for its own account any Outside Activities, and (ii) no Member or its Affiliates shall have any duty or obligation, express or implied, to account to, or to share the results or profits of such Outside Activities with, the Company, any other Member or any Affiliate of any other Member, by reason of such Outside Activities. 6.05 UNANIMOUS CONSENT REQUIRED FOR CERTAIN ACTION. Any other provision of this Agreement to the contrary notwithstanding, the unanimous consent of the Members, and at least one Independent Member, shall be required to: 21 22 (a) File a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to the Company, or take any action that would result in such an event occurring with respect to South Central. (b) Cause the dissolution, liquidation, consolidation, merger or sale of substantially all of the assets of the Company or South Central. (c) Cause or permit the Company to engage in any other activity other than those set forth in Section 2.04. (d) Amend this Agreement in any manner that would have a material adverse impact on any creditor of the Company. 6.06 CERTAIN ACTIONS PROHIBITED. So long as the Company has any indebtedness outstanding, (a) the Company shall not be dissolved, liquidated, consolidated or merged with any other entity, nor shall this Agreement be amended in any manner that would have a material adverse impact on the holders of such indebtedness, and (b) notwithstanding the failure of the Members to continue the existence of the Company as provided in Section 2.06 during such period, no action shall be taken by the Company or any of the Members that shall cause any collateral for such indebtedness to be liquidated or that would adversely affect the rights of the holders of such indebtedness or their agents to exercise their rights under any security documents relating thereto or to retain such collateral until such indebtedness is paid in full or otherwise completely discharged. 6.07 DISCLAIMER OF DUTIES AND LIABILITIES. (a) NO MEMBER SHALL OWE ANY DUTY (INCLUDING ANY FIDUCIARY DUTY) TO THE OTHER MEMBERS OR TO THE COMPANY, OTHER THAN THE DUTIES THAT ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. (b) NO MEMBER SHALL BE LIABLE (WHETHER IN CONTRACT, TORT OR OTHERWISE) FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES. (c) THE OBLIGATIONS OF THE MEMBERS UNDER THIS AGREEMENT ARE OBLIGATIONS OF THE MEMBERS ONLY, AND NO RECOURSE SHALL BE AVAILABLE AGAINST ANY OFFICER, DIRECTOR OR AFFILIATE OF ANY MEMBER, EXCEPT AS PERMITTED UNDER APPLICABLE LAW. 6.08 INDEMNIFICATION. Each Member shall indemnify, protect, defend, release and hold harmless each other Member, and such other Member's Representatives, Affiliates, and their respective directors, officers, employees and agents from and against any Claims asserted by or on behalf of any Person (including another Member) that arise out of, relate to or are otherwise attributable to, directly or indirectly, a breach by the indemnifying Member of this Agreement, or the negligence, gross negligence or willful misconduct of the indemnifying Member in connection with this Agreement; provided, however, that this Section 6.08 shall not apply to any Claim or other matter for which a Member (or its Representative) has no liability or duty, or is indemnified or released, pursuant to Section 6.02(a)(iii), or 6.07. 22 23 ARTICLE 7 TAXES 7.01 TAX RETURNS. The Tax Matters Member shall prepare and timely file (on behalf of the Company) all federal, state and local tax returns required to be filed by the Company. Each Member shall furnish to the Tax Matters Member all pertinent information in its possession relating to the Company's operations that is necessary to enable the Company's tax returns to be timely prepared and filed. The Company shall bear the costs of the preparation and filing of its returns. 7.02 TAX ELECTIONS. The Company shall make the following elections on the appropriate tax returns: (a) to adopt as the Company's fiscal year the calendar year; (b) to adopt the accrual method of accounting; (c) if a distribution of the Company's property as described in Code Section 734 occurs or upon a transfer of Membership Interest as described in Code Section 743 occurs, on request by notice from any Member, to elect, pursuant to Code Section 754, to adjust the basis of the Company's properties; (d) to elect to amortize the organizational expenses of the Company ratably over a period of 60 months as permitted by Section 709(b) of the Code; and (e) any other election the Management Committee may deem appropriate. Neither the Company nor any Member shall make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law and no provision of this Agreement (including Section 2.07) shall be construed to sanction or approve such an election. 7.03 TAX MATTERS MEMBER. (a) South Central shall be the "tax matters partner" of the Company pursuant to Section 6231(a)(7) of the Code (the "Tax Matters Member"). At the request of each other Member, the Tax Matters Member shall take such action as may be necessary to cause, to the extent possible, such other Member to become a "notice partner" within the meaning of Section 6223 of the Code. The Tax Matters Member shall inform each other Member of all significant matters that may come to its attention in its capacity as Tax Matters Member by giving notice thereof on or before the fifth Business Day after becoming aware thereof and, within that time, shall forward to each other Member copies of all significant written communications it may receive in that capacity. (b) The Tax Matters Member shall take no action without the authorization of the Management Committee, other than such action as may be required by Law. Any cost or expense incurred by the Tax Matters Member in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, shall be paid by the Company. 23 24 (c) The Tax Matters Member shall not enter into any extension of the period of limitations for making assessments on behalf of the Members without first obtaining the consent of the Management Committee. The Tax Matters Member shall not bind any Member to a settlement agreement without obtaining the consent of such Member. Any Member that enters into a settlement agreement with respect to any Company item (as described in Code Section 6231(a)(3)) shall notify the other Members of such settlement agreement and its terms within 90 Days from the date of the settlement. (d) No Member shall file a request pursuant to Code Section 6227 for an administrative adjustment of Company items for any taxable year without first notifying the other Members. If the Management Committee consents to the requested adjustment, the Tax Matters Member shall file the request for the administrative adjustment on behalf of the Members. If such consent is not obtained within 30 Days from such notice, or within the period required to timely file the request for administrative adjustment, if shorter, any Member, including the Tax Matters Member, may file a request for administrative adjustment on its own behalf. Any Member intending to file a petition under Code Sections 6226, 6228 or other Code Section with respect to any item involving the Company shall notify the other Members of such intention and the nature of the contemplated proceeding. In the case where the Tax Matters Member is the Member intending to file such petition on behalf of the Company, such notice shall be given within a reasonable period of time to allow the other Members to participate in the choosing of the forum in which such petition will be filed. (e) If any Member intends to file a notice of inconsistent treatment under Code Section 6222(b), such Member shall give reasonable notice under the circumstances to the other Members of such intent and the manner in which the Member's intended treatment of an item is (or may be) inconsistent with the treatment of that item by the other Members. ARTICLE 8 BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS 8.01 MAINTENANCE OF BOOKS. (a) The Management Committee shall keep or cause to be kept at the principal office of the Company or at such other location approved by the Management Committee complete and accurate books and records of the Company, supporting documentation of the transactions with respect to the conduct of the Company's business and minutes of the proceedings of its Members and the Management Committee, and any other books and records that are required to be maintained by applicable Law. (b) The books of account of the Company shall be (i) maintained on the basis of a fiscal year that is the calendar year, (ii) maintained on an accrual basis in accordance with generally accepted accounting principles, consistently applied, and (iii) audited by the Certified Public Accountants at the end of each calendar year. 8.02 REPORTS. (a) With respect to each calendar year, the Management Committee shall prepare and deliver to each Member: 24 25 (i) Within 120 Days after the end of such calendar year, a profit and loss statement and a statement of cash flows for such year, a balance sheet and a statement of each Member's Capital Account as of the end of such year, together with a report thereon of the Certified Public Accountants; and (ii) Such federal, state and local income tax returns and such other accounting, tax information and schedules as shall be necessary for the preparation by each Member on or before July 15 following the end of each calendar year of its income tax return with respect to such year. (b) Within 15 Business Days after the end of each calendar month, the Management Committee shall cause to be prepared and delivered to each Member, with an appropriate certificate of the Person authorized to prepare the same (provided that the Management Committee may change the financial statements required by this Section 8.02(b) to a quarterly basis or may make such other change therein as it may deem appropriate): (i) A profit and loss statement and a statement of cash flows for such month (including sufficient information to permit the Members to calculate their tax accruals), for the portion of the calendar year then ended; (ii) A balance sheet and a statement of each Member's Capital Account as of the end of such month and the portion of the calendar year then ended; and (iii) A statement comparing the actual financial status and results of the Company as of the end of or for such month and the portion of the calendar year then ended with the budgeted or forecasted status and results as of the end of or for such respective periods. (c) The Management Committee shall also cause to be prepared and delivered to each Member such other reports, forecasts, studies, budgets and other information as the Management Committee may request from time to time. 8.03 BANK ACCOUNTS. Funds of the Company shall be deposited in such banks or other depositories as shall be designated from time to time by the Management Committee. All withdrawals from any such depository shall be made only as authorized by the Management Committee and shall be made only by check, wire transfer, debit memorandum or other written instruction. ARTICLE 9 BUYOUT OPTION 9.01 BUYOUT EVENTS. This Article 9 shall apply to any of the following events (each a "Buyout Event"): (a) a Member shall dissolve or become Bankrupt; or (b) a Member shall commit a Default. 25 26 In each case, the Member with respect to whom a Buyout Event has occurred is referred to herein as the "Affected Member." 9.02 PROCEDURE. If a Buyout Event occurs and is not cured within 30 Business Days of the Affected Member's receipt of notice thereof from another Member (or such shorter period (not less than 10 Business Days) as may be reasonable under the circumstances and set forth in such notice), then each of the other Members shall have the option to acquire the Membership Interest of the Affected Member (or to cause it to be acquired by a third party designated by the other Members), in accordance with procedures that are substantively equivalent to those set forth in Section 3.03(b)(iii) (and with the Members exercising such preferential right also being referred to herein as "Purchasing Members"). 9.03 PURCHASE PRICE; TERMS AND METHOD OF PAYMENT. The purchase price for a Membership Interest being purchased pursuant to this Article 9 (the "Purchase Price") shall be determined in the following manner. The Affected Member and the Purchasing Members shall attempt to agree upon the fair market value of the applicable Membership Interest and the terms and method of payment of such amount. If those Members do not reach such agreement on or before the 30th Day following the exercise of the option, any such Member, by notice to the others, may require the determination of fair market value and the terms and method of payment to be made by the Arbitrator pursuant to Article 10. 9.04 CLOSING. If an option to purchase is exercised in accordance with the other provisions of this Article 9, the closing of such purchase shall occur on the 30th Day after the determination of the Fair Market Value pursuant to Section 9.03 (or, if later, the fifth Business Day after the receipt of all applicable regulatory and governmental approvals to the purchase), and shall be conducted in a manner substantively equivalent to that set forth in Section 3.03. 9.05 TERMINATED MEMBER. Upon the occurrence of a closing under Section 9.04, the following provisions shall apply to the Affected Member (now a "Terminated Member"): (a) The Terminated Member shall cease to be a Member immediately upon the occurrence of the closing. (b) As the Terminated Member is no longer a Member, it will no longer be entitled to receive any distributions (including liquidating distributions) or allocations from the Company, and neither it nor its Representative shall be entitled to exercise any voting or consent rights or to receive any further information (or access to information) from the Company. (c) The Terminated Member must pay to the Company all amounts owed to it by such Member. (d) The Terminated Member shall remain obligated for all liabilities it may have under this Agreement or otherwise with respect to the Company that accrue prior to the closing. (f) The Sharing Ratio of the Terminated Member shall be allocated among the purchasing Members in the proportion of the total Purchase Price paid by each. 26 27 ARTICLE 10 DISPUTE RESOLUTION 10.01 DISPUTES. This Article 10 shall apply to any dispute arising under or related to this Agreement (whether arising in contract, tort or otherwise, and whether arising at law or in equity), including (a) any dispute regarding the construction, interpretation, performance, validity or enforceability of any provision of this Agreement or whether any Person is in compliance with, or breach of, any provisions of this Agreement, and (b) the applicability of this Article 10 to a particular dispute. Notwithstanding the foregoing, this Article 10 shall not apply to any matters that, pursuant to the provisions of this Agreement, are to be resolved by a vote of the Members (including through the Management Committee); provided, however, that if a vote, approval, consent, determination or other decision must, under the terms of this Agreement, be made (or withheld) in accordance with a standard other than Sole Discretion (such as a reasonableness standard), then the issue of whether such standard has been satisfied may be a dispute to which this Article 10 applies. Any dispute to which this Article 10 applies is referred to herein as a "Dispute." With respect to a particular Dispute, each Member that is a party to such Dispute is referred to herein as a "Disputing Member." The provisions of this Article 10 shall be the exclusive method of resolving Disputes. 10.02 NEGOTIATION TO RESOLVE DISPUTES. If a Dispute arises, either Disputing Member may initiate the dispute-resolution procedures of this Article 10 by delivering a notice (a "Dispute Notice") to the other Disputing Members. Within 10 Days of delivery of a Dispute Notice, each Disputing Member shall designate a representative, and such representatives shall promptly meet (whether by phone or in person) in a good faith attempt to resolve the Dispute. If such representatives can resolve the Dispute, such resolution shall be reported in writing and shall be binding upon the Disputing Members. If such representatives are unable to resolve the Dispute within 30 Days following the delivery of the Dispute Notice (or such other period as such representatives may agree), or if a Disputing Member fails to appoint a representative within 10 Days of delivery following the delivery of the Dispute Notice, then any Disputing Member may take such Dispute to litigation. ARTICLE 11 DISSOLUTION, WINDING-UP AND TERMINATION 11.01 DISSOLUTION. The Company shall dissolve and its affairs shall be wound up on the first to occur of the following events (each a "Dissolution Event"): (a) the unanimous consent of the Members; or (b) entry of a decree of judicial dissolution of the Company under Section 18-802 of the Act. 11.02 WINDING-UP AND TERMINATION. (a) On the occurrence of a Dissolution Event, the Management Committee shall select one Member to act as liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act. The costs of winding up shall be borne as a Company expense. Until final distribution, the 27 28 liquidator shall continue to operate the Company properties with all of the power and authority of the Members. The steps to be accomplished by the liquidator are as follows: (i) as promptly as possible after dissolution and again after final winding up, the liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company's assets, liabilities, and operations through the last calendar day of the month in which the dissolution occurs or the final winding up is completed, as applicable; (ii) the liquidator shall discharge from Company funds all of the Indebtedness and other debts, liabilities and obligations of the Company (including all expenses incurred in winding up and any loans described in Section 4.03) or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine); and (iii) all remaining assets of the Company shall be distributed to the Members as follows: (A) the liquidator may sell any or all Company property, including to Members, and any resulting gain or loss from each sale shall be computed and allocated to the Capital Accounts of the Members in accordance with the provisions of Article 5; (B) with respect to all Company property that has not been sold, the fair market value of that property shall be determined and the Capital Accounts of the Members shall be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the Capital Accounts previously would be allocated among the Members if there were a taxable disposition of that property for the fair market value of that property on the date of distribution; and (C) Company property (including cash) shall be distributed among the Members in accordance with Section 5.02; and those distributions shall be made by the end of the taxable year of the Company during which the liquidation of the Company occurs (or, if later, 90 Days after the date of the liquidation). (b) The distribution of cash or property to a Member in accordance with the provisions of this Section 11.02 constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Membership Interest and all the Company's property and constitutes a compromise to which all Members have consented pursuant to Section 18-502(b) of the Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds. 11.03 DEFICIT CAPITAL ACCOUNTS. No Member will be required to pay to the Company, to any other Member or to any third party any deficit balance that may exist from time to time in the Member's Capital Account. 28 29 11.04 CERTIFICATE OF CANCELLATION. On completion of the distribution of Company assets as provided herein, the Members (or such other Person or Persons as the Act may require or permit) shall file a certificate of cancellation with the Secretary of State of Delaware, cancel any other filings made pursuant to Section 2.05, and take such other actions as may be necessary to terminate the existence of the Company. Upon the filing of such certificate of cancellation, the existence of the Company shall terminate (and the Term shall end), except as may be otherwise provided by the Act or other applicable Law. ARTICLE 12 GENERAL PROVISIONS 12.01 OFFSET. Whenever the Company is to pay any sum to any Member, any amounts that Member owes the Company may be deducted from that sum before payment. 12.02 NOTICES. Except as expressly set forth to the contrary in this Agreement, all notices, requests or consents provided for or permitted to be given under this Agreement must be in writing and must be delivered to the recipient in person, by courier or mail or by facsimile or other electronic transmission. A notice, request or consent given under this Agreement is effective on receipt by the Member to receive it; provided, however, that a facsimile or other electronic transmission that is transmitted after the normal business hours of the recipient shall be deemed effective on the next Business Day. All notices, requests and consents to be sent to a Member must be sent to or made at the addresses given for that Member on Exhibit A or in the instrument described in Section 3.03(b)(iv)(A)(II) or 3.04, or such other address as that Member may specify by notice to the other Members. Any notice, request or consent to the Company must be given to all of the Members. Whenever any notice is required to be given by Law, the Delaware Certificate or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 12.03 ENTIRE AGREEMENT; SUPERSEDING EFFECT. This Agreement constitutes the entire agreement of the Members and their Affiliates relating to the Company and the transactions contemplated hereby and supersedes all provisions and concepts contained in all prior contracts or agreements between the Members or any of their Affiliates with respect to the Company and the transactions contemplated hereby, whether oral or written. 12.04 PRESS RELEASES. Each Member agrees that it shall not (and shall cause its Affiliates not to), without the other Members' consent, issue a press release or have any contact with or respond to the news media with any sensitive or Confidential Information, except as required by securities or similar laws applicable to a Member and its Affiliates. Any press release by a Member or its Affiliates with respect to any sensitive or Confidential Information shall be subject to review and approval by the other Party, which approval shall not be unreasonably withheld. 12.05 EFFECT OF WAIVER OR CONSENT. Except as otherwise provided in this Agreement, a waiver or consent, express or implied, to or of any breach or default by any Member in the performance by that Member of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Member of the same or any other obligations of that Member with respect to the Company. Except as otherwise provided in this Agreement, failure on the part of a Member to complain of any act of any Member or to declare any Member in default with respect to the Company, irrespective of how long that failure continues, does 29 30 not constitute a waiver by that Member of its rights with respect to that default until the applicable statute-of-limitations period has run. 12.06 AMENDMENT OR RESTATEMENT. This Agreement or the Delaware Certificate may be amended or restated only by a written instrument executed (or, in the case of the Delaware Certificate, approved) by all of the Members. 12.07 BINDING EFFECT. Subject to the restrictions on Dispositions set forth in this Agreement, this Agreement is binding on and shall inure to the benefit of the Members and their respective successors and permitted assigns. 12.08 GOVERNING LAW; SEVERABILITY. This Agreement is governed by and shall be construed in accordance with the Law of the State of Delaware, excluding any conflict-of-laws rule or principle that might refer the governance or the construction of this Agreement to the Law of another jurisdiction. In the event of a direct conflict between the provisions of this Agreement and any mandatory, non-waivable provision of the Act, such provision of the Act shall control. NRG STERLINGTON POWER LLC By: /s/ Craig A. Mataczynski ------------------------------ Name: Craig A. Mataczynski ------------------------------ Title: President ------------------------------ 30 31 EXHIBIT A
Members Membership Interest Capital Contribution NRG South Central Generating LLC 100%
EX-3.9 11 y57012ex3-9.txt CERTIFICATE OF FORMATION 1 Exhibit 3.9 State of Delaware Office of the Secretary of State PAGE 1 -------------------------------- I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF "BIG CAJUN I PEAKING POWER LLC" AS RECEIVED AND FILED IN THIS OFFICE. THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED: CERTIFICATE OF FORMATION, FILED THE TWENTY-EIGHTH DAY OF JULY, A.D. 2000, AT 4 O'CLOCK P.M. CERTIFICATE OF AMENDMENT, CHANGING ITS NAME FROM "BC-I UNITS 3 & 4 LLC" TO "BIG CAJUN I PEAKING POWER LLC", FILED THE THIRD DAY OF AUGUST, A.D. 2000, AT 2 0' CLOCK P.M. AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID LIMITED LIABILITY COMPANY. /s/ Edward J. Freel [SEAL] ---------------------------------------- Edward J. Freel, Secretary of State 3267138 8100H AUTHENTICATION: 0736193 001520068 DATE: 10-16-00 2 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 04:00 PM 07/28/2000 001384686 - 3267138 CERTIFICATE OF FORMATION OF BC-I UNITS 3 & 4 LLC The undersigned, being a natural person 18 years of age or older and for the purpose of forming a limited liability company for general business purposes under the Delaware Limited Liability Act, hereby adopts the following Certificate of Formation: 1. Name: The name of the limited liability company is BC-I Units 3 & 4 LLC. 2. Registered Office: The address of the registered office of the limited liability company is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. 3. Organizer: The name and address of the sole organizer of the limited liability company is Karin M. Wentz, NRG Energy, Inc., 1221 Nicollet Mall, Suite 700, Minneapolis, Minnesota 55403-2445. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation of BC-I Units 3 & 4 LLC this 28th day of July, 2000. /s/ Karin M. Wentz ---------------------------------------- Karin M. Wentz Authorized Person 3 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 02:00 PM 08/03/2000 001394004 - 3267138 CERTIFICATE OF AMENDMENT OF BC-I UNITS 3 & 4 LLC 1. The name of the limited liability company is BC-I Units 3 & 4 LLC. 2. The Certificate of Formation of the limited liability company is hereby amended as follows: The name of the limited liability company is Big Cajun I Peaking Power LLC. IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment of BC-I Units 3 & 4 LLC this 3rd day of August, 2000. /s/ David H. Peterson ---------------------------------------- David H. Peterson Manager EX-3.10 12 y57012ex3-10.txt LIMITED LIABILITY COMPANY AGREEMENT 1 Exhibit 3.10 LIMITED LIABILITY COMPANY AGREEMENT OF BIG CAJUN I PEAKING POWER LLC A Delaware Limited Liability Company THIS LIMITED LIABILITY COMPANY AGREEMENT OF BIG CAJUN I PEAKING POWER LLC (this "Agreement"), dated as of August 3, 2000 (the"Effective Date"), is adopted, executed and agreed to, for good and valuable consideration, by the Members (as defined below). RECITALS 1. NRG South Central Generating LLC, a Delaware limited liability company ("South Central"), has agreed to become the Sole Member of the Company (as defined below). 2. South Central desires to enter into this Agreement to agree upon various matters relating to the Company. ARTICLE 1 DEFINITIONS 1.01 DEFINITIONS. As used in this Agreement, the following terms have the respective meanings set forth below or set forth in the Sections referred to below: ACT - the Delaware Limited Liability Company Act. AFFECTED MEMBER - Section 9.01. AFFILIATE - with respect to any Person, (a) each entity that such Person Controls; (b) each Person that Controls such Person, including, in the case of a Member, such Member's Parent; and (c) each entity that is under common Control with such Person, including, in the case of a Member, each entity that is Controlled by such Member's Parent. AGREEMENT - introductory paragraph. ALTERNATE REPRESENTATIVE - Section 6.02(a)(i). ASSIGNEE - any Person that acquires a Membership Interest or any portion thereof through a Disposition; provided, however, that, an Assignee shall have no right to be admitted to the Company as a Member except in accordance with Section 3.03(b)(iii). BANKRUPTCY OR BANKRUPT - with respect to any Person, that (a) such Person (i) makes a general assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bankruptcy or insolvency proceedings; (iv) files a petition or answer seeking for such Person a reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Law; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or 1 2 acquiesces in the appointment of a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties; or (b) against such Person, a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any Law has been commenced and 60 Days have expired without dismissal thereof or with respect to which, without such Person's consent or acquiescence, a trustee, receiver, or liquidator of such Person or of all or any substantial part of such Person's properties has been appointed and 60 Days have expired without the appointment's having been vacated or stayed, or 60 Days have expired after the date of expiration of a stay, if the appointment has not previously been vacated. BUSINESS DAY - any day other than a Saturday, a Sunday, or a holiday on which national banking associations in Minnesota, Louisiana or New York are not open for business. BUYOUT EVENT - Section 9.01. CAPITAL ACCOUNT - the account to be maintained by the Company for each Member in accordance with Section 4.06. CAPITAL CONTRIBUTION - with respect to any Member, the amount of money and the net agreed value of any property (other than money) contributed to the Company by the Member. Any reference in this Agreement to the Capital Contribution of a Member shall include a Capital Contribution of its predecessors in interest. CERTIFIED PUBLIC ACCOUNTANTS - a firm of independent public accountants selected from time to time by the Management Committee. CHANGE OF MEMBER CONTROL - with respect to any Member, an event (such as a Disposition of voting securities) that causes such Member to cease to be Controlled by such Member's Parent; provided, however, that an event that causes any of such Member's Parents to be Controlled by another Person shall not constitute a Change of Member Control. CLAIM - any and all judgments, claims, causes of action, demands, lawsuits, suits, proceedings, Governmental investigations or audits, losses, assessments, fines, penalties, administrative orders, obligations, costs, expenses, liabilities and damages (whether actual, consequential or punitive), including interest, penalties, reasonable attorney's fees, disbursements and costs of investigations, deficiencies, levies, duties and imposts. CODE - the Internal Revenue Code of 1986, as amended. COMPANY - Big Cajun I Peaking Power LLC. CONFIDENTIAL INFORMATION - information and data (including all copies thereof) that is furnished or submitted by any of the Members or their Affiliates, whether oral (and if oral, reduced to writing and marked "confidential" within 10 days of disclosure), written, or electronic, on a confidential basis to the other Members or their Affiliates in connection with the Company, and any and all of the activities and studies performed pursuant to this Agreement and the resulting information and data obtained from those studies. Notwithstanding the foregoing, the term "Confidential Information" shall not include any 2 3 information that: (a) is in the public domain at the time of its disclosure or thereafter (other than as a result of a disclosure directly or indirectly by a Member or its Affiliates in contravention of this Agreement); (b) as to any Member, was in the possession of such Member or its Affiliates prior to the execution of this Agreement; or (c) is engineering information (for example, heat balance and capital cost information) that has been independently acquired or developed by a Member or its Affiliates without violating any of the obligations of such Member or its Affiliates under this Agreement. CONTROL - the possession, directly or indirectly of either of the following: (a) (i) in the case of a corporation, more than 50% of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, more than 50% of the beneficial interest therein; and (iv) in the case of any other entity, more than 50% of the economic or beneficial interest therein; or (b) in the case of any entity, the power or authority, through ownership of voting securities, by contract or otherwise, to exercise a controlling influence over the management of the entity. DAY - a calendar day; provided, however, that if any period of Days referred to in this Agreement shall end on a Day that is not a Business Day, then the expiration of such period shall be automatically extended until the end of the first succeeding Business Day. DEFAULT - the failure of a Member to comply in any material respect with any of its material agreements, covenants or obligations under this Agreement; the failure of any representation or warranty made by a Member in this Agreement to have been true and correct in all material respects at the time it was made; or the failure of a Member, without justified cause, to take any action materially necessary for the progress of the business of South Central consistent with or required by the terms of this Agreement (including participating in meetings or decisions). DEFAULT RATE - a rate per annum equal to the lesser of (a) a varying rate per annum equal to the sum of (i) the prime rate as published in The Wall Street Journal, with adjustments in that varying rate to be made on the same date as any change in that rate is so published, plus (ii) 3% per annum, and (b) the maximum rate permitted by Law. DELAWARE CERTIFICATE - Section 2.01. DISPOSE, DISPOSING OR DISPOSITION - with respect to any asset (including a Membership Interest or any portion thereof), a sale, assignment, transfer, conveyance, gift, exchange or other disposition (other than the pledge or assignment to any creditor of the 3 4 Company or any collateral agent for such creditor, of any Membership Interest as security for the indebtedness to such creditor) of such asset, whether such disposition be voluntary, involuntary or by operation of Law, including the following: (a) in the case of an asset owned by a natural person, a transfer of such asset upon the death of its owner, whether by will, intestate succession or otherwise; (b) in the case of an asset owned by an entity, (i) a merger or consolidation of such entity (other than where such entity is the survivor thereof), (ii) a conversion of such entity into another type of entity, or (iii) a distribution of such asset, including in connection with the dissolution, liquidation, winding-up or termination of such entity (unless, in the case of dissolution, such entity's business is continued without the commencement of liquidation or winding-up); and (c) a disposition in connection with, or in lieu of, a foreclosure of an Encumbrance; but such terms shall not include the creation of an Encumbrance. DISPUTE - Section 10.01. DISPUTE NOTICE - Section 10.02. DISPUTING MEMBER - Section 10.01. DISSOLUTION EVENT - Section 11.01(a). EFFECTIVE DATE - introductory paragraph. ENCUMBER, ENCUMBERING, OR ENCUMBRANCE - the creation of a security interest, lien, pledge, mortgage or other encumbrance, whether such encumbrance be voluntary, involuntary or by operation of Law; provided, however, that the pledge or assignment to any creditor of the Company or any collateral agent for such creditor, of any Membership Interest as security for the indebtedness to such creditor shall not be deemed to be an Encumbrance thereof. FAIR MARKET VALUE - Section 9.03. GOVERNMENTAL AUTHORITY (OR GOVERNMENTAL) - a federal, state, local or foreign governmental authority; a state, province, commonwealth, territory or district thereof; a county or parish; a city, town, township, village or other municipality; a district, ward or other subdivision of any of the foregoing; any executive, legislative or other governing body of any of the foregoing; any agency, authority, board, department, system, service, office, commission, committee, council or other administrative body of any of the foregoing; any court or other judicial body; and any officer, official or other representative of any of the foregoing. INCLUDING - including, without limitation. INDEPENDENT MEMBER - means a natural person who is not an officer, director, agent, employee or representative of the Company, NRG, South Central, or any Affiliate of any of the foregoing. LAW - any applicable constitutional provision, statute, act, code (including the Code), law, regulation, rule, ordinance, order, decree, ruling, proclamation, resolution, judgment, 4 5 decision, declaration, or interpretative or advisory opinion or letter of a Governmental Authority having valid jurisdiction. LENDING MEMBER - Section 4.03(a)(ii). LOAN DOCUMENTS - any and all documents relating to money borrowed by the Company or South Central including money borrowed through public or private sales of its debt securities, as the same may be amended or restated from time to time. MANAGEMENT COMMITTEE - Section 6.02. MEMBER - any Person executing this Agreement as of the date of this Agreement as a member or hereafter admitted to the Company as a member as provided in this Agreement, but such term does not include any Person who has ceased to be a member in the Company. MEMBERSHIP INTEREST - with respect to any Member, (a) that Member's status as a Member; (b) that Member's share of the income, gain, loss, deduction and credits of, and the right to receive distributions from, the Company; (c) all other rights, benefits and privileges enjoyed by that Member (under the Act, this Agreement, or otherwise) in its capacity as a Member, including that Member's rights to vote, consent and approve and otherwise to participate in the management of the Company, including through the Management Committee; and (d) all obligations, duties and liabilities imposed on that Member (under the Act, this Agreement or otherwise) in its capacity as a Member, including any obligations to make Capital Contributions. NON-CONTRIBUTING MEMBER - Section 4.03(a). OFFICER - any Person designated as an officer of the Company as provided in Section 6.02(j), but such term does not include any Person who has ceased to be an officer of the Company. OUTSIDE ACTIVITIES - Section 6.04. PARENT - if applicable to a Member, the company or companies set forth opposite the name of such Member on Exhibit A. PERMITS - all permits, licenses, approvals or other actions of Governmental Authorities that are required for the ownership and operation of the businesses of South Central, as contemplated by this Agreement. PERSON - the meaning assigned that term in Section 18-101(11) of the Act and also includes a Governmental Authority and any other entity. PURCHASE PRICE - Section 9.03. REPRESENTATIVE - Section 6.02(a)(i). SECURITIES ACT - the Securities Act of 1933. 5 6 SHARING RATIO - subject in each case to adjustments in accordance with this Agreement or in connection with Dispositions of Membership Interests, (a) in the case of a Member executing this Agreement as of the date of this Agreement or a Person acquiring such Member's Membership Interest, the percentage specified for that Member as its Sharing Ratio on Exhibit A, and (b) in the case of Membership Interest issued pursuant to Section 3.04, the Sharing Ratio established pursuant thereto; provided, however, that the total of all Sharing Ratios shall always equal 100%. SOLE DISCRETION - a Member's sole and absolute discretion, with or without cause, and subject to whatever limitations or qualifications the Member may impose. TAX MATTERS MEMBER - Section 7.03(a). TERM - Section 2.06. TERMINATED MEMBER - Section 9.05. TREASURY REGULATIONS - the regulations (including temporary regulations) promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code. All references herein to sections of the Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar or substitute, temporary or final Treasury Regulations. UNIFORM COMMERCIAL CODE - means the Uniform Commercial Code as in effect from time to time in the State of New York. Other terms defined herein have the meanings so given them. 1.02 CONSTRUCTION. Unless the context requires otherwise: (a) the gender (or lack of gender) of all words used in this Agreement includes the masculine, feminine, and neuter; (b) references to Articles and Sections refer to Articles and Sections of this Agreement; (c) references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part hereof for all purposes; (d) references to Laws refer to such Laws as they may be amended from time to time, and references to particular provisions of a Law include any corresponding provisions of any succeeding Law; and (e) references to money refer to legal currency of the United States of America. ARTICLE 2 ORGANIZATION 2.01 FORMATION. The Company was organized as BC-I Units 3 & 4 LLC by the filing of a Certificate of Formation (the "Delaware Certificate"), dated July 28, 2000 (the "Formation Date"), with the Secretary of State of Delaware pursuant to the Act, and its name was changed to Big Cajun I Peaking Power LLC as of the Effective Date. 2.02 NAME. The name of the Company is "Big Cajun I Peaking Power LLC" and all Company business must be conducted in that name or such other names that comply with Law as the Management Committee may select. 6 7 2.03 REGISTERED OFFICE; REGISTERED AGENT; PRINCIPAL OFFICE IN THE UNITED STATES; OTHER OFFICES. The registered office of the Company required by the Act to be maintained in the State of Delaware shall be the office (which need not be a place of business of the Company) as the Management Committee may designate in the manner provided by Law. The registered agent of the Company in the State of Delaware shall be such Person or Persons as the Management Committee may designate in the manner provided by Law. The principal office of the Company in the United States shall be at such place as the Management Committee may designate, which need not be in the State of Delaware, and the Company shall maintain records there or such other place as the Management Committee shall designate and shall keep the street address of such principal office at the registered office of the Company in the State of Delaware. The Company may have such other offices as the Management Committee may designate. 2.04 PURPOSE. The purpose of the Company shall be the ownership and operation of power generation facilities. 2.05 FOREIGN QUALIFICATION. Prior to the Company's conducting business in any jurisdiction other than Delaware, the Management Committee shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Management Committee, with all requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. At the request of the Management Committee, each Member shall execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to qualify, continue, and terminate the Company as a foreign limited liability company in all such jurisdictions in which the Company may conduct business. 2.06 TERM. The period of existence of the Company (the "Term") commenced on the Formation Date and shall end at such time as a certificate of cancellation is filed with the Secretary of State of Delaware in accordance with Section 11.04. Such period may be extended from time to time by Members holding a majority of the Membership Interests. 2.07 NO STATE-LAW PARTNERSHIP. The Members intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member, for any purposes other than federal and state tax purposes, and this Agreement may not be construed to suggest otherwise. 2.08 CERTIFICATES OF MEMBERSHIP INTEREST; APPLICABILITY OF ARTICLE 8 OF UCC. All Membership Interests shall be represented by certificates in such form as the Management Committee shall from time to time approve, shall be recorded in a register thereof maintained by the Company, and shall be subject to such rules for the issuance thereof as the Management Committee may from time to time determine. Membership Interests shall be subject to the provisions of Article 8 of the Uniform Commercial Code as may be applicable from time to time. ARTICLE 3 MEMBERSHIP; DISPOSITIONS OF INTERESTS 3.01 INITIAL MEMBERS. The initial Member of the Company is South Central, which is admitted to the Company as a Member effective contemporaneously with the execution by it of this Agreement. 7 8 3.02 REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Member hereby represents, warrants and covenants to the Company and each other Member that the following statements are true and correct as of the Effective Date and shall be true and correct at all times that such Member is a Member: (a) that Member is duly incorporated, organized or formed (as applicable), validly existing, and (if applicable) in good standing under the Law of the jurisdiction of its incorporation, organization or formation; if required by applicable Law, that Member is duly qualified and in good standing in the jurisdiction of its principal place of business, if different from its jurisdiction of incorporation, organization or formation; and that Member has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and all necessary actions by the board of directors, shareholders, members, partners, trustees, beneficiaries, or other applicable Persons necessary for the due authorization, execution, delivery, and performance of this Agreement by that Member have been duly taken; (b) that Member has duly executed and delivered this Agreement and the other documents contemplated herein, and they constitute the legal, valid and binding obligation of that Member enforceable against it in accordance with their terms (except as may be limited by bankruptcy, insolvency or similar Laws of general application and by the effect of general principles of equity, regardless of whether considered at law or in equity); and (c) that Member's authorization, execution, delivery, and performance of this Agreement does not and will not (i) conflict with, or result in a breach, default or violation of, (A) the organizational documents of such Member, (B) any contract or agreement to which that Member is a party or is otherwise subject, or (C) any Law, order, judgment, decree, writ, injunction or arbitral award to which that Member is subject; or (ii) require any consent, approval or authorization from, filing or registration with, or notice to, any Governmental Authority or other Person, unless such requirement has already been satisfied. 3.03 DISPOSITIONS AND ENCUMBRANCES OF MEMBERSHIP INTERESTS. (a) GENERAL RESTRICTION. A Member may not Dispose of or Encumber all or any portion of its Membership Interest except in strict accordance with this Section 3.03. (References in this Section 3.03 to Dispositions or Encumbrances of a "Membership Interest" shall also refer to Dispositions or Encumbrances of a portion of a Membership Interest.) Any attempted Disposition or Encumbrance of a Membership Interest, other than in strict accordance with this Section 3.03, shall be, and is hereby declared, null and void ab initio. The Members agree that a breach of the provisions of this Section 3.03 may cause irreparable injury to the Company and to the other Members for which monetary damages (or other remedy at law) are inadequate in view of (i) the complexities and uncertainties in measuring the actual damages that would be sustained by reason of the failure of a Member to comply with such provision and (ii) the uniqueness of the Company business and the relationship among the Members. Accordingly, the Members agree that the provisions of this Section 3.03 may be enforced by specific performance. (b) DISPOSITIONS OF MEMBERSHIP INTERESTS. (i) GENERAL RESTRICTION. A Member may not Dispose of all or any 8 9 portion of its Membership Interest except by complying with all of the following requirements: (A) such Member must receive the unanimous consent of the non-Disposing Members, which consent shall not be unreasonably withheld by each of such other Members; provided, however, that such consent need not be obtained if (I) the proposed Assignee is a Wholly-Owned Affiliate of the Disposing Member and (II) such proposed Assignee demonstrates to the reasonable satisfaction of the other Members that it has the ability to meet the financial and contractual commitments and other obligations of the Disposing Member; and (B) such Member must comply with the requirements of Section 3.03(b)(iii) and, if the Assignee is to be admitted as a Member, Section 3.03(b)(ii). (ii) ADMISSION OF ASSIGNEE AS A MEMBER. An Assignee has the right to be admitted to the Company as a Member, with the Membership Interest (and attendant Sharing Ratio) so transferred to such Assignee, only if (A) the Disposing Member making the Disposition has granted the Assignee either (I) the Disposing Member's entire Membership Interest or (II) the express right to be so admitted; and (B) such Disposition is effected in strict compliance with this Section 3.03. (iii) REQUIREMENTS APPLICABLE TO ALL DISPOSITIONS AND Admissions. In addition to the requirements set forth in Sections 3.03(b)(i) and 3.03(b)(ii), any Disposition of a Membership Interest and any admission of an Assignee as a Member shall also be subject to the following requirements, and such Disposition (and admission, if applicable) shall not be effective unless such requirements are complied with; provided, however, that the Management Committee, in its sole and absolute discretion, may waive any of the following requirements: (A) DISPOSITION DOCUMENTS. The following documents must be delivered to the Management Committee and must be satisfactory, in form and substance, to the Management Committee: (I) DISPOSITION INSTRUMENT. A copy of the instrument pursuant to which the Disposition is effected. (II) RATIFICATION OF THIS AGREEMENT. An instrument, executed by the Disposing Member and its Assignee, containing the following information and agreements, to the extent they are not contained in the instrument described in Section 3.03(b)(iii)(A)(I): (1) the notice address of the Assignee; (2) if applicable, the Parent of the Assignee; (3) the Sharing Ratios after the Disposition of the Disposing Member and its Assignee (which together must total the Sharing Ratio of the Disposing Member before the Disposition); (4) the Assignee's ratification of this Agreement and agreement to be bound by it, and its confirmation that the representations and warranties in Section 3.02 are true and correct 9 10 with respect to it; (5) the Assignee's ratification of all of the Company's Agreements and agreement by be bound by them, to the same extent that the Disposing Member was bound by them prior to the Disposition; and (6) representations and warranties by the Disposing Member and its Assignee (aa) that the Disposition and admission is being made in accordance with all applicable Laws, and (bb) that the matters set forth in Sections 3.03(b)(iii)(A)(III) and (IV) are true and correct. (III) SECURITIES LAW OPINION. Unless the Membership Interest subject to the Disposition is registered under the Securities Act and any applicable state securities Law, or the proposed Assignee is a Wholly-Owned Affiliate as described in 3.03(b)(i)(A) above, a favorable opinion of the Company's legal counsel, or of other legal counsel acceptable to the Management Committee, to the effect that the Disposition and admission is being made pursuant to a valid exemption from registration under those Laws and in accordance with those Laws. (IV) TAX OPINION. A favorable opinion of the Certified Public Accountants, or of other certified public accountants acceptable to the Management Committee, to the effect that the Disposition would not result in the Company's being considered to have terminated within the meaning of Code Section 708. (B) PAYMENT OF EXPENSES. The Disposing Member and its Assignee shall pay, or reimburse the Company for, all reasonable costs and expenses incurred by the Company in connection with the Disposition and admission, including the legal fees incurred in connection with the legal opinions referred to in Sections 3.03(b)(iii)(A)(III) and (IV), on or before the tenth Day after the receipt by that Person of the Company's invoice for the amount due. (C) NO RELEASE. No Disposition of a Membership Interest shall effect a release of the Disposing Member from any liabilities to the Company or the other Members arising from events occurring prior to the Disposition. (iv) CHANGE OF MEMBER CONTROL. A Change of Member Control must also comply with the requirements of this Section 3.03. (c) ENCUMBRANCES OF MEMBERSHIP INTEREST. A Member may Encumber its Membership Interest if (i) the instrument creating such Encumbrance provides that any foreclosure of such Encumbrance (or Disposition in lieu of such foreclosure) must comply with the requirements of Section 3.03(b), and (ii) any such Encumbrance is not prohibited by the Loan Documents. (d) RIGHT OF FIRST REFUSAL. Except as otherwise expressly permitted by this Agreement, this Section 3.03(d) shall apply to any proposed voluntary Disposition of a 10 11 Membership Interest to any purchaser (other than a majority owned Affiliate of the disposing party) for consideration in the form of cash or promissory notes or other obligations to pay sums certain. The Member proposing to make such a Distribution shall provide written notice (a "Disposition Notice") to the remaining Members at least 90 days prior to the proposed Disposition. The Disposition Notice must set forth the identity of the proposed transferee, the sale price, and all other material terms and conditions of the proposed Disposition. In the Case of a Change of member Control, the Disposition notice must set forth the portion, if less than 100%, of the total purchase price that is applicable to such Member's Membership Interest. Upon receipt of a Disposition Notice, the remaining Members shall have the option for a period of 30 days to purchase all, but not less than all, of such Membership Interest. Such Membership Interest shall be allocated to the Members exercising their option under this Section 3.03(d) pro rata in accordance with their Membership Interests. The purchase pursuant to the exercise of this option shall be at the price and pursuant to the terms and conditions of the proposed Disposition. If no Member exercises such option, the Member proposing such Disposition shall be free, for a period of 60 days after the expiration of the remaining Members' options, to Dispose of the Membership Interests that were the subject of the Disposition Notice, but only to the party, and for the price and on the terms and conditions, set forth in the Disposition Notice. If the proposed disposition does not occur within 60 days after the expiration of the remaining Members' options, the Membership Interest may not be Disposed of pursuant to this Section 30.3(d) unless the Member again complies with the terms of this Agreement. (e) RIGHTS IN MEMBERSHIP INTERESTS PLEDGED AS COLLATERAL. Any other provision of this Agreement to the contrary notwithstanding, by executing and delivering this Agreement, each Member shall be deemed to have consented to (i) the pledge, assignment, hypothecation and transfer to any creditor of the Company or South Central or its agents, successors or assigns of, and the grant to such creditor or other Person of a lien on and security interest in, as security for the indebtedness of the Company or South Central to such creditor, all of such Member's right, title and interest in, to and under its Membership Interest and any other collateral securing such indebtedness, (ii) the exercise by any such creditor or other Person of the rights and remedies under any security document related to such collateral, including, without limitation, the right to exercise the voting and consensual rights and other powers of each Member to the extent provided in any such security document, and the right to foreclose upon or exercise a power of sale with respect to the Membership Interest of each Member and any other collateral subject to such security documents and to cause the agent or designee of such creditor or any third party purchaser of such Membership Interest to become an additional or substitute Member, and (iii) all other provisions of the loan and security documents relating to such indebtedness or collateral, the issuance of new or substituted Membership Interests, or the ownership of Membership Interests. 3.04 CREATION OF ADDITIONAL MEMBERSHIP INTEREST. Additional Membership Interests may be created and issued to existing Members or to other Persons, and such other Persons may be admitted to the Company as Members, with the unanimous consent of the existing Members, on such terms and conditions as the existing Members may unanimously determine at the time of admission. The terms of admission or issuance must specify the Sharing Ratios applicable thereto and may provide for the creation of different classes or groups of Members having different rights, powers, and duties. The Management Committee may reflect the creation of any new class or group in an amendment to this Agreement indicating the different rights, powers, and duties. Any such 11 12 admission is effective only after the new Member has executed and delivered to the Members an instrument containing the notice address of the new Member, the Assignee's ratification of this Agreement and agreement to be bound by it, and its confirmation that the representations and warranties in Section 3.02 are true and correct with respect to it. The provisions of this Section 3.04 shall not apply to Dispositions of Membership Interests or admissions of Assignees in connection therewith, such matters being governed by Section 3.03. 3.05 ACCESS TO INFORMATION. Each Member shall be entitled to receive any information that it may request concerning the Company; provided, however, that this Section 3.05 shall not obligate the Company or the Management Committee to create any information that does not already exist at the time of such request (other than to convert existing information from one medium to another, such as providing a printout of information that is stored in a computer database). Each Member shall also have the right, upon reasonable notice, and at all reasonable times during usual business hours to inspect the properties of the Company and to audit, examine and make copies of the books of account and other records of the Company. Such right may be exercised through any agent or employee of such Member designated in writing by it or by an independent public accountant, engineer, attorney or other consultant so designated. The Member making the request shall bear all costs and expenses incurred in any inspection, examination or audit made on such Member's behalf. Confidential Information obtained pursuant to this Section 3.05 shall be subject to the provisions of Section 3.06. 3.06 CONFIDENTIAL INFORMATION. (a) Except as permitted by Section 3.06(b), (i) each Member shall keep confidential all Confidential Information and shall not disclose any Confidential Information to any Person, including any of its Affiliates, and (ii) each Member shall use the Confidential Information only in connection with the Company. (b) Notwithstanding Section 3.06(a), but subject to the other provisions of this Section 3.06, a Member may make the following disclosures and uses of Confidential Information: (i) disclosures to another Member in connection with the Company; (ii) disclosures and uses that are approved by the Management Committee; (iii) disclosures to an Affiliate of such Member on a "need to know" basis in connection with the Company, if such Affiliate has agreed to abide by the terms of this Section 3.06; (iv) disclosures to a Person that is not a Member or an Affiliate of a Member, if such Person has been retained to provide services by the Member in connection with the Company or such Member's Membership Interest and has agreed to abide by the terms of this Section 3.06; 12 13 (v) disclosures to lenders, potential lenders or other Persons providing financing to the Company and potential purchasers of equity interests in the Company, so long as such Persons have agreed to abide by the terms of this Section 3.06; (vi) disclosures to any independent system operator or its consultants and representatives in connection with the conduct of the businesses of South Central; (vii) disclosures to Governmental Authorities that are necessary to operate the businesses of South Central; (viii) disclosures that a Member is legally compelled to make by deposition, interrogatory, request for documents, subpoena, civil investigative demand, order of a court of competent jurisdiction, or similar process, or otherwise by Law or securities exchange requirements; provided, however, that, prior to any such disclosure, such Member shall, to the extent legally permissible: (A) provide the Management Committee with prompt notice of such requirements so that one or more of the Members may seek a protective order or other appropriate remedy or waive compliance with the terms of this Section 3.06(b)(vii); (B) consult with the Management Committee on the advisability of taking steps to resist or narrow such disclosure; and (C) cooperate with the Management Committee and with the other Members in any attempt one or more of them may make to obtain a protective order or other appropriate remedy or assurance that confidential treatment will be afforded the Confidential Information; and in the event such protective order or other remedy is not obtained, or the other Members waive compliance with the provisions hereof, such Member agrees (I) to furnish only that portion of the Confidential Information that the other Members are advised by counsel to the disclosing Member is legally required and (II) to exercise all reasonable efforts to obtain assurance that confidential treatment will be accorded such Confidential Information. (c) Each Member shall take such precautionary measures as may be required to ensure (and such Member shall be responsible for) compliance with this Section 3.06 by any of its Affiliates, and its and their directors, officers, employees and agents, and other Persons to which it may disclose Confidential Information in accordance with this Section 3.06. (d) A Terminated Member shall promptly destroy (and provide a certificate of destruction to the Company with respect to) or return to the Company, as directed by the Management Committee, all Confidential Information in its possession. Notwithstanding the immediately-preceding sentence, a Terminated Member may, subject to the other provisions of this Section 3.06, retain and use Confidential Information for the limited purpose of preparing such Terminated Member's tax returns and defending audits, investigations and proceedings relating thereto. 13 14 (e) The Members agree that no adequate remedy at law exists for a breach or threatened breach of any of the provisions of this Section 3.06, the continuation of which unremedied will cause the Company and the other Members to suffer irreparable harm. Accordingly, the Members agree that the Company and the other Members shall be entitled, in addition to other remedies that may be available to them, to immediate injunctive relief from any breach of any of the provisions of this Section 3.06 and to specific performance of their rights hereunder, as well as to any other remedies available at law or in equity. (f) The obligations of the Members under this Section 3.06 shall terminate on the third anniversary of the end of the Term. 3.07 LIABILITY TO THIRD PARTIES. No Member shall be liable for the debts, obligations or liabilities of the Company. 3.08 WITHDRAWAL. A Member may not withdraw or resign from the Company. ARTICLE 4 CAPITAL CONTRIBUTIONS 4.01 INITIAL CAPITAL CONTRIBUTIONS. Contemporaneously with the execution by such Member of this Agreement, each Member shall make the Capital Contributions described for that Member in Exhibit A. 4.02 SUBSEQUENT CAPITAL CONTRIBUTIONS. Without creating any rights in favor of any third party, each Member shall contribute to the Company, in cash, on or before the date specified as hereinafter described, that Member's Sharing Ratio of all monies that in the unanimous judgment of the Management Committee are necessary to enable the Company to acquire additional businesses for South Central and to cause the existing businesses of South Central to be properly operated and maintained and to pay and perform their respective costs, expenses, obligations, and liabilities. The Management Committee shall notify each other Member of the need for Capital Contributions pursuant to this Section 4.02 when appropriate, which notice must include a statement in reasonable detail of the proposed uses of the Capital Contributions and a date (which date may be no earlier than the fifth Business Day following each Member's receipt of its notice) before which the Capital Contributions must be made. Notices for Capital Contributions must be made to all Members in accordance with their Sharing Ratios. 4.03 FAILURE TO CONTRIBUTE. (a) If a Member does not contribute, within 10 Days of the date required, all or any portion of a Capital Contribution that Member is required to make as provided in this Agreement, the other Members may cause the Company to exercise, on notice to that Member (the "Non-Contributing Member"), one or more of the following remedies: (i) taking such action (including court proceedings) as the other Members may deem appropriate to obtain payment by the Non-Contributing Member of the portion of the Non-Contributing Member's Capital Contribution that is in default, together with interest thereon at the Default Rate from the date that the Capital Contribution was due until the date that it is made, all at the cost and expense of the Non-Contributing Member; 14 15 (ii) permitting the other Members in proportion to their Sharing Ratios or in such other percentages as they may agree (the "Lending Member," whether one or more), to advance the portion of the Non-Contributing Member's Capital Contribution that is in default, with the following results: (A) the sum advanced constitutes a loan from the Lending Member to the Non-Contributing Member and a Capital Contribution of that sum to the Company by the Non-Contributing Member pursuant to the applicable provisions of this Agreement, (B) the principal balance of the loan and all accrued unpaid interest thereon is due and payable in whole on the tenth Day after written demand therefor by the Lending Member to the Non-Contributing Member, (C) the amount lent bears interest at the Default Rate from the Day that the advance is deemed made until the date that the loan, together with all interest accrued on it, is repaid to the Lending Member, (D) all distributions from the Company that otherwise would be made to the Non-Contributing Member (whether before or after dissolution of the Company) instead shall be paid to the Lending Member until the loan and all interest accrued on it have been paid in full to the Lending Member (with payments being applied first to accrued and unpaid interest and then to principal), (E) the payment of the loan and interest accrued on it is secured by a security interest in the Non-Contributing Member's Membership Interest, as more fully set forth in Section 4.03(b), and (F) the Lending Member has the right, in addition to the other rights and remedies granted to it pursuant to this Agreement or available to it at Law or in equity, to take any action (including court proceedings) that the Lending Member may deem appropriate to obtain payment by the Non-Contributing Member of the loan and all accrued and unpaid interest on it, at the cost and expense of the Non-Contributing Member; (iii) exercising the rights of a secured party under the Uniform Commercial Code, as more fully set forth in Section 4.03(b); or (iv) exercising any other rights and remedies available at Law or in equity. In addition, the failure to make such contributions shall constitute a Default by the Non-Contributing Member, and the other Members shall have the rights set forth in Article 9 with respect to such Default. (b) Each Member grants to the Company, and to each Lending Member with respect to any loans made by the Lending Member to that Member as a Non-Contributing Member pursuant to Section 4.03(a)(ii), as security, equally and ratably, for the payment of 15 16 all Capital Contributions that Member has agreed to make and the payment of all loans and interest accrued on them made by Lending Members to that Member as a Non-Contributing Member pursuant to Section 4.03(a)(ii), a security interest in and a general lien on its Membership Rights and the proceeds thereof, all under the Uniform Commercial Code. On any default in the payment of a Capital Contribution or in the payment of such a loan or interest accrued on it, the Company or the Lending Member, as applicable, is entitled to all the rights and remedies of a secured party under the Uniform Commercial Code with respect to the security interest granted in this Section 4.03(b). Each Member shall execute and deliver to the Company and the other Members all financing statements and other instruments that the Lending Member may request to effectuate and carry out the preceding provisions of this Section 4.03(b). At the option of a Lending Member, this Agreement or a carbon, photographic, or other copy hereof may serve as a financing statement. 4.04 LOANS. If the Company does not have sufficient cash to pay its obligations, any Member(s) that may agree to do so with the consent of the Management Committee may advance all or part of the needed funds to or on behalf of the Company. An advance described in this Section 4.04 constitutes a loan from the Member to the Company, bears interest at a rate determined by the Management Committee from the date of the advance until the date of payment, and is not a Capital Contribution. 4.05 RETURN OF CONTRIBUTIONS. Except as expressly provided herein, a Member is not entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is not a liability of the Company or of any Member. A Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return any Member's Capital Contributions. 4.06 CAPITAL ACCOUNTS. A Capital Account shall be established and maintained for each Member. Each Member's Capital Account shall be increased by (a) the amount of money contributed by that Member to the Company, (b) the fair market value of property contributed by that Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Section 752 of the Code), and (c) allocations to that Member of Company income and gain (or items thereof), including income and gain exempt from tax and income and gain described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding income and gain described in Treasury Regulation Section 1.704-1(b)(4)(i), and shall be decreased by (d) the amount of money distributed to that Member by the Company, (e) the fair market value of property distributed to that Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Section 752 of the Code), (f) allocations to that Member of expenditures of the Company described (or treated as described) in Section 705(a)(2)(B) of the Code, and (g) allocations of Company loss and deduction (or items thereof), including loss and deduction described in Treasury Regulation Section 1.704-1(b)(2)(iv)(g), but excluding items described in (f) above and loss or deduction described in Treasury Regulation Section 1.704-1(b)(4)(i) or 1.704-1(b)(4)(iii). The Members' Capital Accounts shall also be maintained and adjusted as permitted by the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f) and as required by the other provisions of Treasury Regulation Sections 1.704-1(b)(2)(iv) and 1.704-1(b)(4), including adjustments to reflect the allocations to the Members of depreciation, depletion, amortization, and gain or loss as computed for book purposes rather than the allocation of the corresponding items as computed for tax purposes, as required by Treasury Regulation Section 1.704-1(b)(2)(iv)(g). Thus, the Members' Capital Accounts shall be increased or decreased to reflect a revaluation of the 16 17 Company's property on its books based on the fair market value of the Company's property on the date of adjustment immediately prior to (A) the contribution of money or other property to the Company by a new or existing Member as consideration for a Membership Interest or an increased Sharing Ratio, (B) the distribution of money or other property by the Company to a Member as consideration for a Membership Interest, or (C) the liquidation of the Company. A Member that has more than one Membership Interest shall have a single Capital Account that reflects all such Membership Interests, regardless of the class of Membership Interests owned by such Member and regardless of the time or manner in which such Membership Interests were acquired. Upon the Disposition of all or a portion of a Membership Interest, the Capital Account of the Disposing Member that is attributable to such Membership Interest shall carry over to the Assignee in accordance with the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(l). ARTICLE 5 DISTRIBUTIONS AND ALLOCATIONS 5.01 DISTRIBUTIONS OR BILLINGS. Distributions to the Members shall be made only to all simultaneously in proportion to their respective Sharing Ratios (at the time the amounts of such distributions are determined), and distributions shall be made only in such aggregate amounts and at such times as shall be determined by the Management Committee and as are permitted by the Loan Documents. When so permitted, the Management Committee shall endeavor to distribute to the Members, on or before the last day of each calendar month, or more often if approved by the Management Committee, the estimated amount of any cash available for such calendar month (net of any adjustments, if any, made to reflect the actual cash available for the preceding calendar month). 5.02 DISTRIBUTIONS ON DISSOLUTION AND WINDING UP. Upon the dissolution and winding up of the Company, after adjusting the Capital Accounts for all distributions made under Section 5.01 and all allocations under Article 5, all available proceeds distributable to the Members as determined under Section 11.02 shall be distributed to all of the Members to the extent of the Members' positive Capital Account balances. 5.03 ALLOCATIONS. (a) For purposes of maintaining the Capital Accounts pursuant to Section 4.06 and for income tax purposes, except as provided in Section 5.03(b), each item of income, gain, loss, deduction and credit of the Company shall be allocated to the Members in accordance with their Sharing Ratios. (b) For income tax purposes, income, gain, loss, and deduction with respect to property contributed to the Company by a Member or revalued pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall be allocated among the Members in a manner that takes into account the variation between the adjusted tax basis of such property and its book value, as required by Section 704(c) of the Code and Treasury Regulation Section 1.704-1(b)(4)(i), using the remedial allocation method permitted by Treasury Regulation Section 1.704-3(d). 5.04 VARYING INTERESTS. All items of income, gain, loss, deduction or credit shall be allocated, and all distributions shall be made, to the Persons shown on the records of the Company to have been Members as of the last calendar day of the period for which the allocation or distribution is to be made. Notwithstanding the foregoing, if during any taxable year there is a change in any 17 18 Member's Sharing Ratio, the Members agree that their allocable shares of such items for the taxable year shall be determined on any method determined by the Management Committee to be permissible under Code Section 706 and the related Treasury Regulations to take account of the Members' varying Sharing Ratios. ARTICLE 6 MANAGEMENT 6.01 MANAGEMENT BY MEMBERS. Except as described below in Sections 6.03 and 6.05, the management of the Company is fully vested in the Members, acting exclusively in their membership capacities. To facilitate the orderly and efficient management of the Company, the Members shall act (a) collectively as a "committee of the whole" pursuant to Section 6.02, or (b) through the delegation from time to time of certain responsibility and authority to particular Members pursuant to Section 6.03. No Member has the right, power or authority to act for or on behalf of the Company, to do any act that would be binding on the Company, or to incur any expenditures on behalf of the Company, except in accordance with the immediately preceding sentence. Decisions or actions taken in accordance with the provisions of this Agreement shall constitute decisions or actions by the Company and shall be binding on each Member, Representative, Officer and employee of the Company. 6.02 MANAGEMENT COMMITTEE. All Members shall act collectively through meetings as a "committee of the whole" which is hereby named the "Management Committee." The Management Committee shall conduct its affairs in accordance with the following provisions and the other provisions of this Agreement: (a) REPRESENTATIVES. (i) DESIGNATION. To facilitate the orderly and efficient conduct of Management Committee meetings, each Member shall notify the other Members, from time to time, of the identity of two of its officers, employees or agents who will represent it at such meetings (each a "Representative"). In addition, each Member may (but shall have not obligation to) notify the other Members, from time to time, of the identity of other officers, employees or agents who will represent it at any meeting that the Member's Representatives are unable to attend (each an "Alternate Representative"). (The term "Representative" shall also refer to any Alternate Representative that is actually performing the duties of the applicable Representative.). The initial Representatives of each Member are set forth on Exhibit A. A Member may designate different Representatives or Alternate Representatives for any meeting of the Management Committee by notifying each of the other Members at least three Business Days prior to the scheduled date for such meeting; provided, however, that if giving such advance notice is not feasible, then such new Representatives or Alternate Representatives shall present written evidence of their authority at the commencement of such meeting. (ii) AUTHORITY. Each Representative shall have the full authority to act on behalf of the Member that designated such Representative; the action of a Representative at a meeting (or through a written consent) of the Management Committee shall bind the Member that designated such Representative; and the other Members shall be entitled to rely upon such action without further inquiry or 18 19 investigation as to the actual authority (or lack thereof) of such Representative. In addition, the act of an Alternate Representative shall be deemed the act of the Representative for which such Alternate Representative is acting, without the need to produce evidence of the absence or unavailability of such Representative. (iii) DISCLAIMER OF DUTIES; INDEMNIFICATION. EACH REPRESENTATIVE SHALL REPRESENT, AND OWE DUTIES TO, ONLY THE MEMBER THAT DESIGNATED SUCH REPRESENTATIVE (THE NATURE AND EXTENT OF SUCH DUTIES BEING AN INTERNAL CORPORATE AFFAIR OF SUCH MEMBER), AND NOT TO THE COMPANY, ANY OTHER MEMBER OR REPRESENTATIVE, OR ANY OFFICER OR EMPLOYEE OF THE COMPANY. THE PROVISIONS OF SECTION 6.04 SHALL ALSO INURE TO THE BENEFIT OF EACH MEMBER'S REPRESENTATIVES. THE COMPANY SHALL INDEMNIFY, PROTECT, DEFEND, RELEASE AND HOLD HARMLESS EACH REPRESENTATIVE FROM AND AGAINST ANY CLAIMS ASSERTED BY OR ON BEHALF OF ANY PERSON (INCLUDING ANOTHER MEMBER), OTHER THAN THE MEMBER THAT DESIGNATED SUCH REPRESENTATIVE, THAT ARISE OUT OF, RELATE TO OR ARE OTHERWISE ATTRIBUTABLE TO, DIRECTLY OR INDIRECTLY, SUCH REPRESENTATIVE'S SERVICE ON THE MANAGEMENT COMMITTEE, OTHER THAN SUCH CLAIMS ARISING OUT OF THE FRAUD OR WILLFUL MISCONDUCT OF SUCH REPRESENTATIVE. (iv) ATTENDANCE. Each Member shall use all reasonable efforts to cause its Representatives or Alternate Representatives to attend each meeting of the Management Committee, unless its Representatives are unable to do so because of a "force majeure" event or other event beyond his reasonable control, in which event such Member shall use all reasonable efforts to cause its Representatives or Alternate Representatives to participate in the meeting by telephone pursuant to Section 6.02(h). (b) CHAIRMAN AND SECRETARY. One of the Representatives will be designated as Chairman of the Management Committee, in accordance with this Section 6.02(b), to preside over meetings of the Management Committee. The Management Committee shall also designate a Secretary of the Management Committee, who need not be a Representative. (c) PROCEDURES. The Secretary of the Management Committee shall maintain written minutes of each of its meetings, which shall be submitted for approval no later than the next regularly-scheduled meeting. The Management Committee may adopt whatever rules and procedures relating to its activities as it may deem appropriate, provided that such rules and procedures shall not be inconsistent with or violate the provisions of this Agreement. (d) TIME AND PLACE OF MEETINGS. The Management Committee shall meet quarterly, subject to more or less frequent meetings upon approval of the Management Committee. Notice of, and an agenda for, all Management Committee meetings shall be provided by the Chairman to all Members at least ten Days prior to the date of each meeting, together with proposed minutes of the previous Management Committee meeting (if such minutes have not been previously ratified). Special meetings of the Management Committee 19 20 may be called at such times, and in such manner, as any Member deems necessary. Any Member calling for any such special meeting shall notify the Chairman, who in turn shall notify all Members of the date and agenda for such meeting at least ten Days prior to the date of such meeting. Such ten-day period may be shortened by the Management Committee. All meetings of the Management Committee shall be held at a location designated by the Chairman. Attendance of a Member at a meeting of the Management Committee shall constitute a waiver of notice of such meeting, except where such Member attends the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. (e) QUORUM. The presence of one Representative designated by each Member shall constitute a quorum for the transaction of business at any meeting of the Management Committee. (f) VOTING. Except as provided otherwise in this Agreement, (i) voting at any meeting of the Management Committee shall be according to the Members' respective Sharing Ratios, and (ii) the affirmative vote of Members holding a majority of the Sharing Ratios shall constitute the act of the Management Committee. (g) ACTION BY WRITTEN CONSENT. Any action required or permitted to be taken at a meeting of the Management Committee may be taken without a meeting, without prior notice, and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by Members that could have taken the action at a meeting of the Management Committee at which all Members entitled to vote on the action were represented and voted. (h) MEETINGS BY TELEPHONE. Members may participate in and hold such meeting by means of conference telephone, video conference or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such a meeting shall constitute presence in person at such meeting, except where a Member participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. (i) SUBCOMMITTEES. The Management Committee may create such subcommittees, delegate to such subcommittees such authority and responsibility, and rescind any such delegations, as it may deem appropriate. (j) OFFICERS. The Management Committee may designate one or more Persons to be Officers of the Company. Any Officers so designated shall have such titles and, subject to the other provisions of this Agreement, have such authority and perform such duties as the Management Committee may specifically delegate to them and shall serve at the pleasure of the Management Committee. 6.03 DELEGATION TO PARTICULAR MEMBER. The Management Committee may delegate to one or more Members such authority and duties as the Management Committee may deem advisable. Decisions or actions taken by any such Member in accordance with the provisions of this Agreement shall constitute decisions or actions by the Company and shall be binding on each Member, Representative, Officer and employee of the Company. Any delegation pursuant to this Section 6.03 may be revoked at any time by the Management Committee. With respect to duties 20 21 discharged hereunder by a Member (a) such Member may discharge such duties through the personnel of a Affiliate of such Member, and (b) unless the Members otherwise agree, the Company shall compensate such Member (or its Affiliate, as applicable) for the performance of such duties in an amount equal to the man-hours expended by the personnel of such Member (or its Affiliate) multiplied by the applicable rate(s) shown on Exhibit B (which rates each shall escalate on the first day of each calendar year during the term hereof by an amount which is 5% of the rate applicable during the prior calendar year), and shall reimburse such Member for all out of pocket costs incurred by such Member in discharging such duties. In addition, prior to performing any such duties, the performing Member shall provide to the other Member for approval an estimate of man-hours and types of personnel required to perform the delegated duties and a schedule for the performance of the delegated duties and for other costs associated therewith, and shall promptly inform the other Member of any variance from the budget or schedule. 6.04 AFFILIATE AGREEMENTS; CONFLICTS OF INTEREST. Subject to any other agreement between the Members (and their respective Affiliates, as applicable), a Member or an Affiliate of a Member may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including ones in competition with the Company, with no obligation to offer to the Company, any other Member or any Affiliate of another Member the right to participate therein. The Company may transact business with any Member or Affiliate thereof, provided the terms of those transactions are approved by the Management Committee or expressly contemplated by this Agreement. Without limiting the generality of the foregoing, the Members recognize and agree that they and their respective Affiliates currently engage in certain activities involving the generation, transmission, distribution, marketing and trading of electricity and other energy products (including futures, options, swaps, exchanges of future positions for physical deliveries and commodity trading), and the gathering, processing, storage and transportation of such products, as well as other commercial activities related to such products, and that these and other activities by Members and their Affiliates may be made possible or more profitable by reason of the Company's activities (herein referred to as "Outside Activities"). The Members agree that (i) no Member or Affiliate of a Member shall be restricted in its right to conduct, individually or jointly with others, for its own account any Outside Activities, and (ii) no Member or its Affiliates shall have any duty or obligation, express or implied, to account to, or to share the results or profits of such Outside Activities with, the Company, any other Member or any Affiliate of any other Member, by reason of such Outside Activities. 6.05 UNANIMOUS CONSENT REQUIRED FOR CERTAIN ACTION. Any other provision of this Agreement to the contrary notwithstanding, the unanimous consent of the Members, and at least one Independent Member, shall be required to: (a) File a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to the Company, or take any action that would result in such an event occurring with respect to South Central. (b) Cause the dissolution, liquidation, consolidation, merger or sale of substantially all of the assets of the Company or South Central. (c) Cause or permit the Company to engage in any other activity other than those set forth in Section 2.04. (d) Amend this Agreement in any manner that would have a material adverse 21 22 impact on any creditor of the Company. 6.06 CERTAIN ACTIONS PROHIBITED. So long as the Company has any indebtedness outstanding, (a) the Company shall not be dissolved, liquidated, consolidated or merged with any other entity, nor shall this Agreement be amended in any manner that would have a material adverse impact on the holders of such indebtedness, and (b) notwithstanding the failure of the Members to continue the existence of the Company as provided in Section 2.06 during such period, no action shall be taken by the Company or any of the Members that shall cause any collateral for such indebtedness to be liquidated or that would adversely affect the rights of the holders of such indebtedness or their agents to exercise their rights under any security documents relating thereto or to retain such collateral until such indebtedness is paid in full or otherwise completely discharged. 6.07 DISCLAIMER OF DUTIES AND LIABILITIES. (a) NO MEMBER SHALL OWE ANY DUTY (INCLUDING ANY FIDUCIARY DUTY) TO THE OTHER MEMBERS OR TO THE COMPANY, OTHER THAN THE DUTIES THAT ARE EXPRESSLY SET FORTH IN THIS AGREEMENT. (b) NO MEMBER SHALL BE LIABLE (WHETHER IN CONTRACT, TORT OR OTHERWISE) FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES. (c) THE OBLIGATIONS OF THE MEMBERS UNDER THIS AGREEMENT ARE OBLIGATIONS OF THE MEMBERS ONLY, AND NO RECOURSE SHALL BE AVAILABLE AGAINST ANY OFFICER, DIRECTOR OR AFFILIATE OF ANY MEMBER, EXCEPT AS PERMITTED UNDER APPLICABLE LAW. 6.08 INDEMNIFICATION. Each Member shall indemnify, protect, defend, release and hold harmless each other Member, and such other Member's Representatives, Affiliates, and their respective directors, officers, employees and agents from and against any Claims asserted by or on behalf of any Person (including another Member) that arise out of, relate to or are otherwise attributable to, directly or indirectly, a breach by the indemnifying Member of this Agreement, or the negligence, gross negligence or willful misconduct of the indemnifying Member in connection with this Agreement; provided, however, that this Section 6.08 shall not apply to any Claim or other matter for which a Member (or its Representative) has no liability or duty, or is indemnified or released, pursuant to Section 6.02(a)(iii), or 6.07. ARTICLE 7 TAXES 7.01 TAX RETURNS. The Tax Matters Member shall prepare and timely file (on behalf of the Company) all federal, state and local tax returns required to be filed by the Company. Each Member shall furnish to the Tax Matters Member all pertinent information in its possession relating to the Company's operations that is necessary to enable the Company's tax returns to be timely prepared and filed. The Company shall bear the costs of the preparation and filing of its returns. 7.02 TAX ELECTIONS. The Company shall make the following elections on the appropriate tax returns: 22 23 (a) to adopt as the Company's fiscal year the calendar year; (b) to adopt the accrual method of accounting; (c) if a distribution of the Company's property as described in Code Section 734 occurs or upon a transfer of Membership Interest as described in Code Section 743 occurs, on request by notice from any Member, to elect, pursuant to Code Section 754, to adjust the basis of the Company's properties; (d) to elect to amortize the organizational expenses of the Company ratably over a period of 60 months as permitted by Section 709(b) of the Code; and (e) any other election the Management Committee may deem appropriate. Neither the Company nor any Member shall make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law and no provision of this Agreement (including Section 2.07) shall be construed to sanction or approve such an election. 7.03 TAX MATTERS MEMBER. (a) South Central shall be the "tax matters partner" of the Company pursuant to Section 6231(a)(7) of the Code (the "Tax Matters Member"). At the request of each other Member, the Tax Matters Member shall take such action as may be necessary to cause, to the extent possible, such other Member to become a "notice partner" within the meaning of Section 6223 of the Code. The Tax Matters Member shall inform each other Member of all significant matters that may come to its attention in its capacity as Tax Matters Member by giving notice thereof on or before the fifth Business Day after becoming aware thereof and, within that time, shall forward to each other Member copies of all significant written communications it may receive in that capacity. (b) The Tax Matters Member shall take no action without the authorization of the Management Committee, other than such action as may be required by Law. Any cost or expense incurred by the Tax Matters Member in connection with its duties, including the preparation for or pursuance of administrative or judicial proceedings, shall be paid by the Company. (c) The Tax Matters Member shall not enter into any extension of the period of limitations for making assessments on behalf of the Members without first obtaining the consent of the Management Committee. The Tax Matters Member shall not bind any Member to a settlement agreement without obtaining the consent of such Member. Any Member that enters into a settlement agreement with respect to any Company item (as described in Code Section 6231(a)(3)) shall notify the other Members of such settlement agreement and its terms within 90 Days from the date of the settlement. (d) No Member shall file a request pursuant to Code Section 6227 for an administrative adjustment of Company items for any taxable year without first notifying the other Members. If the Management Committee consents to the requested adjustment, the 23 24 Tax Matters Member shall file the request for the administrative adjustment on behalf of the Members. If such consent is not obtained within 30 Days from such notice, or within the period required to timely file the request for administrative adjustment, if shorter, any Member, including the Tax Matters Member, may file a request for administrative adjustment on its own behalf. Any Member intending to file a petition under Code Sections 6226, 6228 or other Code Section with respect to any item involving the Company shall notify the other Members of such intention and the nature of the contemplated proceeding. In the case where the Tax Matters Member is the Member intending to file such petition on behalf of the Company, such notice shall be given within a reasonable period of time to allow the other Members to participate in the choosing of the forum in which such petition will be filed. (e) If any Member intends to file a notice of inconsistent treatment under Code Section 6222(b), such Member shall give reasonable notice under the circumstances to the other Members of such intent and the manner in which the Member's intended treatment of an item is (or may be) inconsistent with the treatment of that item by the other Members. ARTICLE 8 BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS 8.01 MAINTENANCE OF BOOKS. (a) The Management Committee shall keep or cause to be kept at the principal office of the Company or at such other location approved by the Management Committee complete and accurate books and records of the Company, supporting documentation of the transactions with respect to the conduct of the Company's business and minutes of the proceedings of its Members and the Management Committee, and any other books and records that are required to be maintained by applicable Law. (b) The books of account of the Company shall be (i) maintained on the basis of a fiscal year that is the calendar year, (ii) maintained on an accrual basis in accordance with generally accepted accounting principles, consistently applied, and (iii) audited by the Certified Public Accountants at the end of each calendar year. 8.02 REPORTS. (a) With respect to each calendar year, the Management Committee shall prepare and deliver to each Member: (i) Within 120 Days after the end of such calendar year, a profit and loss statement and a statement of cash flows for such year, a balance sheet and a statement of each Member's Capital Account as of the end of such year, together with a report thereon of the Certified Public Accountants; and (ii) Such federal, state and local income tax returns and such other accounting, tax information and schedules as shall be necessary for the preparation by each Member on or before July 15 following the end of each calendar year of its income tax return with respect to such year. 24 25 (b) Within 15 Business Days after the end of each calendar month, the Management Committee shall cause to be prepared and delivered to each Member, with an appropriate certificate of the Person authorized to prepare the same (provided that the Management Committee may change the financial statements required by this Section 8.02(b) to a quarterly basis or may make such other change therein as it may deem appropriate): (i) A profit and loss statement and a statement of cash flows for such month (including sufficient information to permit the Members to calculate their tax accruals), for the portion of the calendar year then ended; (ii) A balance sheet and a statement of each Member's Capital Account as of the end of such month and the portion of the calendar year then ended; and (iii) A statement comparing the actual financial status and results of the Company as of the end of or for such month and the portion of the calendar year then ended with the budgeted or forecasted status and results as of the end of or for such respective periods. (c) The Management Committee shall also cause to be prepared and delivered to each Member such other reports, forecasts, studies, budgets and other information as the Management Committee may request from time to time. 8.03 BANK ACCOUNTS. Funds of the Company shall be deposited in such banks or other depositories as shall be designated from time to time by the Management Committee. All withdrawals from any such depository shall be made only as authorized by the Management Committee and shall be made only by check, wire transfer, debit memorandum or other written instruction. ARTICLE 9 BUYOUT OPTION 9.01 BUYOUT EVENTS. This Article 9 shall apply to any of the following events (each a "Buyout Event"): (a) a Member shall dissolve or become Bankrupt; or (b) a Member shall commit a Default. In each case, the Member with respect to whom a Buyout Event has occurred is referred to herein as the "Affected Member." 9.02 PROCEDURE. If a Buyout Event occurs and is not cured within 30 Business Days of the Affected Member's receipt of notice thereof from another Member (or such shorter period (not less than 10 Business Days) as may be reasonable under the circumstances and set forth in such notice), then each of the other Members shall have the option to acquire the Membership Interest of the Affected Member (or to cause it to be acquired by a third party designated by the other Members), in accordance with procedures that are substantively equivalent to those set forth in Section 3.03(b)(iii) (and with the Members exercising such preferential right also being referred to 25 26 herein as "Purchasing Members"). 9.03 PURCHASE PRICE; TERMS AND METHOD OF PAYMENT. The purchase price for a Membership Interest being purchased pursuant to this Article 9 (the "Purchase Price") shall be determined in the following manner. The Affected Member and the Purchasing Members shall attempt to agree upon the fair market value of the applicable Membership Interest and the terms and method of payment of such amount. If those Members do not reach such agreement on or before the 30th Day following the exercise of the option, any such Member, by notice to the others, may require the determination of fair market value and the terms and method of payment to be made by the Arbitrator pursuant to Article 10. 9.04 CLOSING. If an option to purchase is exercised in accordance with the other provisions of this Article 9, the closing of such purchase shall occur on the 30th Day after the determination of the Fair Market Value pursuant to Section 9.03 (or, if later, the fifth Business Day after the receipt of all applicable regulatory and governmental approvals to the purchase), and shall be conducted in a manner substantively equivalent to that set forth in Section 3.03. 9.05 TERMINATED MEMBER. Upon the occurrence of a closing under Section 9.04, the following provisions shall apply to the Affected Member (now a "Terminated Member"): (a) The Terminated Member shall cease to be a Member immediately upon the occurrence of the closing. (b) As the Terminated Member is no longer a Member, it will no longer be entitled to receive any distributions (including liquidating distributions) or allocations from the Company, and neither it nor its Representative shall be entitled to exercise any voting or consent rights or to receive any further information (or access to information) from the Company. (c) The Terminated Member must pay to the Company all amounts owed to it by such Member. (d) The Terminated Member shall remain obligated for all liabilities it may have under this Agreement or otherwise with respect to the Company that accrue prior to the closing. (f) The Sharing Ratio of the Terminated Member shall be allocated among the purchasing Members in the proportion of the total Purchase Price paid by each. ARTICLE 10 DISPUTE RESOLUTION 10.01 DISPUTES. This Article 10 shall apply to any dispute arising under or related to this Agreement (whether arising in contract, tort or otherwise, and whether arising at law or in equity), including (a) any dispute regarding the construction, interpretation, performance, validity or enforceability of any provision of this Agreement or whether any Person is in compliance with, or breach of, any provisions of this Agreement, and (b) the applicability of this Article 10 to a particular dispute. Notwithstanding the foregoing, this Article 10 shall not apply to any matters that, pursuant to the provisions of this Agreement, are to be resolved by a vote of the Members (including 26 27 through the Management Committee); provided, however, that if a vote, approval, consent, determination or other decision must, under the terms of this Agreement, be made (or withheld) in accordance with a standard other than Sole Discretion (such as a reasonableness standard), then the issue of whether such standard has been satisfied may be a dispute to which this Article 10 applies. Any dispute to which this Article 10 applies is referred to herein as a "Dispute." With respect to a particular Dispute, each Member that is a party to such Dispute is referred to herein as a "Disputing Member." The provisions of this Article 10 shall be the exclusive method of resolving Disputes. 10.02 NEGOTIATION TO RESOLVE DISPUTES. If a Dispute arises, either Disputing Member may initiate the dispute-resolution procedures of this Article 10 by delivering a notice (a "Dispute Notice") to the other Disputing Members. Within 10 Days of delivery of a Dispute Notice, each Disputing Member shall designate a representative, and such representatives shall promptly meet (whether by phone or in person) in a good faith attempt to resolve the Dispute. If such representatives can resolve the Dispute, such resolution shall be reported in writing and shall be binding upon the Disputing Members. If such representatives are unable to resolve the Dispute within 30 Days following the delivery of the Dispute Notice (or such other period as such representatives may agree), or if a Disputing Member fails to appoint a representative within 10 Days of delivery following the delivery of the Dispute Notice, then any Disputing Member may take such Dispute to litigation. ARTICLE 11 DISSOLUTION, WINDING-UP AND TERMINATION 11.01 DISSOLUTION. The Company shall dissolve and its affairs shall be wound up on the first to occur of the following events (each a "Dissolution Event"): (a) the unanimous consent of the Members; or (b) entry of a decree of judicial dissolution of the Company under Section 18-802 of the Act. 11.02 WINDING-UP AND TERMINATION. (a) On the occurrence of a Dissolution Event, the Management Committee shall select one Member to act as liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act. The costs of winding up shall be borne as a Company expense. Until final distribution, the liquidator shall continue to operate the Company properties with all of the power and authority of the Members. The steps to be accomplished by the liquidator are as follows: (i) as promptly as possible after dissolution and again after final winding up, the liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company's assets, liabilities, and operations through the last calendar day of the month in which the dissolution occurs or the final winding up is completed, as applicable; (ii) the liquidator shall discharge from Company funds all of the Indebtedness and other debts, liabilities and obligations of the Company (including all expenses incurred in winding up and any loans described in Section 4.03) or 27 28 otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine); and (iii) all remaining assets of the Company shall be distributed to the Members as follows: (A) the liquidator may sell any or all Company property, including to Members, and any resulting gain or loss from each sale shall be computed and allocated to the Capital Accounts of the Members in accordance with the provisions of Article 5; (B) with respect to all Company property that has not been sold, the fair market value of that property shall be determined and the Capital Accounts of the Members shall be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the Capital Accounts previously would be allocated among the Members if there were a taxable disposition of that property for the fair market value of that property on the date of distribution; and (C) Company property (including cash) shall be distributed among the Members in accordance with Section 5.02; and those distributions shall be made by the end of the taxable year of the Company during which the liquidation of the Company occurs (or, if later, 90 Days after the date of the liquidation). (b) The distribution of cash or property to a Member in accordance with the provisions of this Section 11.02 constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Membership Interest and all the Company's property and constitutes a compromise to which all Members have consented pursuant to Section 18-502(b) of the Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds. 11.03 DEFICIT CAPITAL ACCOUNTS. No Member will be required to pay to the Company, to any other Member or to any third party any deficit balance that may exist from time to time in the Member's Capital Account. 11.04 CERTIFICATE OF CANCELLATION. On completion of the distribution of Company assets as provided herein, the Members (or such other Person or Persons as the Act may require or permit) shall file a certificate of cancellation with the Secretary of State of Delaware, cancel any other filings made pursuant to Section 2.05, and take such other actions as may be necessary to terminate the existence of the Company. Upon the filing of such certificate of cancellation, the existence of the Company shall terminate (and the Term shall end), except as may be otherwise provided by the Act or other applicable Law. ARTICLE 12 GENERAL PROVISIONS 12.01 OFFSET. Whenever the Company is to pay any sum to any Member, any amounts that 28 29 Member owes the Company may be deducted from that sum before payment. 12.02 NOTICES. Except as expressly set forth to the contrary in this Agreement, all notices, requests or consents provided for or permitted to be given under this Agreement must be in writing and must be delivered to the recipient in person, by courier or mail or by facsimile or other electronic transmission. A notice, request or consent given under this Agreement is effective on receipt by the Member to receive it; provided, however, that a facsimile or other electronic transmission that is transmitted after the normal business hours of the recipient shall be deemed effective on the next Business Day. All notices, requests and consents to be sent to a Member must be sent to or made at the addresses given for that Member on Exhibit A or in the instrument described in Section 3.03(b)(iv)(A)(II) or 3.04, or such other address as that Member may specify by notice to the other Members. Any notice, request or consent to the Company must be given to all of the Members. Whenever any notice is required to be given by Law, the Delaware Certificate or this Agreement, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 12.03 ENTIRE AGREEMENT; SUPERSEDING EFFECT. This Agreement constitutes the entire agreement of the Members and their Affiliates relating to the Company and the transactions contemplated hereby and supersedes all provisions and concepts contained in all prior contracts or agreements between the Members or any of their Affiliates with respect to the Company and the transactions contemplated hereby, whether oral or written. 12.04 PRESS RELEASES. Each Member agrees that it shall not (and shall cause its Affiliates not to), without the other Members' consent, issue a press release or have any contact with or respond to the news media with any sensitive or Confidential Information, except as required by securities or similar laws applicable to a Member and its Affiliates. Any press release by a Member or its Affiliates with respect to any sensitive or Confidential Information shall be subject to review and approval by the other Party, which approval shall not be unreasonably withheld. 12.05 EFFECT OF WAIVER OR CONSENT. Except as otherwise provided in this Agreement, a waiver or consent, express or implied, to or of any breach or default by any Member in the performance by that Member of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that Member of the same or any other obligations of that Member with respect to the Company. Except as otherwise provided in this Agreement, failure on the part of a Member to complain of any act of any Member or to declare any Member in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Member of its rights with respect to that default until the applicable statute-of-limitations period has run. 12.06 AMENDMENT OR RESTATEMENT. This Agreement or the Delaware Certificate may be amended or restated only by a written instrument executed (or, in the case of the Delaware Certificate, approved) by all of the Members. 12.07 BINDING EFFECT. Subject to the restrictions on Dispositions set forth in this Agreement, this Agreement is binding on and shall inure to the benefit of the Members and their respective successors and permitted assigns. 12.08 GOVERNING LAW; SEVERABILITY. This Agreement is governed by and shall be construed in accordance with the Law of the State of Delaware, excluding any conflict-of-laws rule 29 30 or principle that might refer the governance or the construction of this Agreement to the Law of another jurisdiction. In the event of a direct conflict between the provisions of this Agreement and any mandatory, non-waivable provision of the Act, such provision of the Act shall control. NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Mataczynski --------------------------- Name: Craig A. Mataczynski --------------------------- Title: President --------------------------- 30 31 EXHIBIT A Members - -------
Member Capital Contribution Number of Units Percentage Ownership - ------ -------------------- --------------- -------------------- NRG South Central $1,000.00 1,000 100% Generating LLC
Designated Representatives to Management Committee: - -------------------------------------------------- NRG South Central Generating LLC: Craig Mataczynski Alan Williams 31 EX-4.1 13 y57012ex4-1.txt TRUST INDENTURE 1 Exhibit 4.1 TRUST INDENTURE between NRG SOUTH CENTRAL GENERATING LLC, as the Issuer LOUISIANA GENERATING LLC, as the Subsidiary Guarantor and THE CHASE MANHATTAN BANK as Bond Trustee and THE CHASE MANHATTAN BANK as Depositary Bank ------------------------------------ Dated as of March 30, 2000 ------------------------------------ 8.962% Senior Secured Series A Bonds Due 2016 9.479% Senior Secured Series B Bonds Due 2024 2 TABLE OF CONTENTS
Page ARTICLE 1 DEFINITIONS AND CONSTRUCTION; INDENTURE TO CONSTITUTE CONTRACT Section 1.1 Definitions; Construction 2 Section 1.2 Indenture to Constitute Contract 3 Section 1.3 Conflict with Trust Indenture Act 3 Section 1.4 Beneficial Holders 4 ARTICLE 2 THE BONDS Section 2.1 Authorization, Amount, Terms and Issuance of Bonds 4 Section 2.2 Authorization and Terms of the Initial Bonds 4 Section 2.3 Additional Bonds 6 Section 2.4 Record Dates 9 Section 2.5 Form of Bonds 9 Section 2.6 Maintenance of Offices and Agencies 12 Section 2.7 Transfer and Exchange of Bonds 15 Section 2.8 Execution 22 Section 2.9 Authentication and Delivery 23 Section 2.10 Mutilated, Destroyed, Lost or Stolen Bonds 24 Section 2.11 Temporary Bonds 25 Section 2.12 Cancellation and Destruction of Surrendered Bonds 25 Section 2.13 Disposition of Bond Proceeds of Initial Bonds 26 Section 2.14 Payment of Principal and Interest; Principal and Interest Rights Preserved 26 Section 2.15 Sources of Payments Limited; Rights and Liabilities of the Issuer 27 Section 2.16 Allocation of Principal and Interest 28 Section 2.17 Parity of Bonds 28
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Page ARTICLE 3 REDEMPTION OF BONDS Section 3.1 Redemption at the Option of the Issuer or the Holders 28 Section 3.2 Mandatory Redemption 29 Section 3.3 Redemption Account 31 Section 3.4 Prepayment of Guarantor Loans 31 Section 3.5 Notice of Redemption 32 Section 3.6 Bonds Payable on Redemption Date 33 Section 3.7 Selection of Bonds to be Redeemed 33 Section 3.8 Bonds Redeemed in Part 34 Section 3.9 Change of Control 34 ARTICLE 4 COVENANTS Section 4.1 Reporting Requirements 36 Section 4.2 Existence; Governmental Approvals; Compliance with Applicable Laws 38 Section 4.3 Title to Assets 38 Section 4.4 Payment of Taxes and Claims 38 Section 4.5 Books and Records 39 Section 4.6 Right of Inspection 39 Section 4.7 Use of Proceeds; Depositary Accounts 39 Section 4.8 Performance of Transaction Documents 39 Section 4.9 Rating 40 Section 4.10 Rule 144A Information; Other Information 40 Section 4.11 Auditors 40 Section 4.12 Operation of its Assets 40 Section 4.13 Insurance 40 Section 4.14 Third Party Consents 41 Section 4.15 Permitted Indebtedness 41 Section 4.16 Permitted Liens 42 Section 4.17 Guarantees 42 Section 4.18 Business Activities 42 Section 4.19 Assignment of Obligations; Additional Agreements 43 Section 4.20 Fundamental Changes; Sale of Assets 43 Section 4.21 Investments; Transactions with Affiliates 44 Section 4.22 Finance Documents; Project Documents 46 Section 4.23 Restricted Payments 46
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Page Section 4.24 Investment Company Act 46 Section 4.25 Taxation 47 Section 4.26 Further Assurances 47 ARTICLE 5 EVENTS OF DEFAULT; REMEDIES Section 5.1 Events of Default 47 Section 5.2 Remedies Upon an Indenture Event of Default 51 Section 5.3 Specific Remedies 53 Section 5.4 Judicial Proceedings Instituted by Bond Trustee 53 Section 5.5 Control by Holders 55 Section 5.6 Waiver of Defaults and Events of Default 55 Section 5.7 Limitation on Suits by Holders 55 Section 5.8 Undertaking to Pay Court Costs 56 Section 5.9 Unconditional Right to Receive Payment 57 Section 5.10 Application of Monies Collected by Bond Trustee 57 Section 5.11 Waiver of Stay and Extension Laws 57 Section 5.12 Remedies Cumulative; Delay or Omission Not Waiver 58 Section 5.13 The Intercreditor Agreement 58 Section 5.14 Limitation on Holders' Bankruptcy Rights 59 ARTICLE 6 THE DEPOSITARY ACCOUNTS Section 6.1 Procedures Governing Accounts 59 Section 6.2 Establishment of Accounts 61 Section 6.3 Security Interest 61 Section 6.4 Termination 61 Section 6.5 Revenue Account 62 Section 6.6 Debt Service Reserve Account 63 Section 6.7 Restricted Payments 64 Section 6.8 Investment of Monies 65 Section 6.9 Disposition of Monies Upon Retirement of Bonds and Additional Bonds 66 Section 6.10 Account Balance Statements 66 Section 6.11 Trigger Events 66
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Page ARTICLE 7 ACTS OF HOLDERS Section 7.1 Acts of Holders 67 Section 7.2 Purposes for Which Holders' Meeting May Be Called 69 Section 7.3 The Issuer and Holders May Call Meeting 70 Section 7.4 Persons Entitled to Vote at Meeting 70 Section 7.5 Determination of Voting Rights; Conduct and Adjournment of Meeting 70 Section 7.6 Counting Votes and Recording Action of Meeting 71 Section 7.7 Bonds Owned by Certain Persons Deemed Not Outstanding 72 ARTICLE 8 SUPPLEMENTAL INDENTURES Section 8.1 Amendments and Supplements to Indenture Without Consent of Holders 72 Section 8.2 Amendments and Supplements to Indenture With Consent of Holders 74 Section 8.3 Amendment of Guarantor Loan Agreement or Guarantor Notes 75 Section 8.4 Bond Trustee Authorized to Join in Amendments and Supplements; Reliance on Counsel 76 Section 8.5 Effect of Supplemental Indentures 76 Section 8.6 Conformity with Trust Indenture Act 76 Section 8.7 Reference in Bonds to Supplemental Indentures 76 ARTICLE 9 SATISFACTION AND DISCHARGE; DEFEASANCE Section 9.1 Satisfaction and Discharge of Bonds and Indenture 77 Section 9.2 Defeasance 79 Section 9.3 Survival of Obligations 81 Section 9.4 Application of Trust Money 81 Section 9.5 Unclaimed Monies 81 Section 9.6 Indemnity for US Government Obligations 82 Section 9.7 Reinstatement 82 ARTICLE 10 THE BOND TRUSTEE Section 10.1 Certain Duties and Responsibilities of Bond Trustee 82
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Page Section 10.2 Certain Rights of Bond Trustee 84 Section 10.3 Notice of Defaults 85 Section 10.4 Not Responsible for Recitals or Issuance of Bonds 86 Section 10.5 May Hold Bonds 86 Section 10.6 Monies Held in Trust 86 Section 10.7 Compensation; Reimbursement; Indemnification 87 Section 10.8 Eligibility 88 Section 10.9 Resignation and Removal; Appointment of Successor 88 Section 10.10 Acceptance of Appointment by Successor Bond Trustee 90 Section 10.11 Merger, Conversion, Consolidation or Succession to Business 91 Section 10.12 Authorization 91 Section 10.13 Disqualification; Conflicting Interests 91 Section 10.14 Trustee's Application for Instructions from the Company 91 ARTICLE 11 HOLDERS' LISTS AND REPORTS BY BOND TRUSTEE Section 11.1 Names and Addresses of Holders 93 Section 11.2 Bond Trustee to Furnish Other Information 93 ARTICLE 12 MISCELLANEOUS PROVISIONS Section 12.1 Third Party Beneficiaries 93 Section 12.2 Severability 93 Section 12.3 Substitute Notice 94 Section 12.4 Notice to Rating Agencies 94 Section 12.5 Notices 94 Section 12.6 Successors and Assigns 95 Section 12.7 Section Headings 95 Section 12.8 Counterparts 95 Section 12.9 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial 95 Section 12.10 Legal Holidays 96 Section 12.11 Limitation of Liability 97 Section 12.12 Entire Agreement 97 Section 12.13 All Payments in US Dollars 97 Section 12.14 Trust Indenture Act 97 Section 12.15 Communication Among Holders 98
v 7 Section 12.16 Officers' Certificates and Opinions of Counsel 98 Section 12.17 Form of Certificates and Opinions Delivered to Bond Trustee 99
vi 8 Table of Schedules, Appendices and Exhibits SCHEDULE I AMORTIZATION OF PRINCIPAL SCHEDULE II ACCOUNT INFORMATION SCHEDULE III NOTICE ADDRESSES SCHEDULE IV ASSETS SPECIFICALLY HELD FOR RESALE SCHEDULE 4.16 LIENS SCHEDULE 4.17 GUARANTEES SCHEDULE 4.21 INVESTMENTS APPENDIX A DEFINITIONS EXHIBIT A FORM OF FACE OF BOND EXHIBIT B FORM OF TERMS AND CONDITIONS OF BONDS EXHIBIT C FORM OF TRANSFER EXHIBIT D FORM OF TRANSFER RESTRICTION LEGEND EXHIBIT E FORM OF REGULATION S TRANSFER CERTIFICATE EXHIBIT F FORM OF RULE 144 TRANSFER CERTIFICATE EXHIBIT G FORM OF RULE 144A TRANSFER CERTIFICATE EXHIBIT H FORM OF REQUEST FOR INFORMATION FROM THE BOND TRUSTEE EXHIBIT I SUBORDINATED INDEBTEDNESS vii 9 TRUST INDENTURE This TRUST INDENTURE, dated as of March 30, 2000 (this "Indenture"), by and between NRG SOUTH CENTRAL GENERATING, LLC, a limited liability company formed under the laws of the State of Delaware (the "Issuer"), LOUISIANA GENERATING LLC, a limited liability company formed under the laws of the State of Delaware (the "Subsidiary Guarantor") (solely with respect to Sections 6.1, 6.3, 6.5 and 6.7) and THE CHASE MANHATTAN BANK, a New York banking corporation, as trustee (in such capacity, together with its successors in such capacity, the "Bond Trustee") and depositary bank (in such capacity, together with its successors in such capacity, the "Depositary Bank"). W I T N E S S E T H: WHEREAS, the Issuer has been formed for the sole purposes of (a) issuing Bonds under this Indenture and incurring other Permitted Issuer Indebtedness, (b) owning the membership interests in the Subsidiary Guarantor and any other Subsidiaries or additional assets as permitted hereunder and (c) entering into those transactions incident hereto; and WHEREAS, in furtherance of such purpose, the Issuer has determined to issue the Bonds, initially to be issued in the aggregate principal amount of $800,000,000; WHEREAS, the Issuer has entered into the Guarantor Loan Agreement pursuant to which the proceeds of the Bonds will be loaned to the Subsidiary Guarantor to be used, among other things, (i) to finance the costs of the Acquisition and (ii) to pay financing fees and all other fees, expenses, costs and taxes associated with the Acquisition; WHEREAS, the Subsidiary Guarantor shall repay the Guarantor Loans to the Issuer in amounts sufficient to enable the Issuer to pay from time to time the principal of, premium (if any), and interest on all Bonds at any time issued and outstanding under this Indenture according to their tenor and to pay other costs of the Issuer and the Bond Trustee incurred in connection with the Bonds, this Indenture and the other Finance Documents; 10 WHEREAS, the Subsidiary Guarantor has guaranteed to the Bond Trustee the payment of principal, premium (if any), interest and other amounts due from the Issuer under this Indenture with respect to the Bonds; and WHEREAS, the execution and delivery of the Bonds and of this Indenture have been duly authorized and all things necessary to make the Bonds, when executed by the Issuer and authenticated by the Bond Trustee, valid and binding legal obligations of the Issuer and to make this Indenture a valid and binding agreement have been done. NOW, THEREFORE, for and in consideration of the premises, the covenants herein contained and the purchase of the Bonds by the Holders thereof, it is mutually covenanted and agreed, for the benefit of the parties hereto and the equal and proportionate benefit of all Holders, as follows: ARTICLE 1 DEFINITIONS AND CONSTRUCTION; INDENTURE TO CONSTITUTE CONTRACT Section 1.1 Definitions; Construction. (a) Capitalized terms used in this Indenture shall have the respective meanings given to such terms in Appendix A attached hereto, which Appendix A is hereby incorporated by reference herein. (b) The following principles of construction shall apply to this Indenture: (i) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (ii) all references in this Indenture to designated "Articles," "Sections," "Exhibits," and other subdivisions are to the designated Articles, Sections, Exhibits and other subdivisions of this Indenture; (iii) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; 2 11 (iv) unless otherwise expressly specified, any agreement, contract or document defined or referred to herein shall mean such agreement, contract or document as in effect as of the date hereof, as the same may thereafter be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof and of this Indenture and the other Finance Documents and including any agreement, contract or document in substitution or replacement of any of the foregoing; (v) unless the context clearly intends the contrary, pronouns having a masculine or feminine gender shall be deemed to include the other gender; (vi) any reference to any Person shall include its successors and assigns, and in the case of any Governmental Authority, any Person succeeding to its functions and capacities; and (vii) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meaning assigned to them therein. Section 1.2 Indenture to Constitute Contract. In consideration of the purchase and acceptance of any or all of the Bonds by those who shall hold the same from time to time, the provisions of this Indenture shall be part of the contract of the Issuer with the Holders of the Bonds, and shall be deemed to be and shall constitute contracts between the Issuer, the Bond Trustee and the Holders from time to time of the Bonds. The provisions, covenants and agreements herein set forth to be performed by or on behalf of the Issuer shall be for the equal and ratable benefit, protection and security of the Holders of any and all of the Bonds. All of the Bonds, regardless of the time or times of their issuance or maturity, shall be of equal rank without preference, priority or distinction of any of the Bonds over any other except as expressly provided in or pursuant to this Indenture. Section 1.3 Conflict with Trust Indenture Act. If any provision hereof, including without limitation, Section 5.13 hereof, limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply in this Indenture as so modified or to be excluded, as the case may be. 3 12 Section 1.4 Beneficial Holders. Each investor that executes and delivers to the Bond Trustee a "Form of Request for Information from the Bond Trustee" substantially in the form of Exhibit H hereto shall be deemed a "Beneficial Holder" of the Bonds and shall be treated as a Holder of the Bonds for all purposes hereunder. ARTICLE 2 THE BONDS Section 2.1 Authorization, Amount, Terms and Issuance of Bonds. (a) Bonds may be issued hereunder from time to time in one or more series (each such series, a "Series"). No Bonds may be issued under this Indenture except in accordance with this Article 2. The maximum principal amount of Bonds which may be issued, authenticated and delivered hereunder is not limited. The Initial Bonds shall be issued in denominations of $100,000 or any amount in excess thereof that is an integral multiple of $1,000. (b) "CUSIP" numbers (if then generally in use) may be printed on the Bonds and, if so, the Bond Trustee shall use CUSIP numbers in notices of redemption as a convenience to the Holders. Neither the Issuer nor the Bond Trustee shall have any responsibility for any defect in the CUSIP number that appears on any bond, check, advice of payment or redemption notice, and any such document may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the Issuer nor the Bond Trustee shall be liable for any inaccuracy in such numbers. The Issuer shall promptly notify the Bond Trustee in writing of any change in CUSIP numbers with respect to the Bonds. Section 2.2 Authorization and Terms of the Initial Bonds. (a) The Initial Bonds to be issued under this Indenture are hereby created and the Issuer may issue the Initial Bonds upon execution of this Indenture. The Initial Bonds shall be substantially in the form set forth in Exhibit A and contain substantially the terms and conditions set forth in Exhibit B. The Bond Trustee shall, at the Issuer's written request, authenticate the Initial Bonds and deliver them as specified in such request, without any further action by the Issuer. 4 13 (b) The Initial Bonds shall be dated as of the Closing Date, shall be issued in the aggregate principal amount set forth below and shall have a stated maturity date and bear interest as set forth below; provided that, pursuant to the terms and provisions of the Registration Rights Agreement, the interest rate of the Initial Bonds shall be increased by one half of one percent (0.50%) per annum from and after the date that a Registration Default occurs, and shall accrue to but not including the date on which such Registration Default shall cease to exist. Notice of the occurrence and cessation of any Registration Default and the date, if any, that a Registration Statement is declared effective shall be set forth in an Officer's Certificate of the Issuer delivered to the Bond Trustee and the Depositary within ten (10) Business Days after the Issuer has obtained knowledge of such event. If a Registration Default occurs subsequent to any Regular Record Date, the Person entitled to receive the increased amount of interest payable as a result of such Registration Default shall receive such additional interest on the Interest Payment Date relating to the next subsequent Regular Record Date. Bonds subsequently issued pursuant to Section 2.7 shall be dated as of the date of authentication thereof.
Series Interest Rate Stated Maturity Date Principal Amount ------ ------------- -------------------- ---------------- Series A Bonds 8.962% March 15, 2016 $500,000,000 Series B Bonds 9.479% September 15, 2024 $300,000,000
(c) Interest on the Initial Bonds shall accrue from the Closing Date and shall be paid semi-annually in arrears on each March 15 and September 15, commencing September 15, 2000 and concluding on the Maturity Date for such Series. Interest on the Bonds shall be computed on the basis of a three hundred sixty (360) day year consisting of twelve (12) thirty (30) day months. (d) Principal of the Initial Bonds shall be paid in an amount, and on the Payment Dates, as set forth on Schedule I hereto. (e) The principal of, premium (if any) and interest on the Bonds shall be payable in immediately available funds and in such coin or currency of the United States which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts. Payment of principal of, premium (if any) and interest on any Initial Bond shall be made by check or draft drawn on a bank having an office located in the United States and mailed on the relevant Payment Date to the Person in whose name such Initial Bond is registered at the close of business on the 5 14 Regular Record Date immediately preceding such Payment Date, at such Person's address as it appears on the Securities Register, or by wire transfer to an account maintained by such Person in the continental United States if the Bond Trustee shall have received written notice from such Person requesting such wire transfer and providing the appropriate wire transfer information at least fifteen (15) days prior to the relevant Regular Record Date; provided, however, that if and to the extent there shall be a default in the payment of principal, premium (if any) or interest due with respect to any Initial Bond on any Payment Date, such defaulted interest, premium (if any) and/or principal shall be paid to the Holder in whose name such Initial Bond is registered at the close of business on the Special Record Date determined by the Bond Trustee as provided in Section 2.4. The Issuer shall pay any reasonable administrative costs imposed by banks in connection with the making of payments by wire transfer. Section 2.3 Additional Bonds. (a) Additional Bonds may, upon satisfaction of the conditions set forth in this Section 2.3, be issued in the amounts and for the purposes permitted in this Section 2.3. All Additional Bonds shall bear such date or dates, bear such interest rate or rates, have such maturity dates, redemption dates and redemption premiums, be in such form and be issued at such prices as set forth in the Supplemental Indenture applicable to such Bonds. (b) Upon satisfaction of the applicable conditions set forth in this Section 2.3, the execution and delivery of an appropriate Supplemental Indenture in compliance with clause (e) of this Section 2.3, the execution and delivery of appropriate supplements, amendments or modifications to or of the Finance Documents (in respect of which the consent of the Bond Trustee and the Holders shall not be required), receipt by the Bond Trustee of the written consent of the Subsidiary Guarantor and any Additional Guarantor confirming that the Guarantee applies to the Outstanding Bonds and the Additional Bonds which the Issuer proposes to issue and receipt by the Depositary Bank of an Officer's Certificate from the Issuer confirming that moneys on deposit in the Debt Service Reserve Account or otherwise available pursuant to Acceptable Credit Support shall, in the aggregate, after giving effect to the issuance of such Additional Bonds, be equal to the Debt Service Reserve Required Balance (as such shall be increased to reflect payments due on the Additional Bonds), the Issuer shall execute Additional Bonds and deliver them to the Bond Trustee, and the Bond Trustee, upon the written request of the Issuer, shall authenticate such Additional Bonds and deliver them to the purchasers thereof as may be directed by the Issuer in writing, without any further action of the Issuer; provided, 6 15 however, that, notwithstanding anything to the contrary contained herein, no Additional Bonds shall be issued hereunder: (A) without the written consent of the Issuer; or (B) at any time when a Default or an Event of Default shall have occurred and be continuing or if such proposed issuance would, upon notice or passage of time, cause a Default or an Event of Default. (c) Upon the issuance of any Additional Bonds, the Issuer shall promptly provide the Bond Trustee with a revised Schedule I to this Indenture that will set forth the requirements for the payment of principal of and interest on such Additional Bonds. (d) Additional Bonds may be issued by the Issuer; provided that the Bond Trustee shall have received prior to such issuance an Officer's Certificate from the Issuer certifying that (i) each of the conditions set forth in Section 2.3(b) or the relevant Supplemental Indenture has been satisfied, (ii) no Default or Event of Default exists at the time of the issuance of the Additional Bonds and that such issuance will not cause a Default or an Event of Default and (iii) the incurrence of Indebtedness pursuant to the issuance of Additional Bonds shall comply with Section 4.15(c) subject to the applicable conditions described in such Section. (e) Prior to the issuance of Additional Bonds of any Series hereunder, the following shall be established in one or more Supplemental Indentures: (i) the title of the Additional Bonds of such Series (which shall distinguish the Additional Bonds of such Series from all other Bonds) and the form or forms of such Bonds of such Series; (ii) any limit upon the aggregate principal amount of the Additional Bonds of such Series that may be authenticated and delivered under this Indenture (except for Additional Bonds authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Bonds of such Series and except for Additional Bonds that, pursuant to the last sentence of Section 2.9, are deemed never to have been authenticated and delivered hereunder); 7 16 (iii) the date or dates on or as of which the Additional Bonds of such Series shall be dated; (iv) the date or dates on which the principal of the Additional Bonds of such Series is payable, the amounts of principal payable on such date or dates and the Regular Record Date for the determination of Holders to whom principal is payable; (v) the rate or rates at which the Additional Bonds of such Series shall bear interest or the method by which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the Payment Dates on which such interest shall be payable and the Regular Record Date for the determination of Holders to whom interest is payable and the basis of computation of interest, if other than as provided in Section 2.2(c); (vi) the place or places where the principal of, premium (if any) and interest on the Additional Bonds of such Series shall be payable, Additional Bonds of such Series may be surrendered for registration of transfer or exchange and notices and demands to or upon the Issuer in respect of the Additional Bonds of such Series and this Indenture may be served; (vii) the price or prices (including premium (if any)) at which, the period or periods within which and the terms and conditions upon which the Additional Bonds of such Series may be redeemed, in whole or in part, at the option of the Issuer; (viii) the obligation (if any) of the Issuer to redeem, purchase or repay Additional Bonds of such Series pursuant to any sinking fund or analogous provision or at the option of a Holder thereof and the price or prices at which, the period or periods within which and the terms and conditions upon which Additional Bonds of such Series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligations; (ix) if other than denominations of $100,000 and any integral multiple of $1,000 in excess thereof, the denominations in which Additional Bonds of such Series shall be issuable; (x) the restrictions or limitations (if any) on the transfer or exchange of the Additional Bonds of such Series, including, without limitation, with 8 17 respect to Bonds to be sold outside the United States pursuant to Regulation S or any other exemption under the Securities Act; (xi) the obligation (if any) of the Issuer to file a registration statement with respect to the Additional Bonds of such Series or to exchange the Additional Bonds of such Series for Additional Bonds registered pursuant to the Securities Act; (xii) any Authorized Agents with respect to the Additional Bonds of such Series; and (xiii) any other terms of such Series (which terms shall not be inconsistent with the provisions of this Indenture). Section 2.4 Record Dates. The Person in whose name any Bond is registered at the close of business on any Regular Record Date with respect to any Payment Date shall be entitled to receive the principal, premium (if any) and/or interest payable on such Payment Date notwithstanding the cancellation of such Bond upon any transfer or exchange thereof subsequent to such Regular Record Date and prior to such Payment Date; provided, however, that if and to the extent there is a default in the payment of the principal, premium (if any) and/or interest due on such Payment Date, such defaulted principal, premium (if any) and/or interest shall be paid pursuant to Section 2.14. Section 2.5 Form of Bonds. 2.5.1 Form Generally. The Initial Bonds and the Bond Trustee's certificate of authentication thereon shall be substantially in the form set forth in Exhibit A and shall contain substantially the terms and conditions set forth in Exhibit B, which exhibits are hereby incorporated in and expressly made a part of this Indenture. The Initial Bonds shall be issued in fully registered form, without interest coupons. Additional Bonds shall be substantially in the form and shall contain the terms established in one or more Supplemental Indentures relating to such Additional Bonds. Any Bond may have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or the relevant Supplemental Indenture and may have imprinted or otherwise reproduced thereon such legends or endorsements, not inconsistent with the provisions of this Indenture or the relevant Supplemental Indenture, as may be required to comply with Applicable Law or with any rules or regulations pursuant thereto, or with any rules of any 9 18 securities exchange or to conform to general usage, all as may, consistently herewith, be determined by the officers executing such Bond, such determination and approval to be evidenced by the execution and authentication thereof. The Bonds shall be numbered, lettered or otherwise distinguished in such manner or in accordance with such plan as the officers executing the Bonds may determine, as evidenced by the execution and authentication thereof. Certificated Bonds may be printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Certificated Bonds, as evidenced by the execution and authentication thereof. 2.5.2 Bonds Sold Pursuant to Rule 144A. Any Initial Bonds offered and sold in their initial distribution in reliance on Rule 144A to Qualified Institutional Buyers shall be issued in the form of a permanent global bond (the "Restricted Global Bond") (which may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate), duly executed by the Issuer and authenticated by the Bond Trustee as hereinafter provided. The Restricted Global Bond shall be registered in the name of the Depositary or its nominee and deposited with the Bond Trustee, at its principal Corporate Trust Office, as custodian for the Depositary. 2.5.3 Bonds Sold Pursuant to Regulation S. Any Initial Bonds offered and sold in their initial distribution in reliance on Regulation S shall be issued in the form of a permanent global bond (the "Unrestricted Global Bond" and together with the Restricted Global Bond, the "Global Bonds") (which may be represented by more than one certificate, if so required by the Depositary's rules regarding the maximum principal amount to be represented by a single certificate), duly executed by the Issuer and authenticated by the Bond Trustee as hereinafter provided. The Unrestricted Global Bond shall be registered in the name of the Depositary or its nominee and deposited with the Bond Trustee, at its Corporate Trust Office, as custodian for the Depositary, for credit to the respective accounts of Euroclear and Clearstream. Prior to the termination of the Regulation S Restricted Period, beneficial interests in the Unrestricted Global Bond may be held only through Euroclear and Clearstream. 2.5.4 Bonds Sold to Institutional Accredited Investors. Any Initial Bonds offered and sold in their initial distribution in reliance on an exemption from registration under the Securities Act (other than Rule 144A or Regulation S) to institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) of the Securities Act ("Accredited Investors") shall be issued in the form of Certificated Bonds. 10 19 2.5.5 Depositary. (a) The Issuer hereby appoints DTC to act as depositary (in such capacity, together with its successors in such capacity, the "Depositary") with respect to the Global Bonds. The Bond Trustee shall act as custodian of the Global Bonds for the Depositary. So long as the Depositary or its nominee is the registered owner of the Global Bonds, it shall be considered the Holder of the Bonds represented thereby for all purposes hereunder and under the Global Bonds, and neither any members of, or participants in, the Depositary ("Agent Members") nor any other Persons on whose behalf Agent Members may act or shall have any rights hereunder or with respect to the Global Bonds. Notwithstanding the foregoing, nothing herein shall (i) prevent the Issuer, the Bond Trustee or any agent of the Issuer or the Bond Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or its nominee, as the case may be, or (ii) impair, as between the Depositary, its Agent Members and any other Person on whose behalf an Agent Member may act, the operation of customary practices of such Persons governing the exercise of the rights of a Holder of any Bond. (b) The Issuer may remove or replace DTC or any successor as Depositary for any reason upon thirty (30) days' written notice to DTC or such successor (with a copy thereof to the Bond Trustee). The Holders shall have no right to a depositary for the Bonds. (c) Notwithstanding any other provision of this Indenture or the Bonds, so long as DTC or its nominee is the registered owner of the Bonds: (i) the provisions of the DTC Letter of Representations shall control over the provisions of this Indenture with respect to the matters covered thereby; (ii) presentation of Bonds to the Bond Trustee at redemption or at maturity shall be deemed made to the Bond Trustee when the right to exercise ownership rights in the Bonds through DTC or Agent Members is transferred by DTC on its books; and (iii) DTC may present notices, approvals, waivers or other communications required or permitted to be made by Holders under this Indenture on a fractionalized basis on behalf of some or all of those Persons entitled to exercise ownership rights in the Bonds through DTC or Agent Members. 11 20 Section 2.6 Maintenance of Offices and Agencies. 2.6.1 Registrar and Paying Agent. Unless otherwise permitted in the relevant Supplemental Indenture: (a) (i) the Issuer shall maintain in the Borough of Manhattan, the City of New York, an office or agency (the "Registrar") where Bonds may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Issuer in respect of the Bonds or under this Indenture may be served; (ii) the Issuer shall cause a register for the registration of the Bonds and of their transfer and exchange (the "Securities Register") to be kept at the office of the Registrar and (iii) the Issuer hereby initially appoints the Bond Trustee at its Corporate Trust Office as Registrar, and the Bond Trustee hereby accepts such appointment. (b) Unless otherwise permitted in the relevant Supplemental Indenture, there shall at all times be maintained in the Borough of Manhattan, the City of New York, and in such other places of payment, if any, as shall be specified for the Bonds in a related Supplemental Indenture, an office or agency (the "Paying Agent") where Bonds may be presented for payment of principal, premium (if any) and interest. The Issuer hereby initially appoints the Bond Trustee at its Corporate Trust Office as Paying Agent, and the Bond Trustee hereby accepts such appointment. (c) Whenever the Issuer shall appoint a Paying Agent other than the Bond Trustee, it shall cause, prior to such appointment, each such Paying Agent to execute and deliver to the Bond Trustee an instrument in which such Paying Agent shall agree with the Bond Trustee, subject to the provisions of this Section 2.6.1, that such Paying Agent shall: (i) hold all sums held by such Paying Agent for the payment of the principal of, premium (if any) or interest on the Bonds in trust for the benefit of the Holders or the Bond Trustee; (ii) give the Bond Trustee within five (5) days thereafter written notice of any default by the Issuer (or any other obligor upon the Bonds) in the making of any such payment of principal, premium (if any) or interest; and (iii) at any time during the continuance of any default by the Issuer or any other obligor in respect of the Bonds, upon the written request of the 12 21 Bond Trustee, forthwith pay to the Bond Trustee all sums so held in trust by such Paying Agent. (d) Notwithstanding any other provision of this Indenture, any payment required to be made to or received or held by the Bond Trustee may, to the extent authorized by written instructions of the Bond Trustee, be made to or received or held by any Paying Agent for the account of the Bond Trustee. (e) The Issuer shall give prompt written notice to the Bond Trustee of the location, and any change in the location, of the Registrar and Paying Agent. If at any time the Issuer shall fail to maintain a Registrar and/or Paying Agent or shall fail to furnish the Bond Trustee with the location thereof, presentation or surrender of Bonds for registration of transfer or exchange or for payment may be made or served at the Corporate Trust Office of the Bond Trustee in New York City. 2.6.2 Authenticating Agent. At any time when any Bonds remain Outstanding, the Bond Trustee may appoint an authenticating agent or agents (each an "Authenticating Agent") which shall be authorized to act on behalf of the Bond Trustee to authenticate Bonds issued upon original issuance, exchange, registration of transfer or partial redemption thereof or pursuant to Section 2.10, and Bonds so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Bond Trustee hereunder (it being understood that wherever reference is made in this Indenture to the authentication and delivery of Bonds by the Bond Trustee or the Bond Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Bond Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Bond Trustee by an Authenticating Agent). If an appointment of an Authenticating Agent shall be made pursuant to this Section 2.6.2, the Bonds may have endorsed thereon, in addition to the Bond Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This Bond is one of the Bonds referred to in the within-mentioned Indenture. ----------------------------------------- Trustee Dated: ----------------------------------- 13 22 By: -------------------------------------- Authorized Signatory 2.6.3 Authorized Agents Generally. (a) Any Registrar, Paying Agent or Authenticating Agent (each an "Authorized Agent") shall be a corporation or other entity organized and doing business under the laws of the United States, of any state or territory thereof or of the District of Columbia, be authorized under such laws to act as Registrar, Paying Agent or Authenticating Agent, as the case may be, be subject to supervision or examination by federal, state, territorial or District of Columbia authority and either have a combined capital and surplus of at least $100,000,000. If such corporation or other entity publishes reports of condition at least annually, pursuant to Applicable Law or to the requirements of said supervising or examining authority, then for purposes of this Section 2.6.3, the combined capital and surplus of such corporation or other entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authorized Agent shall cease to be eligible in accordance with the provisions of this Section 2.6.3, it shall resign immediately in the manner and with the effect hereinafter specified in clause (c) of this Section 2.6.3. (b) Any corporation or other entity into which any Authorized Agent may be merged or converted or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which any Authorized Agent shall be a party, or any corporation or other entity succeeding to all or substantially all of the corporate agency or corporate trust business of any Authorized Agent, shall be the successor of such Authorized Agent hereunder, provided such corporation or other entity shall be otherwise qualified and eligible under this Section 2.6.3, without the execution and filing of any instrument or any further act on the part of any of the parties hereto or such Authorized Agent or successor corporation or other entity. (c) Any Authorized Agent may at any time resign by giving written notice of resignation to the Bond Trustee and the Issuer. The Issuer may, and at the request of the Bond Trustee shall, terminate the agency of any Authorized Agent by giving written notice of such termination to such Authorized Agent and to the Bond Trustee. Upon the resignation or termination of any Authorized Agent or in case at any time any Authorized Agent shall cease to be eligible to hold its position under this Section 2.6.3 (when, in either case, no other Authorized Agent performing the functions of such former Authorized Agent shall have been appointed), the Issuer (or the Bond Trustee in the case of any Authenticating Agent) shall promptly appoint 14 23 one or more qualified successor Authorized Agents approved by the Bond Trustee to perform the functions of the Authorized Agent which has resigned or whose agency has been terminated or who shall have ceased to be eligible under this Section 2.6.3. The Issuer (or the Bond Trustee in the case of any Authenticating Agent) shall give written notice of any such appointment to all Holders in the manner provided in Section 12.5(b). (d) The Issuer shall pay to each Authorized Agent (except any Authenticating Agent) from time to time reasonable compensation for its services hereunder in amounts to be agreed upon by the Issuer and such Authorized Agent. Section 2.7 Transfer and Exchange of Bonds. Unless and until a Bond is transferred or exchanged pursuant to an effective registration statement under the Securities Act, the provisions set forth in this Section 2.7 shall apply to the transfer and exchange of such Bond. 2.7.1 Transfer and Exchange Generally. (a) The Bonds are transferable only upon the surrender thereof for registration of transfer. When a Bond is presented to the Registrar with a duly executed instrument of assignment and transfer substantially in the form of Exhibit C, the Registrar shall register the transfer as requested if such transfer complies with the provisions of this Section 2.7. Subject to Section 2.2(e), prior to the due presentation for registration of transfer of any Bond, the Person in whose name such Bond is registered shall be treated as the absolute owner of such Bond for the purpose of receiving payment of principal of, premium (if any) and interest on such Bond (whether or not such payment is overdue) and for all other purposes whatsoever, notwithstanding any notice to the contrary. Registration of transfer of any Bond by the Registrar shall be deemed to be an acknowledgment of such transfer by the Issuer. (b) When Bonds are presented to the Registrar with a written request to exchange such Bonds for Bonds of the same Series of any authorized denominations and of a like aggregate principal amount, the Registrar shall make the exchange as requested if such exchange complies with the provisions of this Section 2.7. The Registrar shall not be required (i) to issue, register the transfer of or exchange any Bond of any Series during a period beginning at the opening of fifteen (15) Business Days before the day of the mailing of a notice of redemption of Bonds of such Series selected for redemption under Article 3 and ending at the close of business on the day of such mailing or (ii) to issue, register the transfer of or exchange any Bond so 15 24 selected for redemption in whole or in part, except the unredeemed portion of any Bond redeemed in part. (c) Following any request for transfer or exchange of one or more Bonds made in compliance with clause (a) or (b), as the case may be, of this Section 2.7.1, the Issuer shall execute, and the Bond Trustee shall authenticate and deliver, one or more new Bonds of a like principal amount and in such authorized denominations as may be requested. No service charge shall be made for any registration of transfer or exchange of Bonds, but the Issuer may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with any transfer or exchange of Bonds; provided, however, that no such requirement of payment shall apply to exchanges made pursuant to Section 2.11 not involving any transfer. (d) Transfers or exchanges of the Global Bonds and beneficial interests therein shall be subject to the provisions of Section 2.7.2 and the rules of the Depositary (and Euroclear or Clearstream, if applicable). Transfers or exchanges of Certificated Bonds shall be subject to the provisions of Section 2.7.3. (e) Except as otherwise provided herein, the Global Bonds and each Certificated Bond shall bear the Transfer Restriction Legend. By its acceptance of any Bond bearing the Transfer Restriction Legend, whether upon original issuance or subsequent transfer, each Holder of such a Bond acknowledges the restrictions on transfer of such Bond set forth in this Indenture and in the Transfer Restriction Legend and agrees that it will transfer such Bond only as provided in this Indenture. Upon the specific written request of a Holder to remove the Transfer Restriction Legend, the Bond Trustee shall authenticate and deliver a Bond of the same Series with an equivalent principal amount not bearing the Transfer Restriction Legend if there is provided to the Issuer (which the Issuer shall confirm in writing to the Bond Trustee) evidence reasonably satisfactory to the Issuer (which may, at the Issuer's request, include an Opinion of Counsel) that neither the Transfer Restriction Legend nor the restrictions on transfer set forth therein are required to ensure compliance with the Securities Act. Upon a written request for the registration of transfer or exchange of a Bond bearing the Transfer Restriction Legend pursuant to an effective registration statement under the Securities Act and in accordance with any applicable securities laws of any state of the United States, the Registrar shall authenticate and deliver a Bond of the same Series with an equivalent principal amount not bearing the Transfer Restriction Legend. If the Transfer Restriction Legend has been removed from a Bond as provided in this clause (e), the transfer of such Bond shall 16 25 not be subject to the restrictions on transfer set forth in the Transfer Restriction Legend, and no other Bond issued in exchange for all or any part of such Bond shall bear the Transfer Restriction Legend unless the Issuer has reasonable cause to believe that such other Bond is a "restricted security" within the meaning of Rule 144 and instructs the Registrar in writing to cause the Transfer Restriction Legend to appear thereon. (f) All Bonds issued upon any transfer or exchange pursuant to the terms hereof shall be the valid obligations of the Issuer, evidencing the same debt, and shall be entitled to the same benefits under this Indenture as the Bonds surrendered upon such transfer or exchange. 2.7.2 Transfers and Exchanges of the Global Bonds and Beneficial Interests Therein. (a) Transfers of the Global Bonds shall be limited to transfers in whole, but not in part, to the Depositary, its successors or their respective nominees. So long as any Global Bond remains outstanding and is held by or on behalf of the Depositary, transfers and exchanges of beneficial interests in such Global Bond shall be made in accordance with the provisions of this Section 2.7.2 and in accordance with the rules and procedures of the Depositary to the extent applicable (the "Applicable Procedures"). (b) Any transfer of a beneficial interest in the Restricted Global Bond to a transferee that will take delivery in the form of a beneficial interest in the Unrestricted Global Bond prior to the termination of the Regulation S Restricted Period shall be registered, subject to the Applicable Procedures, only in accordance with this clause (b). At any time prior to the termination of the Regulation S Restricted Period, upon (i) receipt by the Registrar of (A) instructions given in accordance with the Applicable Procedures from the Depositary or its nominee on behalf of an owner of a beneficial interest in the Restricted Global Bond to transfer such beneficial interest to a Person that will take delivery in the form of a beneficial interest in the Unrestricted Global Bond, (B) a written order of the Depositary or its nominee given in accordance with the Applicable Procedures containing account and other information with respect to such transfer and (C) a certificate of the transferor of the beneficial interest in the Restricted Global Bond substantially in the form of Exhibit E, and (ii) satisfaction of all other conditions imposed by the Applicable Procedures, the Registrar shall (1) reflect in the Securities Register a decrease in the principal amount of the Restricted Global Bond and an increase in the principal amount of the Unrestricted Global Bond, each such adjustment to equal the principal amount of the beneficial interest transferred pursuant to this clause (d), and (2) instruct the Deposi- 17 26 tary to make the corresponding adjustment to its records and debit and credit the accounts of the appropriate Agent Members in accordance with the Applicable Procedures. (c) Any transfer of a beneficial interest in the Restricted Global Bond to a transferee that will take delivery in the form of a beneficial interest in the Unrestricted Global Bond subsequent to the termination of the Regulation S Restricted Period shall be registered, subject to the Applicable Procedures, only in accordance with this clause (c). At any time subsequent to the termination of the Regulation S Restricted Period, upon (i) receipt by the Registrar of (A) instructions given in accordance with the Applicable Procedures from the Depositary or its nominee on behalf of an owner of a beneficial interest in the Restricted Global Bond to transfer such beneficial interest to a Person that will take delivery in the form of a beneficial interest in the Unrestricted Global Bond, (B) a written order of the Depositary or its nominee given in accordance with the Applicable Procedures containing account and other information with respect to such transfer and (C) a certificate of the transferor of the beneficial interest in the Restricted Global Bond substantially in the form of Exhibit E (if transfer is made in reliance on Regulation S) or Exhibit F (if transfer is made in reliance on Rule 144), and (ii) satisfaction of all other conditions imposed by the Applicable Procedures, the Registrar shall (1) reflect in the Securities Register a decrease in the principal amount of the Restricted Global Bond and an increase in the principal amount of the Unrestricted Global Bond, each such adjustment to equal the principal amount of the beneficial interest transferred pursuant to this clause (c), and (2) instruct the Depositary to make the corresponding adjustment to its records and debit and credit the accounts of the appropriate Agent Members in accordance with the Applicable Procedures. (d) Any transfer of a beneficial interest in the Unrestricted Global Bond to a transferee that will take delivery in the form of a beneficial interest in the Restricted Global Bond, either prior or subsequent to the termination of the Regulation S Restricted Period, shall be registered, subject to the Applicable Procedures, only in accordance with this clause (d). At any time upon (i) receipt by the Registrar of (A) instructions given in accordance with the Applicable Procedures from the Depositary or its nominee on behalf of an owner of a beneficial interest in the Unrestricted Global Bond to transfer such beneficial interest to a Person that will take delivery in the form of a beneficial interest in the Restricted Global Bond, (B) a written order of the Depositary or its nominee given in accordance with the Applicable Procedures containing account and other information with respect to such transfer and (C) a certificate of the transferor of the beneficial interest in the Unrestricted Global Bond 18 27 substantially in the form of Exhibit G, and (ii) satisfaction of all other conditions imposed by and the Applicable Procedures, the Registrar shall (1) reflect in the Securities Register a decrease in the principal amount of the Unrestricted Global Bond and an increase in the principal amount of the Restricted Global Bond, each such adjustment to equal the principal amount of the beneficial interest transferred pursuant to this clause (d), and (2) instruct the Depositary to make the corresponding adjustment to its records and debit and credit the accounts of the appropriate Agent Members in accordance with the Applicable Procedures. (e) No restrictions shall apply with respect to the transfer or registration of transfer of (i) a beneficial interest in the Restricted Global Bond to a transferee that takes delivery in the form of a beneficial interest in the Restricted Global Bond or (ii) a beneficial interest in the Unrestricted Global Bond to a transferee that takes delivery in the form of a beneficial interest in the Unrestricted Global Bond; provided that any transfer described in this clause (e) shall be made in accordance with the Applicable Procedures. The Bond Trustee shall not be deemed to have knowledge of such transfers. (f) Persons holding beneficial interests in the Global Bonds may exchange such beneficial interests for one or more Certificated Bonds upon satisfaction of the conditions set forth in this clause (f) and clause (g) below. At any time upon (i) receipt by the Registrar of (A) instructions given in accordance with the Applicable Procedures from the Depositary or its nominee on behalf of an owner of a beneficial interest in a Global Bond to exchange such beneficial interest for one or more Certificated Bonds and (B) a written order of the Depositary or its nominee given in accordance with the Applicable Procedures containing account and other information with respect to such exchange, and (ii) satisfaction of all other conditions imposed by the Applicable Procedures, (1) the Registrar shall (x) reflect in the Securities Register a decrease in the principal amount of the appropriate Global Bond in an amount equal to the beneficial interest exchanged pursuant to this clause (f) and (y) instruct the Depositary to make the corresponding adjustment to its records and debit the account of the appropriate Agent Member in accordance with the Applicable Procedures, and (2) the Issuer shall execute and the Bond Trustee shall authenticate and deliver one or more Certificated Bonds of like tenor and amount bearing the Transfer Restriction Legend. At such time as all interests in a Global Bond have been exchanged for Certificated Bonds or cancelled, such Global Bond shall be cancelled by the Bond Trustee. 19 28 (g) Notwithstanding any contrary provision contained herein, Certificated Bonds shall be issued in exchange for the beneficial interests in the Global Bonds if at any time: (i) the Issuer advises the Bond Trustee in writing that the Depositary is unwilling or unable to continue as depositary for the Global Bonds or is no longer eligible to act as such and in each case the Issuer is unable to appoint a qualified successor depositary; (ii) the Issuer, at its option, elects to terminate the book-entry system through the Depositary with respect to the Global Bonds; or (iii) after the occurrence and continuance of an Indenture Event of Default, beneficial owners holding interests representing an aggregate principal amount of Bonds of not less than fifty-one percent (51%) of the Bonds represented by the Global Bonds advise the Bond Trustee in writing through the Depositary that the continuation of a book-entry system through the Depositary is no longer in such beneficial owners' best interests. Upon the occurrence of any of the events set forth in clauses (i) through (iii) immediately above, the Bond Trustee, upon receipt of written notice thereof and a list of all Persons that hold a beneficial interest in the Global Bonds, shall notify, through the appropriate Agent Members at the expense of the Issuer, all Persons that hold a beneficial interest in the Global Bonds of the issuance of Certificated Bonds. Upon surrender by the Bond Trustee, as custodian for the Depositary, of the Global Bonds and receipt from the Depositary of instructions for re-registration, the Issuer shall execute and the Bond Trustee, upon the written instructions of (A) in the case of the events set forth in clauses (i) and (ii) immediately above, the Issuer, or (B) in the case of the events set forth in clause (iii) immediately above, beneficial owners holding interests representing an aggregate principal amount of Bonds of not less than fifty-one percent (51%) of the Bonds represented by the Global Bonds, authenticate and deliver Certificated Bonds bearing the Transfer Restriction Legend; provided, however, that Certificated Bonds issued in exchange for beneficial interests in the Unrestricted Global Bond at any time subsequent to the termination of the Regulation S Restricted Period shall not, unless determined otherwise in accordance with Applicable Law, be required to bear the Transfer Restriction Legend. Certificated Bonds issued in exchange for beneficial interests in the Global Bonds pursuant to this clause (g) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from Agent Members or otherwise, shall instruct the Bond Trustee. 2.7.3 Transfers and Exchanges of Certificated Bonds. (a) Any transfer of a Certificated Bond bearing the Transfer Restriction Legend to a transferee that takes delivery in the form of one or more Certificated Bonds shall be registered only in accordance with this clause (a). Upon surrender of any Certificated Bond bearing the Transfer Restriction Legend at the office of the Registrar, together with (A) an 20 29 executed instrument of assignment and transfer of such Certificated Bond substantially in the form of Exhibit C and (B) a certificate of the transferor of such Certificated Bond (or of the transferee thereof in the case of a transfer made to an institutional Accredited Investor) substantially in the form of Exhibit E (if transfer is made pursuant to Regulation S), Exhibit F (if such transfer is made pursuant to Rule 144), or Exhibit G (if such transfer is made pursuant to Rule 144A), the Bond Trustee shall register such transfer and the Issuer shall execute and the Bond Trustee shall authenticate and deliver in the name of the transferee one or more Certificated Bonds of any authorized denomination in the same aggregate principal amount and of the same maturity as the transferred Certificated Bond, each such new Certificated Bond bearing the Transfer Restriction Legend; provided, however, that Certificated Bonds so delivered shall not be required to bear the Transfer Restriction Legend if there is provided to the Issuer (which the Issuer shall confirm in writing to the Bond Trustee) evidence reasonably satisfactory to the Issuer (which may, at the Issuer's request, include an Opinion of Counsel) that neither the Transfer Restriction Legend nor the restrictions on transfer set forth therein are required to ensure compliance with the Securities Act. (b) Any transfer of a Certificated Bond not bearing the Transfer Restriction Legend to a transferee that takes delivery in the form of one or more Certificated Bonds shall be registered only in accordance with this clause (b). Upon surrender of any Certificated Bond not bearing the Transfer Restriction Legend at the office of the Registrar, together with an executed instrument of assignment and transfer of such Certificated Bond substantially in the form of Exhibit C, (i) the Bond Trustee shall register such transfer and (ii) the Issuer shall execute and the Bond Trustee shall authenticate and deliver in the name of the transferee one or more Certificated Bonds of any authorized denomination in the same aggregate principal amount and of the same maturity as the transferred Certificated Bond. Each such new Certificated Bond may at the request of the transferee, but shall not be required to, bear the Transfer Restriction Legend. (c) Any transfer of a Certificated Bond bearing the Transfer Restriction Legend to a transferee that takes delivery in the form of a beneficial interest in a Global Bond shall be registered only in accordance with this clause (c). Upon (i) surrender of any Certificated Bond bearing the Transfer Restriction Legend at the office of the Registrar, together with (A) an executed instrument of assignment and transfer of such Certificated Bond substantially in the form of Exhibit C, (B) written instructions from the transferor that such Certificated Bond shall be registered in the name of the Depositary or its nominee and (C) a certificate of the transferor of such 21 30 Certificated Bond (or of the transferee in the case of a transfer to an institutional Accredited Investor) substantially in the form of Exhibit E (if the transferee will take delivery in the form of a beneficial interest in the Unrestricted Global Bond) or Exhibit G (if the transferee will take delivery in the form of a beneficial interest in the Restricted Global Bond) and (ii) satisfaction of all other conditions imposed by the Applicable Procedures, the Registrar shall (x) register such transfer and cancel such Certificated Bond, (y) reflect in the Securities Register an increase in the appropriate Global Bond in an amount equal to the Certificated Bond transferred pursuant to this clause (c) and (z) instruct the Depositary to make the corresponding adjustment to its records and credit the account of the appropriate Agent Member in accordance with the Applicable Procedures. (d) Any transfer of a Certificated Bond not bearing the Transfer Restriction Legend to a transferee that takes delivery in the form of a beneficial interest in a Global Bond shall be registered only in accordance with this clause (d). Upon (i) surrender of a Certificated Bond not bearing the Transfer Restriction Legend at the office of the Registrar, together with (A) an executed instrument of assignment and transfer of such Certificated Bond substantially in the form of Exhibit C and (B) written instructions from the transferor that such Certificated Bond shall be registered in the name of the Depositary or its nominee, and (ii) satisfaction of all other conditions imposed by the Applicable Procedures, the Registrar shall (x) register such transfer and cancel such Certificated Bond, (y) reflect in the Securities Register an increase in the appropriate Global Bond in an amount equal to the Certificated Bond transferred pursuant to this clause (d) and (z) instruct the Depositary to make the corresponding adjustment to its records and credit the account of the appropriate Agent Member in accordance with the Applicable Procedures. (e) Any exchange of a Certificated Bond for one or more Certificated Bonds in different authorized denominations shall be registered only in accordance with this clause (e). Upon surrender of a Certificated Bond at the office of the Registrar, together with a written request to exchange such Certificated Bond for one or more Certificated Bonds in different authorized denominations, (i) the Registrar shall register such exchange and (ii) the Issuer shall execute and the Bond Trustee shall authenticate and deliver in the name of the registered owner one or more Certificated Bonds in any authorized denomination with the same aggregate principal amount and maturity date. Section 2.8 Execution. (a) The Bonds shall be executed by an Authorized Officer of the Issuer. The signature of any such Authorized Officer shall be manual 22 31 or facsimile. Typographical and other minor errors or defects in any signature executing or purporting to execute the Bonds shall not affect the validity or enforceability of any Bond that has been duly authenticated and delivered by the Bond Trustee. (b) Any Bond executed pursuant to clause (a) of this Section 2.8 may be issued and shall be authenticated by the Bond Trustee, notwithstanding that any officer signing such Bond or whose facsimile signature appears thereon shall have ceased to hold office at the time of issuance or authentication or shall not have held office at the date of such Bond. With the delivery of this Indenture, the Issuer is furnishing to the Bond Trustee, and from time to time thereafter may furnish, an Officer's Certificate certifying the incumbency and specimen signatures of the Authorized Representatives. Until the Bond Trustee receives a subsequent Officer's Certificate, the Bond Trustee shall be entitled to conclusively rely on the last such Officer's Certificate delivered to it for purposes of determining the Authorized Representatives of the Issuer. Section 2.9 Authentication and Delivery. A Bond, or any exchange, transfer or replacement thereof, shall not be valid for any purpose until an Authorized Officer of the Bond Trustee or the Authenticating Agent manually signs the certificate of authentication on such Bond substantially in the form set forth in Exhibit A or as otherwise provided in the relevant Supplemental Indenture. Subject to the requirements set forth in this Section 2.9, such authentication shall be conclusive evidence, and the only evidence, that such Bond has been duly authenticated and delivered under this Indenture and that the Holder thereof is entitled to the benefit of the trust hereby created. The Bond Trustee shall, in accordance with a written order of the Issuer signed by two Authorized Officers, authenticate the Bonds at the initial issuance thereof and deliver them to the purchaser thereof upon payment to the Bond Trustee of the purchase price therefor without any further action by the Issuer. Any Bonds subsequently issued under this Indenture or any relevant Supplemental Indenture shall, in accordance with a written order of the Issuer signed by two Authorized Officers, be authenticated by the Bond Trustee or any Authenticating Agent appointed by the Bond Trustee, and such authentication shall, for all purposes of this Indenture, be deemed to be the authentication of and delivery by the Bond Trustee. Notwithstanding the foregoing, if any Bond shall have been authenticated and delivered hereunder but never issued or sold by the Issuer, and the Issuer shall deliver such Bond to the Bond Trustee for cancellation as provided in Section 2.12 23 32 together with a written statement (which need not comply with Section 12.17 and need not be accompanied by an Opinion of Counsel) stating that such Bond has never been issued or sold by the Issuer, for all purposes of this Indenture such Bond shall be deemed never to have been authenticated and delivered hereunder and shall never have been or be entitled to the benefits hereof. Section 2.10 Mutilated, Destroyed, Lost or Stolen Bonds. (a) If any Bond shall become mutilated, the Issuer shall execute, and the Bond Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to the Bond Trustee of such mutilated Bond for cancellation, and the Issuer or the Bond Trustee may require indemnity therefor. If any Bond shall be reported lost, stolen or destroyed, evidence as to the ownership and the loss, theft or destruction thereof shall be submitted to the Bond Trustee. If such evidence shall be satisfactory to both the Bond Trustee and the Issuer and indemnity satisfactory to both shall be given, the Issuer shall execute, and thereupon the Bond Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and denomination; provided that neither the Issuer, the Registrar nor the Bond Trustee has notice that such Bond has been acquired by a bona fide purchaser. If, after the delivery of such new Bond, a bona fide purchaser of the original Bond in lieu of which such new Bond was issued presents for payment such original Bond, the Issuer and the Bond Trustee shall be entitled to recover such new Bond from the Person to whom it was delivered or any Person taking therefrom, except a bona fide purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expenses incurred by the Issuer or the Bond Trustee in connection therewith. The cost of providing any substitute Bond under the provisions of this Section 2.10 shall be borne by the Holder for whose benefit such substitute Bond is provided. If any such mutilated, lost, stolen or destroyed Bond shall have matured or be about to mature, the Issuer may pay to the Holder thereof the principal amount of such Bond upon the maturity thereof and compliance with the aforesaid conditions by such Holder, without the issuance of a substitute Bond therefor, and likewise pay to the Holder the amount of the unpaid interest, if any, which would have been paid on a substitute Bond had one been issued. (b) Every substitute Bond issued pursuant to this Section 2.10 shall constitute an additional contractual obligation of the Issuer, whether or not the Bond alleged to have been mutilated, destroyed, lost or stolen shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionally with any and all other Bonds duly issued hereunder. 24 33 (c) All Bonds shall be held and owned upon the express condition that the foregoing provisions are, to the extent permitted by Applicable Law, exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other rights and remedies with respect thereto. Section 2.11 Temporary Bonds. Pending preparation of definitive Bonds, the Issuer may issue, and upon a written order of the Issuer signed by two Authorized Officers the Bond Trustee shall authenticate and deliver, in lieu of definitive Bonds, one or more temporary printed or typewritten Bonds in the form recited in this Indenture or any relevant Supplemental Indenture, in any authorized denomination. If temporary Bonds are issued, the Issuer shall cause definitive Bonds to be prepared without unreasonable delay. The Bond Trustee shall, in accordance with a written order of the Issuer signed by two Authorized Officers, authenticate and deliver definitive Bonds of such Series of authorized denominations and of like tenor in exchange and upon surrender for cancellation at the appropriate place of payment of an equal principal amount of temporary Bonds, without charge to the Holder of such Bonds. Until so exchanged, temporary Bonds shall in all respects be entitled to the same rights, remedies, security and other benefits under this Indenture and any relevant Supplemental Indenture as definitive Bonds. Section 2.12 Cancellation and Destruction of Surrendered Bonds. All Bonds surrendered for payment, redemption, credit against sinking fund payment or registration of transfer or exchange or deemed lost or stolen shall, if surrendered to any Person other than the Bond Trustee, be delivered to the Bond Trustee and may not be reissued or resold. The Issuer may at any time deliver to the Bond Trustee for cancellation any Bonds previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever. The Bond Trustee (and no one else) shall promptly cancel all Bonds surrendered for payment, redemption, credit against sinking fund payment or registration of transfer or exchange, and all Bonds surrendered for cancellation by the Issuer. All canceled Bonds held by the Bond Trustee shall be (a) disposed of by the Bond Trustee in accordance with the customary procedures of the Bond Trustee in effect from time to time and certification of their destruction shall be delivered to the Issuer or (b) held by the Bond Trustee in accordance with its standard retention policy in effect from time to time, unless the Issuer shall direct the Bond Trustee that they be returned to it. No Bonds shall be authenticated in lieu of or in exchange for any Bonds canceled as provided in this Section 2.12, except as expressly permitted by this Indenture. 25 34 Section 2.13 Disposition of Bond Proceeds of Initial Bonds. The Bond Proceeds shall, on the Closing Date, be deposited into the Escrow Account and shall be released only upon satisfaction of the conditions set forth in the Escrow Agreement. Upon release of the Bond Proceeds of the Initial Bonds from the Escrow Account, the Bond Trustee shall apply such proceeds to the account of the Issuer for loan by the Issuer to the Subsidiary Guarantor pursuant to the Guarantor Loan Agreement or otherwise in accordance with Section 4.7. Section 2.14 Payment of Principal and Interest; Principal and Interest Rights Preserved. Any principal of or interest on any Bond of any Series that is payable, but is not punctually paid or duly provided for, on any scheduled Payment Date of an installment of principal or payment of interest shall forthwith cease to be payable to the Holder on the relevant Regular Record Date and such defaulted principal or interest may be paid by the Issuer, at its election in each case, as provided in paragraph (a) or paragraph (b) below: (a) The Issuer may elect to make payment of all or any portion of such defaulted principal or interest to the Persons in whose names the Bonds of such Series (or their respective predecessor Bonds) in respect of which principal or interest is in default are registered at the close of business on a Special Record Date (such date, a "Special Record Date") for the payment of such defaulted principal or interest, which shall be fixed in the following manner. The Issuer shall notify the Bond Trustee and the Paying Agent in writing of the amount of defaulted principal or interest proposed to be paid on each Bond of such Series and the date of the proposed payment, and concurrently there shall be deposited with the Bond Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted principal or interest or there shall be made arrangements acknowledged by the Bond Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted principal or interest as provided in this paragraph. Thereupon, the Bond Trustee shall fix a Special Record Date for the payment of such defaulted principal or interest (together with other amounts payable with respect to such defaulted principal or interest) which shall not be more than fifteen (15) nor less than ten (10) days prior to the date of the proposed payment and not less than ten (10) days after the receipt by the Bond Trustee of the notice of the proposed payment. The Bond Trustee shall promptly notify the Issuer and the Registrar of such Special Record Date and, in the name and at the expense of the Issuer, shall cause notice of the proposed payment of such defaulted principal or interest and the Special Record Date therefor to be mailed, first class postage prepaid, to each Holder 26 35 of a Bond of such Series at such Holder's address as it appears in the Security Register, not less than ten (10) days prior to such Special Record Date. Notice of the proposed payment of such defaulted principal or interest and the Special Record Date therefor having been mailed as aforesaid, such defaulted principal or interest shall be paid to the Persons in whose names the Bonds of such Series (or their respective predecessor Bonds) are registered on such Special Record Date and shall no longer be payable pursuant to the following paragraph (b). (b) The Issuer may make, or cause to be made, payment of any defaulted principal or interest (together with other amounts payable with respect to such defaulted interest) in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Bonds in respect of which principal or interest is in default may be listed, and, upon such notice as may be required by such exchange, if, after notice given by the Issuer to the Bond Trustee of the proposed payment pursuant to this paragraph, such payment shall be deemed reasonable by the Bond Trustee. Subject to the foregoing provisions of this Section 2.14, each Bond delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Bond shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Bond. Section 2.15 Sources of Payments Limited; Rights and Liabilities of the Issuer. All payments of principal and premium, if any, and interest to be made in respect of the Bonds and this Indenture and any relevant Supplemental Indenture shall be made only from the payments from the revenues or other income of the Issuer, the Subsidiary Guarantor, any Additional Guarantor, the Collateral, any Acceptable Credit Support and the income and proceeds received by the Bond Trustee, the Depositary Bank or Collateral Agent therefrom. Each Holder, by its acceptance of a Bond, agrees that (a) it will look solely to the revenues or other income of the Issuer, the Subsidiary Guarantor, any Additional Guarantor, the Collateral, any Acceptable Credit Support and the income and proceeds received by the Bond Trustee, the Depositary Bank or Collateral Agent therefrom to the extent available for distribution to such Holder as herein provided or provided in the Security Documents, (b) none of the Members, or any of their respective past, present or future members, partners, officers, directors or shareholders or other related Persons, or the Bond Trustee shall be personally or otherwise liable to any Holder, nor shall any of the Members, or any of their respective past, present or future members, partners, officers, directors or shareholders or other related Persons, 27 36 be personally or otherwise liable to the Bond Trustee, for any amounts payable under any Bond or for any liability under this Indenture or any other Transaction Document, except as provided therein, and (c) recourse shall be otherwise limited in accordance with Section 12.11. Section 2.16 Allocation of Principal and Interest. Except as otherwise provided in Section 3.8, each payment of principal of and premium, if any, and interest on each Bond shall be applied, first, to the payment of accrued but unpaid interest on such Bond (as well as any interest on overdue principal or, to the extent permitted by Applicable Law, overdue interest) to the date of such payment, second, to the payment of the principal amount of and premium, if any, on such Bond then due (including any overdue installment of principal) thereunder, and third, the balance, if any, to the payment of the principal amount of such Bond remaining unpaid. Section 2.17 Parity of Bonds. Except as otherwise provided in this Indenture, any relevant Supplemental Indenture or the other Security Documents, all Bonds of a Series issued and outstanding hereunder rank on a parity with each other Bond of the same Series, and with all Bonds of each other Series and each Bond of a Series shall be secured equally and ratably by this Indenture, any relevant Supplemental Indenture or the other Security Documents with each other Bond of the same Series and with all Bonds of each other Series, without preference, priority or distinction of any one thereof over any other by reason of difference in time of issuance or otherwise, and each Bond of a Series shall be entitled to the same benefits and security in this Indenture, any relevant Supplemental Indenture or the other Security Documents as each other Bond of the same Series and with all Bonds of each other Series. ARTICLE 3 REDEMPTION OF BONDS Section 3.1 Redemption at the Option of the Issuer or the Holders. (a) The Issuer, at its option, may redeem the Bonds, pro rata within the Series of Bonds being redeemed, in whole or in part, at any time on any Business Day, at a price equal to the Redemption Price plus the Redemption Premium (if any). (b) Subject to Section 3.9, within thirty (30) days following a Change of Control, the Issuer shall offer (a "Change of Control Offer") to redeem all or any part 28 37 of the Bonds held by any Holder and any Holder, acting pursuant to Article 7, may elect to accept the Issuer's Change of Control Offer to redeem all or any part of the Bonds held by such Holder at a price equal to 101% of the principal amount of the Outstanding Bonds being redeemed plus interest accrued and unpaid to but excluding the Redemption Date; provided, however, that notwithstanding the occurrence of a Change of Control, the Issuer shall not be obligated to purchase any Bonds pursuant to this Section 3.1(b) to the extent that the Issuer has exercised its rights to redeem such Bonds as otherwise described in Sections 3.1 and 3.2. (c) If the Issuer elects to redeem the Bonds pursuant to clause (a) of this Section 3.1, or any Holder elects to accept the Issuer's Change of Control Offer in accordance with clause (b) of this Section 3.1, it shall deliver to the Bond Trustee, at least thirty (30) days prior to the latest date upon which notice of redemption is required to be given to the Holders pursuant to Section 3.5 (unless a shorter notice period shall be satisfactory to the Bond Trustee), an Officer's Certificate specifying the Redemption Date upon which such redemption shall occur and the Series and principal amount of Bonds to be redeemed. Section 3.2 Mandatory Redemption. (a) Unless otherwise provided in a Supplemental Indenture, the Bonds shall be redeemed, pro rata within the Series of Bonds being redeemed, in whole or in part, as follows: (i) if an Event of Loss occurs with respect to the Project or other non-nuclear electric generating or district energy assets owned by the Issuer and the Issuer or the Subsidiary Guarantor (or the Collateral Agent on their behalf) receives Loss Proceeds in connection with such Event of Loss in excess of $10,000,000 and the Project or such other asset is not or cannot be repaired, rebuilt or replaced in accordance with an Approved Restoration Plan, such Loss Proceeds in excess of $10,000,000 shall be used to redeem the Bonds in accordance with this Section 3.2 at a price equal to the Redemption Price and to prepay any other outstanding Secured Obligations on a pro rata basis; (ii) if an Event of Loss occurs with respect to the Project or other non-nuclear electric generating or district energy assets owned by Issuer and the Project or such other asset is repaired, rebuilt or replaced in accordance with an Approved Restoration Plan and the Issuer or the Subsidiary Guarantor (or the Collateral Agent on their behalf) receives Loss Proceeds in excess of $5,000,000 in excess of the cost of such repair, rebuilding or replacement 29 38 in connection with such Event of Loss, such Loss Proceeds in excess of $5,000,000 shall be used to redeem the Bonds in accordance with this Section 3.2 at a price equal to the Redemption Price and to prepay any other outstanding Secured Obligations on a pro rata basis; (iii) if a Title Event occurs with respect to the Project or other non-nuclear electric generating or district energy assets owned by the Issuer and the Issuer or the Subsidiary Guarantor (or the Collateral Agent on their behalf) receives proceeds in connection with such Title Event in excess of $10,000,000, such proceeds in excess of $10,000,000 shall be used to redeem the Bonds in accordance with this Section 3.2 at a price equal to the Redemption Price and to prepay any other outstanding Secured Obligations on a pro rata basis; (iv) if an Involuntary PPA Buy-Out occurs and the Issuer or the Subsidiary Guarantor (or the Collateral Agent on their behalf) receives proceeds from such event in excess of $5,000,000, such proceeds in excess of $5,000,000 shall be used to redeem the Bonds in accordance with this Section 3.2 at a price equal to the Redemption Price and to prepay any other outstanding Secured Obligations on a pro rata basis; unless (A) the Issuer or the Subsidiary Guarantor enters into a replacement power purchase agreement that contains terms and conditions substantially similar to the terminated power purchase agreement and an Authorized Officer of the Issuer delivers an Officer's Certificate to the Bond Trustee certifying that such event would not reasonably be expected to result in a Material Adverse Effect or (B) each Rating Agency confirms in writing that such PPA Buy-Out will not result in a Ratings Downgrade; (v) if a Voluntary PPA Buy-Out occurs and the Issuer or the Subsidiary Guarantor (or the Collateral Agent on their behalf) receives proceeds from such event in excess of $5,000,000, such proceeds in excess of $5,000,000 shall be used to redeem the Bonds in accordance with this Section 3.2 at a price equal to the Redemption Price plus the Redemption Premium and to prepay any other outstanding Secured Obligations on a pro rata basis; unless (A) the Issuer or the Subsidiary Guarantor enters into a replacement power purchase agreement that contains terms and conditions substantially similar to the terminated power purchase agreement and an Authorized Officer of the Issuer delivers an Officer's Certificate to the Bond Trustee certifying that such event would not reasonably be expected to result 30 39 in a Material Adverse Effect or (B) each Rating Agency confirms in writing that such PPA Buy-Out will not result in a Ratings Downgrade; (vi) if the closing of the Acquisition has not occurred on or prior to May 31, 2000 or cannot occur due to the circumstances set forth in Exhibit B to the Escrow Agreement, then all of the Outstanding Bond Proceeds shall be redeemed in accordance with this Section 3.2 at a price equal to the Redemption Price. (b) Unless otherwise provided in a Supplemental Indenture, the Initial Bonds and the Additional Bonds shall be redeemed on a pro rata basis in accordance with the aggregate outstanding principal amount of such Bonds. (c) If the Issuer is required to redeem the Bonds in accordance with Section 3.1(b) or this Section 3.2, it shall deliver to the Bond Trustee, promptly upon the occurrence of the event resulting in such obligation to redeem, an Officer's Certificate specifying the Series and principal amount of Bonds to be redeemed, the Redemption Price, the applicable Redemption Premium (if any), the paragraph of this Indenture pursuant to which the Bonds are being redeemed and, subject to the requirements of Section 3.4, the Redemption Date for such redemption, which Redemption Date shall be (x) except as set forth in clause (z) below, within ninety (90) days of the occurrence of the event resulting in the Issuer's obligation to redeem the Bonds in accordance with this Section 3.2, (y) within ten (10) days after the end of the period specified in the Change of Control Offer for acceptance thereof in accordance with Section 3.9 or (z) within five (5) Business Days of the occurrence of the event resulting in the Issuer's obligation to redeem the Bonds in accordance with clause (a)(vi) of this Section 3.2. Section 3.3 Redemption Account. Prior to any redemption, the Bond Trustee shall establish a special purpose trust fund (the "Redemption Account"). At least one (1) Business Day prior to the Redemption Date for any redemption of Bonds pursuant to this Article 3, the Issuer and/or the Subsidiary Guarantor shall deposit or cause to be deposited in the Redemption Account an amount (in immediately available funds) which, together with monies received by the Bond Trustee for such purpose from the Collateral Agent or the Depositary Bank, is sufficient to redeem on such Redemption Date the Bonds called for redemption in accordance with this Article 3. 31 40 Section 3.4 Prepayment of Guarantor Loans. On or prior to the Redemption Date for any redemption of Bonds pursuant to this Article 3, the Issuer shall (a) cause the Subsidiary Guarantor or any Additional Guarantor (as applicable) to prepay or reduce the principal amount of its Guarantor Loans pursuant to Section 2.4(b) of the Guarantor Loan Agreement and (b) deposit the monies received from such prepayment into the Redemption Account pursuant to Section 3.3. Section 3.5 Notice of Redemption. (a) Unless otherwise specified in the Supplemental Indenture relating to the Bonds of a Series to be redeemed, notice of redemption shall be given in the manner provided in Section 12.5(b) to the Holders of any Bonds to be redeemed pursuant to this Article 3 at least thirty (30) days but not more than sixty (60) days prior to the Redemption Date for such redemption (unless a shorter period shall be satisfactory to the Bond Trustee); provided that notice of any redemption pursuant to Section 3.2(a)(vi) shall be given to the Holders immediately upon the occurrence of such event and the Redemption Date shall be as set forth in Section 3.2. All notices of redemption shall state the following: (i) the Redemption Date; (ii) the Redemption Price and any applicable Redemption Premium; (iii) if less than all Outstanding Bonds are to be redeemed, (x) the identification of the particular Bonds to be redeemed, (y) the aggregate principal amount of Bonds to be redeemed and (z) a statement to the effect that after the Redemption Date, upon surrender of such Bonds, new Bonds in the aggregate principal amount equal to the unredeemed portion thereof will be issued; (iv) the name and address of the Paying Agent; (v) that Bonds called for redemption must be surrendered to the Paying Agent to collect the Redemption Price and any applicable Redemption Premium; (vi) that on the Redemption Date, the Redemption Price and any applicable Redemption Premium will become due and payable upon each Bond to be redeemed or portion thereof, and that interest thereon shall cease to accrue as of and after said date; 32 41 (vii) a statement to the effect that the availability in the Redemption Account on the Redemption Date of an amount of immediately available funds to pay the Redemption Price and any applicable Redemption Premium in full is a condition precedent to the redemption; (viii) the paragraph of this Indenture pursuant to which the Bonds are being redeemed; and (ix) the CUSIP number, if any, relating to the Bonds being redeemed. (b) Notice of redemption of Bonds to be redeemed at the election of the Issuer pursuant to Section 3.1 shall be given by the Issuer or, at the Issuer's written request by the Bond Trustee, in the name and at the expense of the Issuer. Notice of a mandatory redemption pursuant to Section 3.2 shall be given by the Bond Trustee in the name and at the expense of the Issuer. Any notice of redemption given in accordance with this Section 3.5 shall be conclusively presumed to have been given whether or not a Holder receives such notice. In any case, failure to give such notice as herein provided or any defect in the notice given to a Holder of any Bond designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Bond. Section 3.6 Bonds Payable on Redemption Date. Upon the giving of notice pursuant to Section 3.5 and the satisfaction of the conditions, if any, set forth in such notice, the Bonds or portions thereof called for redemption in such notice shall become due and payable on the Redemption Date and at the Redemption Price (plus any applicable Redemption Premium) specified in such notice, and as of and after the Redemption Date such Bonds or portions thereof shall cease to bear interest. Upon surrender of any such Bond for redemption in accordance with such notice, such Bond or portions thereof shall be paid and redeemed by the Issuer at the Redemption Price therefor plus any applicable Redemption Premium; provided, however, that any payment of interest on any Bond the Payment Date of which is on or prior to the Redemption Date shall be payable to the Holder of such Bond registered as such at the close of business on the relevant Regular Record Date in accordance with the terms of this Indenture and such Bond and subject to the provisions of Section 2.14. Section 3.7 Selection of Bonds to be Redeemed. Unless otherwise provided in a Supplemental Indenture, any redemption of Bonds pursuant to this Article 3 shall be among all Series of Bonds on a pro rata basis. If less than all the Bonds of a 33 42 Series are to be redeemed pursuant to this Article 3, the Bond Trustee shall redeem the Bonds of such Series on a pro rata basis among the Outstanding Bonds of such Series not previously called for redemption in whole. The Bond Trustee shall notify the Issuer promptly of the Bonds selected for redemption and, in the case of any Bonds selected for partial redemption, the principal amount thereof to be redeemed. Section 3.8 Bonds Redeemed in Part. (a) For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Bonds shall relate, in the case of any Bonds redeemed or to be redeemed only in part, to the portion of the principal amount of such Bonds that has or is to be redeemed. (b) Any Bond that is to be redeemed only in part shall be surrendered at the place of payment therefor (with, if the Issuer or the Bond Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Issuer and the Bond Trustee duly executed by the Holder thereof or its attorney duly authorized in writing) and, upon such surrender, the Issuer shall execute, and the Bond Trustee shall authenticate and make available for delivery to the Holder of such Bond (at the expense of the Issuer but without any further action on the part of the Issuer), a new Bond of the same Series, of any authorized denomination requested by such Holder and of like tenor and in aggregate principal amount equal to and in exchange for the remaining unpaid principal amount of the surrendered Bond. (c) Upon any partial redemption of Bonds of any Series in accordance with this Article 3, the scheduled principal amortization of the Bonds of such Series as set forth on Schedule I shall be reduced by an amount equal to the product of the scheduled principal amortization of the Bonds of such Series then in effect and a fraction, the numerator of which is equal to the principal amount of the Outstanding Bonds of such Series to be redeemed and the denominator of which is the principal amount of the Outstanding Bonds of such Series immediately prior to such redemption. In connection with any such partial redemption, the Issuer shall furnish the Bond Trustee, prior to such redemption, with an Officer's Certificate setting forth the amortization schedule for the remaining Bonds of such Series after giving effect to such redemption. Notwithstanding any other provision of this Indenture, if any Bond called for redemption shall not be paid upon surrender thereof for redemption, the principal of such Bond shall, until paid or provided for, bear interest from the date fixed for redemption at the interest rate specified in such Bond. Section 3.9 Change of Control. 34 43 (a) Within thirty (30) days following any Change of Control, the Issuer shall notify the Bond Trustee thereof in writing and give a Change of Control Offer to each Holder in the manner provided in Section 12.5(b). Each Change of Control Offer shall state: (i) that a Change of Control has occurred and that such Holder has the right to require the Issuer to repurchase all or any portion of such Holder's Bonds at a repurchase price in cash equal to 101% of the outstanding principal amount thereof, together with accrued and unpaid interest thereon to but excluding Redemption Date (subject to the right of Holders of record on the Regular Record Date or Special Record Date, as applicable, to receive interest due on the relevant Payment Date in accordance with the terms of this Indenture); (ii) the Redemption Price and the expiration date of the Change of Control Offer, which will be a Business Day no earlier than thirty (30) days nor later than sixty (60) days from the date such Change of Control Offer is mailed, or such later date as is necessary to comply with any applicable requirements of the Exchange Act; (iii) the Redemption Date for such Change of Control Offer, which will be a Business Day not more than ten (10) days following the expiration of the Change of Control Offer; (iv) that any Bond not tendered will continue to accrue interest pursuant to its terms; (v) that any Bonds accepted for payment pursuant to the Change of Control Offer will cease to accrue interest as of and after the Redemption Date; (vi) that Holders accepting the Change of Control Offer will be required to surrender the Bond to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day immediately preceding the Redemption Date; and (vii) any other procedures consistent with this Section 3.9 that a Holder must follow to accept a Change of Control Offer or to withdraw such acceptance, including procedures of the Depositary. 35 44 (b) Notwithstanding paragraph (a) above, the Issuer will not be required to make a Change of Control Offer upon a Change of Control if another Person makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 3.9 applicable to a Change of Control Offer made by the Issuer and purchases all the Bonds validly tendered and not withdrawn under such Change of Control Offer. (c) The Issuer will comply with the applicable tender offer rules, including Rule-14e under the Exchange Act, and any other applicable securities laws and regulations in connection with a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 3.9, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations hereunder by virtue thereof. ARTICLE 4 COVENANTS Section 4.1 Reporting Requirements. The Issuer shall furnish or cause to be furnished to the Bond Trustee and each Rating Agency and, the Bond Trustee, at the Issuer's reasonable expense, in the case of clauses (i) and (ii) below, shall furnish or cause to be furnished to any Holder, prospective Holder or any owner of a beneficial interest in any Global Bond upon written request of such Holder or beneficial owner substantially in the form of Exhibit H hereto, (which request may indicate that it is a continuing request for such information until further notice): (i) as soon as available and in any event within sixty (60) days after the end of the first three quarterly accounting periods of each Obligor's respective fiscal years (commencing with the quarter ending June 30, 2000, (x) Unaudited Financial Statements consolidated for the Issuer and each of its Subsidiaries for such period and (y) Unaudited Financial Statements consolidated for each Obligor and each Additional Guarantor for such period, each accompanied by an Officer's Certificate of the Issuer (1) to the effect that such Unaudited Financial Statements fairly present the financial condition and results of operations of each such Person (on a consolidated basis) on the dates and for the periods indicated in accordance with GAAP (other than with respect to the notes and normally recurring year-end adjustments), (2) setting 36 45 forth management's discussion and analysis of the financial condition and results of operations described therein and (3) setting forth the quarterly Debt Service Coverage Ratio for such fiscal quarter; (ii) as soon as available and in any event within one hundred five (105) days after the end of each Obligor's respective fiscal year (commencing with the fiscal year ended December 31, 2000, (x) Annual Audited Financial Statements consolidated for the Issuer and each of its Subsidiaries for such fiscal year and (y) Annual Audited Financial Statements consolidated for each Obligor and each Additional Guarantor for such fiscal year, each accompanied by an audit opinion thereon by the Auditors, which opinion shall state that (1) said financial statements of each such Person (on a consolidated basis) present fairly the financial position, results of operations and cash flows of each such Person (on a consolidated basis) at the end of, and for, such fiscal year in accordance with GAAP, (2) nothing has come to their attention that any Indenture Default or Indenture Event of Default under Section 4.23 has occurred and is continuing, or, if such event has occurred and is continuing, a statement as to the nature thereof and (3) the annual Debt Service Coverage Ratio for such fiscal year; provided, however that such opinion may be limited to the extent required by accounting rules or guidelines; (iii) concurrently with the delivery of the financial statements in clauses (i) and (ii) above, an Officer's Certificate (A) certifying to the best knowledge of the Authorized Representative as to the occurrence of any event or condition which constitutes a Default, and if Default has occurred specifically stating the details thereof and any action taken or proposed to be taken with respect thereto and (B) describing any change in GAAP or in the application thereof that has occurred since the date of the most recent prior Annual Audited Financial Statements delivered pursuant to clause (ii) above and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; and (iv) promptly and in any event within ten (10) days after receiving notice of the occurrence of any litigation, claim, proceeding or controversy pending, or the receipt by either Obligor of a written threat of any such litigation, claim, proceeding or controversy involving or affecting either Obligor or the Project that would in any case reasonably be expected to result in a Material Adverse Effect, notice of the same. 37 46 Section 4.2 Existence; Governmental Approvals; Compliance with Applicable Laws. (a) The Issuer shall at all times preserve and maintain in full force and effect its existence as a limited liability company in good standing under the laws of the State of Delaware and its qualification to do business in each other jurisdiction in which the character of properties owned or leased by it or in which the transaction of its business as conducted or proposed to be conducted makes such qualification necessary, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect provided, however, that (i) the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 4.20 and (ii) the Issuer may change its status as a limited liability company if the Rating Agencies confirm in writing that the change will not result in a Ratings Downgrade and the Issuer otherwise complies with its obligations under the Finance Documents. (b) The Issuer shall (i) obtain all Governmental Approvals necessary for the transaction of its business as conducted or proposed to be conducted and (ii) cause the Subsidiary Guarantor to maintain its status as an EWG except in either case where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. (c) The Issuer shall comply with all Applicable Laws (including Environmental Laws) and Governmental Approvals applicable to it, and all other acts, rules, regulations, permits, orders and requirements of any legislative, executive, administrative or judicial body relating to the issuance of the Bonds by the Issuer and performance by the Issuer of its obligations hereunder, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. Section 4.3 Title to Assets. The Issuer shall preserve and maintain good, valid and marketable title or leasehold rights to the Mortgaged Property and its assets constituting part of the Collateral (excluding any real property that is not part of the Mortgaged Property) (subject to no Liens other than Permitted Liens) except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect; provided, however, that nothing in this Section 4.3 shall prevent the Issuer from disposing of any asset subject to terms and provisions of Section 4.20. Section 4.4 Payment of Taxes and Claims. The Issuer shall, prior to the time that penalties shall attach thereto, pay and discharge or cause to be paid or discharged all Taxes, assessments and governmental charges or levies imposed upon it 38 47 or its income or profits except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect; provided that the Issuer shall not be required to pay any such obligation if (a) such charges are being diligently contested in good faith by appropriate proceedings, and (b) adequate reserves are established with respect to the contested items (in accordance with GAAP). The Issuer shall promptly pay or cause to be paid any valid, final non-appealable judgment enforcing any such Tax, assessment, governmental charge or levy and shall cause the same to be satisfied of record, as applicable. Section 4.5 Books and Records. The Issuer shall at all times keep proper books of record and account truly and fairly reflecting the financial condition and results of operations of the Issuer in which full, true and correct entries in conformity with GAAP and all Applicable Laws shall be made of all dealings and transactions in relation to its business and activities. Section 4.6 Right of Inspection. Upon reasonable advance written notice, the Issuer shall permit the Bond Trustee or its representative to visit and inspect, in the presence of representatives of the Issuer, if reasonably requested by the Bond Trustee, any of the properties of the Issuer, and to examine and make copies of the books of record and accounts of the Issuer as reasonably necessary and discuss the affairs, finances and accounts of the Issuer with, and be advised as to the same by, its officers, all at such reasonable times and intervals and to such reasonable extent as the Bond Trustee may request. Section 4.7 Use of Proceeds; Depositary Accounts. (a) The Issuer shall use all Bond Proceeds solely (i) to make loans to the Subsidiary Guarantor pursuant to the Guarantor Loan Agreement or supplements thereto, (ii) to pay financing fees and all other fees, expenses, costs and taxes associated with the Acquisition and (iii) to make required deposits to the Debt Service Reserve Account (unless funded in whole by Acceptable Credit Support). (b) Unless otherwise provided in this Indenture, the Issuer shall cause all Project Revenues to be deposited into the Revenue Account and shall cause the balance in the Debt Service Reserve Account to, at all times, be equal to the Debt Service Reserve Required Balance (taking into account any Acceptable Credit Support available thereto). Section 4.8 Performance of Transaction Documents. The Issuer shall perform all of its material covenants and agreements contained in any of the Transac- 39 48 tion Documents to which it is a party, except where such nonperformance would not reasonably be expected to result in a Material Adverse Effect. Section 4.9 Rating. The Issuer shall comply with all reasonable requests from each of the Rating Agencies for information and notices related to the Bonds and shall not request that either Rating Agency stop rating the Bonds. Section 4.10 Rule 144A Information; Other Information. Unless a registration statement shall have previously become effective with respect to the Bonds, at any time when the Issuer is not subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act, upon the request of any Holder or any owner of a beneficial interest in a Global Bond, the Issuer shall promptly furnish to such Holder or beneficial owner, to a prospective purchaser of a Bond or beneficial interest therein designated by such Holder or beneficial owner, or to the Bond Trustee for delivery to such Holder, beneficial owner or prospective purchaser, as the case may be, all information specified in, and meeting the requirements of, paragraph (d)(4) of Rule 144A in order to permit compliance by such Holder or beneficial owner with Rule 144A in connection with a resale of Bonds pursuant to Rule 144A. Section 4.11 Auditors. The Issuer shall retain PricewaterhouseCoopers LLP or another nationally recognized firm of independent certified public accountants the United States to act as its auditors and authorize such firm to communicate directly with the Bond Trustee and the Collateral Agent. Section 4.12 Operation of its Assets. The Issuer shall maintain and operate its assets (excluding those held by any of its Subsidiaries) in accordance with prudent independent power industry practice. Section 4.13 Insurance. (a) The Issuer shall at all times maintain, with responsible, reputable and financially sound insurance carriers, and provide satisfactory evidence of, customary insurance in such amounts (subject to reasonable and customary deductibles and sublimits) and with terms and conditions in accordance with prudent independent power industry practice. All policies (other than workers' compensation) shall name the Collateral Agent and the Bond Trustee as loss payee or additional insured. (b) Each insurance policy obtained by the Issuer and the Subsidiary Guarantor shall provide for at least ten (10) days' written notice to the Bond Trustee and the 40 49 Collateral Agent of cancellation, reduction in amount of coverage or any other material change in coverage. Section 4.14 Third Party Consents. The Issuer shall use commercially reasonable efforts to obtain Third Party Consents with respect to each material Project Document entered into by the Issuer after the Closing Date. Section 4.15 Permitted Indebtedness. The Issuer shall not create or incur or suffer to exist or cause to be created, incurred or suffered to exist any Indebtedness except the following (collectively, "Permitted Issuer Indebtedness"): (a) Indebtedness incurred pursuant to this Indenture and the Initial Bonds; (b) Indebtedness incurred pursuant to Additional Bonds issued in accordance with the provisions of Section 2.3; (c) Indebtedness provided that: (i) an Authorized Officer of the Issuer certifies to the Bond Trustee in writing that no Default or Event of Default has occurred and is continuing or will occur after giving effect to the incurrence of such Indebtedness and the application of the net proceeds thereof; (ii) an Authorized Officer of the Issuer certifies to the Bond Trustee in writing that after giving effect to the incurrence of such Indebtedness, the minimum annual Projected Debt Service Coverage Ratio for each fiscal year through the Final Maturity Date for the Bonds (starting in the fiscal year in which the Indebtedness is incurred) with the longest maturity, will not be less than 1.5 to 1; and (iii) written confirmation from each Rating Agency then rating the Bonds that the incurrence of such Indebtedness will not result in a Rating Downgrade. (d) Indebtedness related to Permitted Liens; (e) Indebtedness represented by interest rate protection agreements with respect to other Permitted Issuer Indebtedness; 41 50 (f) Indebtedness in the form of a working capital facility in an aggregate principal amount not to exceed, at any one time outstanding, (i) $40,000,000 (Escalated)plus (ii) upon the acquisition of an Additional Guarantor or additional district energy assets, 5% of the Indebtedness incurred by the Issuer in connection with such acquisition; provided that the outstanding principal amount of such Indebtedness shall be reduced to zero for five (5) days each year; (g) Indebtedness owed to the Subsidiary Guarantor or any Additional Guarantor; and (h) Subordinated Indebtedness. Section 4.16 Permitted Liens. The Issuer shall not create or suffer to exist or permit any Lien upon or with respect to any of its properties except Permitted Liens. Section 4.17 Guarantees. The Issuer shall not become liable, directly or indirectly, in connection with any Guarantee Obligation, except for (i) endorsements and similar obligations in the ordinary course of business; (ii) guarantees existing on the Closing Date as set forth on Schedule 4.17; and (iii) guarantees to (w) NRG Power Marketing, (x) the Subsidiary Guarantor, (y) any Additional Guarantor or (z) any other Person that has entered into a power marketing agreement with the Subsidiary Guarantor, the Issuer or any Additional Guarantor, entered into by the Issuer in the ordinary course of business in connection with fuel procurement, sales or purchases of power and emissions credits directly related to the Project or the other non-nuclear electric generating or district energy assets of the Issuer or any Additional Guarantor, so long as such activities are not for speculative purposes; provided that with respect to guarantees in favor or Persons described in clause (z), each Rating Agency confirms in writing that such guarantee will not result in a Ratings Downgrade. Section 4.18 Business Activities. The Issuer shall not engage in any activities other than (a) those contemplated by this Indenture, any Supplemental Indenture and the other Finance Documents and activities incidental thereto, (b) the acquisition or creation of the Subsidiary Guarantor, any Additional Guarantors or Unrestricted Subsidiaries; provided that, (i) prior to acquiring or creating any Additional Guarantor, the Issuer shall obtain written confirmation from each Rating Agency that such action will not result in a Ratings Downgrade; (ii) each Additional Guarantor shall enter into a loan agreement containing covenants substantially similar to those set forth in Sections 3.13, 3.14, 3.15, 3.16, 3.18, 3.19, 3.21, 3.22 and 42 51 3.23 of the Guarantor Loan Agreement; and (iii) each Additional Guarantor shall enter into a guarantee of payments due on the Bonds substantially similar to the Guarantee and (c) the acquisition, ownership, construction, development, operation and maintenance of non-nuclear electric generating or district energy assets in the United States; provided that, prior to acquiring or constructing such additional assets, the Issuer shall obtain written confirmation from each Rating Agency that such action will not result in a Ratings Downgrade. Section 4.19 Assignment of Obligations; Additional Agreements. Other than assignments to the Collateral Agent, the Issuer shall not assign any of its rights or obligations under any material Project Document or enter into any additional material Project Document unless (a) an Authorized Officer of the Issuer certifies in writing that the transactions contemplated by such assignment or additional Project Document would not reasonably be expected to result in a Material Adverse Effect or (b) each Rating Agency confirms in writing that the assignment or entering into such additional Project Document would not result in a Ratings Downgrade. Section 4.20 Fundamental Changes; Sale of Assets. Except as otherwise permitted under the Indenture, any Supplemental Indenture or other Finance Documents, (a) the Issuer shall not, and shall not permit the Subsidiary Guarantor or any Additional Guarantor to, enter into any transaction of merger or consolidation, change its form of organization or its business, liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except that, if at the time no Default exists or is caused by such action: (i) the Subsidiary Guarantor, any Additional Guarantor or any Unrestricted Subsidiary may merge into the Issuer in a transaction in which the Issuer is the surviving corporation; provided that any Indebtedness the Issuer assumes in such transaction is permitted under Section 4.15 hereof (ii) the Subsidiary Guarantor, any Additional Guarantor or any Unrestricted Subsidiary may merge into the Subsidiary Guarantor or an Additional Guarantor in a transaction in which the surviving entity is the Subsidiary Guarantor or such Additional Guarantor and the Issuer's economic interest in each merging Subsidiary's assets shall not have been diminished as a result of such merger; and (iii) the Subsidiary Guarantor or any Additional Guarantor may liquidate or dissolve if the assets of that Subsidiary Guarantor or Additional Guarantor are transferred to the Subsidiary Guarantor or an Additional Guarantor (provided that the Issuer's economic interest in such assets would not be diminished as a result thereof) if the Issuer determines in good faith that such liquidation or dissolution is in the best interests of the Issuer and would not reasonably be expected to result in a Material Adverse Effect. 43 52 (b) The Issuer shall not sell, lease, transfer, assign or otherwise dispose of (in one transaction or in a series of transactions) any of its assets unless such transaction is a Permitted Asset Sale. (c) The Issuer shall not amend its certificate of formation or any other organizational document unless such amendment is (i) for the purpose of authorizing the issuance of Additional Bonds in accordance with Section 2.3, (ii) in connection with a name change and (iii) otherwise permitted by Section 4.2. Section 4.21 Investments; Transactions with Affiliates. (a) The Issuer shall not directly or indirectly, make investments, loans or advances or acquire the stock, obligations or securities of any Person except: (i) loans to the Subsidiary Guarantor or any Additional Guarantor with the funds borrowed in accordance with the Indenture; (ii) investments in Cash Equivalents; (iii) investments outstanding on the Closing Date as set forth on Schedule 4.21; (iv) operating deposits with banks; (v) investments in Unrestricted Subsidiaries with funds that (x) could otherwise be distributed in accordance with this Indenture or (y) otherwise with the proceeds of additional equity contributions to the Issuer made explicitly for this purpose; (vi) investments by the Issuer in the Subsidiary Guarantor or any Additional Guarantors; (vii) investments in another Person, if as a result of such investment (x) such other Person becomes an Additional Guarantor or (y) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to an Obligor or an Additional Guarantor; (viii) investments representing capital stock or obligations issued to the Issuer in settlement of claims against any other Person by reason of a 44 53 composition or readjustment of debt or a reorganization of any debtor of the Issuer; (ix) investments acquired by the Issuer in connection with any asset sale permitted under the Indenture to the extent such investments are non-cash proceeds as permitted under the Indenture; (x) any investment to the extent that the consideration therefore is capital stock (other than redeemable capital stock) of the Issuer; (xi) amounts constituting Restricted Payments which the Issuer would be permitted to make under Section 4.23; and (xii) additional investments up to but not exceeding $10,000,000 (Escalated) outstanding at any one time in the aggregate among the Obligors and any Additional Guarantor. For purposes of clause (xii) of this Section, the aggregate amount of an investment at any time shall be deemed to be equal to (A) the aggregate amount of cash, together with the aggregate fair market value of property, including any securities, loaned, advanced, contributed, transferred or otherwise invested that gives rise to such investment minus (B) the aggregate amount of dividends, distributions or other payments received in cash or other property in respect of such investment; the amount of an investment shall not in any event be reduced by reason of any write-off of such investment not increased by any increase in the amount of earnings retained in the Person in which such Investment is made that have not been dividend, distributed or otherwise paid out. (b) The Issuer shall not enter into any transaction or series of related transactions with any Affiliate except (i) transaction in the ordinary course of business at prices and on terms not less favorable than a comparable transaction entered into on arm's-length basis; (ii) transactions between or among the Issuer, the Subsidiary Guarantor or any Additional Guarantor not involving any other Affiliate; (iii) any Restricted Payment otherwise permitted by the terms and conditions of this Indenture; and (iv) transactions that are contemplated by any Transaction Document entered into on or prior to the Closing Date or any extension, renewal or replacement thereof that would not reasonably be expected to result in a Material Adverse Effect. 45 54 Notwithstanding the foregoing, the restrictions set forth in this covenant shall not apply to (i) reasonable and customary directors' fees, indemnification and similar arrangements, consulting fees, employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of the Issuer or any Subsidiary entered into in the ordinary course of business; (ii) loans and advances to officers directors and employees of the Issuer or any Subsidiary for reasonable travel, entertainment, moving and other relocation expenses, in each case made in the ordinary course of business; (iii) the incurrence of intercompany Indebtedness which constitutes Permitted Indebtedness and (iv) transactions pursuant to agreements in effect on the date hereof. Section 4.22 Finance Documents; Project Documents. (a) The Issuer shall not consent to, enter into or grant any amendment, waiver, consent, change or modification to the Finance Documents, or assign any of its obligations thereunder, except in accordance with this Indenture. (b) The Issuer shall enforce all of its material rights under the Finance Documents for the benefit of the Bond Trustee and the Holders. The Issuer shall exercise all remedies under the Finance Documents (including acceleration of the Guarantor Note) as directed in writing by the Collateral Agent, acting pursuant to the Intercreditor Agreement, and in accordance with the terms of this Indenture. (c) The Issuer shall not enter into or grant any amendment, waiver, consent or change or modification, or permit the cancellation or termination of, any Project Document unless such action (i) would not reasonably be expected to result in a Material Adverse Effect or (ii) shall otherwise be permitted by the terms and conditions of this Indenture. Section 4.23 Restricted Payments. The Issuer shall not declare nor make any Restricted Payments or direct any Restricted Payments to be made by or on behalf of the Subsidiary Guarantor, except for payments permitted under Section 6.7 hereof. Section 4.24 Investment Company Act. The Issuer shall not take any action which will cause it to be in violation of the Investment Company Act of 1940 (as such act may be amended, modified or supplemented from time to time) including all rules and regulations promulgated thereunder. 46 55 Section 4.25 Taxation. The Issuer shall not elect or cause itself to be treated as a corporation for United States federal or state income tax purposes and shall not take any action which will cause it to be treated as a corporation for United States federal or state income tax purposes unless in connection with a change permitted under Section 4.2. Section 4.26 Further Assurances. (a) The Issuer shall execute and deliver, from time to time as reasonably requested by the Bond Trustee or the Collateral Agent or as necessary, at the Issuer's expense, such other documents in connection with the rights and remedies of the Bond Trustee and the Holders granted or provided for by the Finance Documents and to consummate the transactions contemplated therein. (b) The Issuer shall, at its own expense, take all reasonable actions necessary to establish, maintain, protect, perfect and continue the perfection of the Liens created by this Agreement and the Security Documents and its rights and title and the rights and title of the Bond Trustee and the Holders to the Issuer Collateral in such manner and in such places as in the opinion of counsel to the Issuer, the Bond Trustee or the Collateral Agent is required by Applicable Law in order to fully preserve and protect the rights of the Collateral Agent and the Bond Trustee, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. ARTICLE 5 EVENTS OF DEFAULT; REMEDIES Section 5.1 Events of Default. The term "Indenture Event of Default," whenever used herein, shall mean any of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or shall come about or be affected by operation of law, or be pursuant to or in compliance with any Applicable Law), and any such event shall continue to be an Indenture Event of Default if and for so long as it shall not have been remedied: (a) the Issuer shall fail to pay any principal of, premium (if any), interest due with respect to any Bond when the same becomes due and payable, whether by scheduled maturity or required prepayment or redemption or by acceleration or otherwise and such failure continues for fifteen (15) or more days following the due date for payment; 47 56 (b) a Guarantor Event of Default (other than a Guarantor Event of Default related to failure to pay amounts owed on a Guarantor Note or a Guarantee) or an event of default under any other loan agreement between either Obligor and an Additional Guarantor shall have occurred and be continuing; (c) the Issuer shall default in the performance or observance of any covenant or agreement contained in Section 4.2 (with respect to the maintenance of the corporate existence of the Issuer only), Section 4.4, Section 4.8, Section 4.15, Section 4.16, Section 4.17, Section 4.18, Section 4.20, Section 4.22, Section 4.23, Section 4.24, Section 4.26 or Section 8.3 and such failure shall continue uncured for thirty (30) or more days from the earliest to occur of (i) the date an Authorized Officer of the Issuer obtains actual knowledge of such failure or (ii) the date on which an Authorized Officer of the Issuer receives written notice from the Bond Trustee, the Collateral Agent or any Holder of such Default; (d) the Issuer shall default in the performance or observance of its covenants or material obligations contained in this Indenture (other than those referred to in clause (c) of this Section 5.1) and such failure shall continue uncured for thirty (30) or more days from the earliest to occur of (i) the date an Authorized Officer of the Issuer obtains actual knowledge of such failure or (ii) the date on which an Authorized Officer of the Issuer receives written notice from the Bond Trustee, the Collateral Agent or any Holder of such Default; provided that if the Issuer commences and diligently pursues efforts to cure such default within such thirty (30) day period and delivers written notice thereof to the Bond Trustee, the Issuer may continue to effect such cure of the default and such default shall not be deemed an "Indenture Event of Default" for an additional sixty (60) days following the end of the initial thirty (30) day period so long as the Issuer is diligently pursuing such cure; (e) the Issuer shall (i) apply for or authorize or approve or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or all or a substantial part of its property, (ii) admit in writing its inability or be generally unable to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code, (v) file a petition seeking to take advantage of any other Debtor Relief Law, (vi) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law or (vii) take any 48 57 action for the purpose of effecting any of the foregoing including, without limitation, commencing a shareholder vote in connection with any of the foregoing; (f) a proceeding or case shall be commenced without the application or consent of the Issuer in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution, winding-up or the composition or readjustment of debts or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Issuer or all or a substantial part of its property under any Debtor Relief Law and such proceeding or case shall continue undismissed, or any order, judgment or decree approving any of the foregoing shall be entered and continue unstayed and in effect, for a period of sixty (60) or more consecutive days, or any order for relief against the Issuer shall be entered in any involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law; (g) an event described in clauses (e) or (f) above occurs with respect to NRG, NRG Power Marketing, NRG Operating Services, a material power purchaser or a material fuel supplier, in each case to the extent such Person is a party to any material Project Document, and remains uncured for the grace periods provided in such clauses; provided, however, that such an event shall not be an Indenture Event of Default if (i) within the following sixty (60) day period either Obligor enters into a replacement agreement substantially similar to the original agreement or (ii) each Rating Agency confirms that such event will not result in a Ratings Downgrade; (h) any Security Document to which the Issuer is a party shall cease to be in full force and effect or, except to the extent permitted by the terms and conditions of any Security Document, any Lien purported to be granted thereby with respect to any Issuer Collateral described therein shall cease to be a valid and perfected Lien in favor of the Collateral Agent for the benefit of the Secured Parties on the Issuer Collateral described therein with the priority purported to be created thereby and such cessation has resulted in a Material Adverse Effect; provided that the Issuer shall have thirty (30) days from the earliest to occur of (i) the date an Authorized Officer of the Issuer obtains actual knowledge thereof or (ii) the date on which an Authorized Officer of the Issuer receives written notice from the Bond Trustee, the Collateral Agent or any Holder of such Default to cure such cessation (if curable) or to furnish to the Collateral Agent all documents or instruments required to cure any such cessation (if curable); (i) Indebtedness for borrowed money of the Issuer in an amount exceeding $15,000,000 (Escalated) (other than any amount due under or pursuant to the 49 58 Finance Documents) is required to be prepaid, or shall be declared to be due and payable, other than by scheduled required payment, prior to the stated maturity thereof, as the result of the acceleration of the stated maturity thereof following an event of default thereunder; provided that such default and acceleration has not been annulled or rescinded within thirty (30) days and remains in effect with respect to such Indebtedness; (j) the entry of one or more final and non-appealable judgment or judgments for the payment of money in excess of $25,000,000 (Escalated) (exclusive of amounts fully covered by insurance or indemnity) against the Issuer, which remain unpaid or unstayed for a period of sixty (60) or more consecutive days; (k) any material Finance Document to which the Issuer is a party is declared in a final nonappealable judgment to be unenforceable against the Issuer, or the Issuer shall have expressly repudiated its obligations thereunder and ceased to perform such obligations, or defaulted in the performance or observance of any of its material obligations thereunder and such default has continued unremedied for a period of five (5) Business Days or more; (l) any material Project Document to which the Issuer is a party ceases to be valid and binding and in full force and effect (other than as permitted or contemplated hereunder), any third party thereto denies that it has any liability or obligation under any such material Project Document and such third party ceases performance thereunder, or any third party is in default under such material Project Document (subject to any applicable grace period thereunder), and in each case such cessation or default has resulted or would reasonably be expected to result in a Material Adverse Effect; provided, however, that no such event shall be an Indenture Event of Default if (i) within one hundred eighty (180) days from any such occurrence the Issuer (x) causes the third party to reaffirm the disaffirmed provisions or resume performance (as the case may be) or (y) enters into a replacement document substantially similar to the original document or (ii) each Rating Agency confirms in writing that such event will not result in a Ratings Downgrade; (m) an Event of Loss with respect to the entire Project shall occur for which no Loss Proceeds are received by either Obligor or the Subsidiary Guarantor shall voluntary abandon the entire Project for sixty (60) consecutive days and in each case such Event of Loss or voluntary abandonment has resulted or would reasonably be expected to result in a Material Adverse Effect; provided that the occurrence of an Event of Loss shall not be an Indenture Event of Default if within thirty (30) days 50 59 from the occurrence of such Event of Loss, there exists an Approved Restoration Plan in respect of the remediation of the damage, loss or taking giving rise to such Event of Loss; and (n) any Governmental Approval required for the operation of the Project is revoked, terminated, withdrawn or ceases to be in full force and effect if such revocation, termination, withdrawal or cessation would reasonably be expected to have a Material Adverse Effect; provided that no such event shall be an Indenture Event of Default if within sixty (60) days from the occurrence thereof either Obligor diligently pursues in good faith and (i) obtains an additional Governmental Approval in substitution therefor or replacement thereof or (ii) causes such Governmental Approval to be reissued; provided further that the such event shall not be an Indenture Event of Default for an additional thirty (30) days following the expiration of the initial sixty (60) day period if within the sixty (60) day period the Indenture Default has not been cured but such Obligor continues to diligently pursue in good faith the items set forth in clauses (i) and (ii) above during such additional thirty (30) day period. Section 5.2 Remedies Upon an Indenture Event of Default. (a) Subject to the Intercreditor Agreement, if one or more Indenture Events of Default shall have occurred and be continuing, then: (i) in the case of an Indenture Event of Default described in Sections 5.1(e) or (f), then, in each and every case, the entire principal amount of the Outstanding Bonds, all interest accrued and unpaid thereon, and all premium (if any) and other amounts payable under the Bonds and this Indenture, if any, shall automatically become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived; or (ii) in the case of an Indenture Event of Default described in Section 5.1(a) hereof, then, in each and every case, (A) upon the written direction of the One-Third Holders, the Bond Trustee shall, by written notice to the Issuer, declare the entire principal amount of the Outstanding Bonds, all interest accrued and unpaid thereon, and all premium (if any), and other amounts payable under the Bonds and this Indenture, if any, to be due and payable, whereupon the same shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived and (B) the Bond Trustee shall (as the One-Third Holders request in writing) direct the Collateral Agent (to the extent permit- 51 60 ted under the Intercreditor Agreement) to take possession of all Collateral and, pursuant to the Intercreditor Agreement, to sell such Collateral, as and to the extent permitted under the Intercreditor Agreement; or (iii) except as described in clauses (i) and (ii) above, in the case of an Indenture Event of Default described in Section 5.1 hereof, then, in each and every case, (A) upon the written direction of the Majority Holders, the Bond Trustee shall, by notice to the Issuer, declare the entire principal amount of the Outstanding Bonds, all interest accrued and unpaid thereon, and all premium (if any), and other amounts payable under the Bonds and this Indenture, if any, to be due and payable, whereupon the same shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived and (B) the Bond Trustee shall (as the Majority Holders request in writing) direct the Collateral Agent (to the extent permitted under the Intercreditor Agreement) to take possession of all Collateral and, pursuant to the Intercreditor Agreement, to sell the Collateral, as and to the extent permitted under the Intercreditor Agreement. (b) Subject to the Intercreditor Agreement, at any time after the principal of all or a portion of the Bonds shall have become due and payable upon a declared acceleration as provided in this Section 5.2, and before any judgment or decree for the payment of the money so due, or any portion thereof, shall be entered, the Majority Holders or, by the One-Third Holders if pursuant to Section 5.2(a)(ii), by written notice to the Bond Trustee and the Issuer, may rescind and annul such declaration and its consequences if: (i) there shall have been paid to or deposited with the Bond Trustee a sum sufficient to pay: (A) all overdue installments of interest on such Bonds; (B) the principal of and premium (if any) on the Bonds that have become due other than by such declaration of acceleration and interest thereon at the respective rates provided in the Bonds; (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the respective rates provided in the Bonds for late payments of interest; and 52 61 (D) all sums paid or advanced by the Bond Trustee hereunder in accordance with the terms and conditions of the Finance Documents to which it is a party and the reasonable compensation, expenses, disbursements and advances of the Bond Trustee and its agents (as provided in this Indenture) and counsel; and (ii) all Indenture Events of Default, other than the nonpayment of principal of the Bonds that has become due solely by such acceleration, have been cured or waived as provided in Section 5.6; provided that no such rescission shall affect any subsequent Indenture Default or Indenture Event of Default or impair any right consequent thereon. Section 5.3 Specific Remedies. Subject to Section 10.3 hereof, if an Indenture Event of Default referred to in Section 5.1(a) shall have occurred and be continuing, the Bond Trustee, subject to the provisions of Sections 5.2, 5.5 and 5.6 hereof, shall enforce the Guarantee and the rights of the Holders thereunder. Section 5.4 Judicial Proceedings Instituted by Bond Trustee. (a) Bond Trustee May File Proofs of Claim; Appointment of Bond Trustee as Attorney-in-Fact in Judicial Proceedings. (i) Subject to the Intercreditor Agreement and Section 5.14, the Bond Trustee, in its own name, as trustee of an express trust or as attorney-in-fact for the Holders, or in any one or more of such capacities (irrespective of whether the principal of the Bonds shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Bond Trustee shall have made any demand for the payment of overdue principal, premium (if any) or interest), shall be entitled and empowered to (x) file such proofs of claim and other papers or documents and take any other actions authorized under the Trust Indenture Act as necessary or advisable in order to have the claims of the Bond Trustee and of the Holders (whether such claims be based upon the provisions of the Bonds or of this Indenture) allowed in any judicial proceeding (including, without limitation, any equity, receivership, insolvency, bankruptcy, liquidation, readjustment or reorganization proceeding) relating to the Issuer or any other obligor on the Bonds (within the meaning of the Trust Indenture Act), the creditors of the Issuer or any such obligor, the Collateral or any other property of the Issuer or such obligor (each such proceeding in accordance with the terms of this Indenture, a "Proceeding") and (y) collect and receive any monies or other property payable or deliverable on any such claims and distribute the same in accordance with the terms 53 62 of this Indenture. Any receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such Proceeding is hereby authorized by each Holder to make such payments to the Bond Trustee and, in the event the Bond Trustee shall consent to the making of such payments directly to the Holders, to pay to the Bond Trustee any amount due to it under this Section 5.4 for the reasonable compensation, expenses, disbursements and advances of the Bond Trustee, its agents and counsel. (ii) No provision of this Indenture shall be deemed to give the Bond Trustee any right to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Bonds or the rights of any Holder, to vote in respect of the claim of any Holder in any Proceeding or to otherwise change or waive in any way the rights of any Holder in any Proceeding; provided, however, that the Bond Trustee may, subject to the Intercreditor Agreement and Applicable Law, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. (iii) Any monies collected by the Bond Trustee under this clause (a) shall be applied as provided in Section 5.10. (b) Bond Trustee Need Not Have Possession of Bonds. Subject to the Intercreditor Agreement and Section 5.14, all proofs of claim, rights of action and rights to assert claims under this Indenture or under any of the Bonds of any particular Series may be enforced by the Bond Trustee without the possession of the Bonds of such Series or the production thereof at any Proceedings instituted by the Bond Trustee. In any Proceedings brought by the Bond Trustee (and any proceedings involving the interpretation of any provision of this Indenture or the Bonds to which the Bond Trustee shall be a party), the Bond Trustee shall be held to represent all of the Holders of such Series and it shall not be necessary to make any such Holders of such Series parties to such Proceedings. (c) Suit to be Brought for the Ratable Benefit of Holders. Subject to the other provisions of this Indenture and to the Intercreditor Agreement, any Proceeding at law, in equity or otherwise which shall be instituted by the Bond Trustee under any of the provisions of this Indenture or the Bonds shall be for the equal, ratable and common benefit of all of the Holders. (d) Restoration of Rights and Remedies. In case the Bond Trustee shall have instituted any Proceeding to enforce any right, power or remedy under this Indenture 54 63 or the Bonds by foreclosure, entry or otherwise and such Proceedings shall have been discontinued or abandoned for any reason, then and in every such case the Issuer and the Bond Trustee shall be restored to their former positions hereunder, and all rights, powers and remedies of the Bond Trustee and the Holders shall continue as if no such Proceeding had been instituted. Section 5.5 Control by Holders. Subject to the Intercreditor Agreement, the Majority Holders shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Bond Trustee, or exercising any trust or power conferred upon the Bond Trustee, under this Indenture; provided that (a) the Bond Trustee may take any other action deemed proper by the Bond Trustee which is not inconsistent with such direction and (b) subject to Section 10.1, the Bond Trustee need not follow any such direction if doing so would, being advised by counsel, either involve it in personal liability or be unduly prejudicial to Holders not joining in such direction. Section 5.6 Waiver of Defaults and Events of Default. Subject to the Intercreditor Agreement, the Majority Holders or One-Third Holders in the case of an Indenture Default or Indenture Event of Default under Section 5.1(a) of any Series may on behalf of the Holders of such Series of all Bonds waive any Indenture Default or Indenture Event of Default and its consequences, except that with respect to a default not theretofore cured, only the One Hundred Percent Holders may waive an Indenture Default or Indenture Event of Default in respect of a covenant or provision hereof that under Section 8.2 cannot be modified or amended without the consent of the Holder of each Outstanding Bond affected. Upon any waiver of any Indenture Default pursuant to this Section 5.6, such Indenture Default shall cease to exist and any Indenture Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Indenture Default or Indenture Event of Default or impair any consequent right in respect thereof. Section 5.7 Limitation on Suits by Holders. (a) Subject to the Intercreditor Agreement and the other provisions of this Article 5, a Holder of any particular Series shall not have the right to institute any Proceeding at law or in equity or otherwise for the appointment of a receiver or for the enforcement of any other remedy under or upon this Indenture, unless: (i) such Holder shall have previously given written notice to the Bond Trustee of a continuing Indenture Event of Default; 55 64 (ii) Holders representing the percentage of aggregate principal amount of Outstanding Bonds of such Series needed to initiate the exercise of remedies shall have requested the Bond Trustee in writing to institute such Proceeding; (iii) the Bond Trustee shall have refused or neglected to institute any Proceeding for sixty (60) days after receipt of such written notice by the Bond Trustee; and (iv) no direction inconsistent with such written request has been given to the Bond Trustee during such sixty (60) day period by the Majority Holders. (b) Subject to the Intercreditor Agreement, it is understood and intended that one or more of the Holders shall not have any right in any manner whatsoever hereunder or under the Bonds of such Series to (i) surrender, impair, waive, affect, disturb or prejudice the Lien of the Security Documents on any property subject thereto or the rights of any other Holders of such Series, (ii) obtain or seek to obtain priority or preference over any other Holders of such Series or (iii) enforce any right under this Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all of the Holders of such Series. Section 5.8 Undertaking to Pay Court Costs. All parties to this Indenture, and each Holder by its acceptance of a Bond, shall be deemed to have agreed that any court may in its discretion require, in any suit for the enforcement of any right or remedy hereunder, or in any suit against the Bond Trustee for any action taken or omitted by it as Bond Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided that the provisions of this Section 5.8 shall not apply to any suit instituted by the Bond Trustee, any suit instituted by a Holder or group of Holders holding in the aggregate more than ten percent (10%) in principal amount of the Outstanding Bonds of any particular Series to which the suit relates or any suit instituted by a Holder pursuant to Section 5.9 for the enforcement of the payment of the principal of, premium (if any) or interest on any Bond on or after the respective due dates expressed in such Bond or, in the case 56 65 of redemption or repayment, on or after the Redemption Date or applicable Payment Date. Section 5.9 Unconditional Right to Receive Payment. Subject to the Intercreditor Agreement, but notwithstanding any other provision of this Indenture (other than Section 5.6), the right of any Holder of a particular Series to receive payment of the principal of, premium (if any) or interest on any Bond of such Series on or after the respective due dates expressed in such Bond (or, in the case of redemption, on the Redemption Date fixed for such Bond), or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. Section 5.10 Application of Monies Collected by Bond Trustee. Following the application of funds pursuant to the Intercreditor Agreement, any money collected by the Bond Trustee pursuant to this Article 5 in respect of the Bonds of a Series, together with any other monies which may then be held by the Bond Trustee under any of the provisions of this Indenture as security for the Bonds of such Series (other than monies at the time required to be held for the payment of specific Bonds of such Series at their stated maturities or at a time fixed for the redemption thereof) shall be applied in the following order from time to time, on the date or dates fixed by the Bond Trustee and, in the case of a distribution of such monies on account of principal, premium (if any) or interest, upon presentation of the Outstanding Bonds of such Series, and stamping thereon of payment, if only partially paid, or upon surrender thereof, if fully paid: FIRST: To the payment of all amounts due and owing to the Bond Trustee or any predecessor Bond Trustee under Section 10.7; SECOND: To the payment of the amounts then due and unpaid upon the Bonds of that Series for principal (and premium, if any) and interest, in respect of which or for the benefit of which such money has been collected, ratably among Bonds within each Series and among the Series, without preference or priority of any kind, according to the amounts due and payable on such Bonds for principal (and premium, if any) and interest, respectively. Section 5.11 Waiver of Stay and Extension Laws. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may 57 66 affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Bond Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. Section 5.12 Remedies Cumulative; Delay or Omission Not Waiver. Each and every right, power and remedy herein specifically given to the Bond Trustee shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised, subject to the Intercreditor Agreement, from time to time and as often and in such order as may be deemed expedient by the Bond Trustee, and the exercise or commencement of the exercise of any right, power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy, and no delay or omission by the Bond Trustee in the exercise of any right, power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Issuer or be an acquiescence therein. Section 5.13 The Intercreditor Agreement. (a) Simultaneously with the execution and delivery of this Indenture, the Bond Trustee shall enter into the Intercreditor Agreement acting for itself and on behalf of all Holders of the Outstanding Bonds and all future Holders of any of the Bonds. (b) Notwithstanding any other provision of this Indenture, all rights, powers and remedies available to the Bond Trustee and the Holders, and all future Holders, shall be subject to the Intercreditor Agreement. In the event of any conflict or inconsistency between the terms and provisions of this Indenture and the terms and provisions of the Intercreditor Agreement, the terms and provisions of the Intercreditor Agreement shall govern and control. (c) In the event that the Bond Trustee is called upon by the Collateral Agent to participate in any intercreditor vote pursuant to the Intercreditor Agreement, the Bond Trustee shall duly convene a meeting of any Holders in accordance with Article 7 to canvass the Holders as to the vote to be cast. The Bond Trustee shall vote in any intercreditor vote only in accordance with instructions issued by the Holders at such meeting, and shall cast its vote in accordance with the direction of the Holders of the percentage of Outstanding Bonds required to take action under 58 67 this Indenture. In the event of the failure of any Holder to issue voting instructions to the Bond Trustee prior to the expiration of the decision period in respect of the subject intercreditor decision, the Bond Trustee shall refrain from voting on such intercreditor decision with respect to the Bonds held by such Holder. Section 5.14 Limitation on Holders' Bankruptcy Rights. Each Holder hereby irrevocably agrees, for itself and any other Person who may claim by, through or under it, not to (a) file, directly or indirectly, a petition to commence or join any other Person in the filing or prosecution of a petition to commence an involuntary filing or prosecution of a petition to commence an involuntary case under the Federal Bankruptcy Code against either Obligor or any Additional Guarantor and (b) institute any proceeding, judicial or otherwise, with respect to this Indenture or the Bonds or for the appointment of a receiver or a trustee or for any other remedy hereunder. ARTICLE 6 THE DEPOSITARY ACCOUNTS Section 6.1 Procedures Governing Accounts. (a) The Chase Manhattan Bank hereby agrees to act as depositary bank under this Indenture and to accept all Monies to be delivered to or held by the Depositary Bank pursuant to the terms of this Indenture and the other Finance Documents, and to promptly deposit all such Monies into the Depositary Accounts established hereunder. The Depositary Bank shall hold and safeguard the Depositary Accounts prior to the Debt Termination Date and shall treat the Monies, and all rights related thereto, now or hereafter deposited in or credited to the Depositary Accounts as "financial assets" (as defined in Section 8-102(a)(9) of the Uniform Commercial Code) pledged by the Obligors to the Collateral Agent for the benefit of the Secured Parties, to be held by the Depositary Bank acting as a "securities intermediary" (as defined in the Uniform Commercial Code). (b) The Depositary Accounts and sub-accounts established pursuant to Section 6.2 shall be in the name of the Collateral Agent for the benefit of the Secured Parties and shall be located in the State of New York. All Monies from time to time on deposit in or credited to each Depositary Account shall be (i) registered in the name of the Depositary Bank for the benefit of the Secured Parties, (ii) held in the custody of the Depositary Bank for the purposes and on the terms set forth in this Indenture and the other Finance Documents and (iii) endorsed to the Depositary 59 68 Bank. All such Monies shall constitute a part of the Collateral and shall not constitute payment of any Indebtedness or any other obligation of Obligor until applied as explicitly as such. The Depositary Bank shall maintain the Depositary Accounts and all Monies on deposit therein or credited thereto in the State of New York. (c) Each of the Depositary Accounts shall at all times be in the exclusive possession of, and under the exclusive dominion and control of, the Depository Bank, acting at the direction of the Collateral Agent. Each of the Obligors agree that their rights to Monies on deposit in or credited to the Depositary Accounts are subject to and controlled by the terms of this Indenture. In no case will any Monies deposited in or credited to any Depositary Account be registered in the name of either Obligor, be payable to the order of either Obligor or be specially endorsed to either Obligor, except to the extent the foregoing have been specially endorsed to the Depositary Bank or in blank. (d) The Depositary Bank hereby agrees that, notwithstanding any other provision herein or in any other Finance Document, it will comply only with "entitlement orders" (within the meaning of Section 8-102(a)(8) of the Uniform Commercial Code, including, without limitation, any notification to the Depositary Bank directing transfer or redemption of any securities or other financial assets in any Depositary Account) issued by the Collateral Agent and relating to any Depositary Account without the requirement of further consent by either Obligor or any other Person. The Depositary Bank hereby represents that it has not entered into, and hereby agrees that until the termination of each of the Finance Documents it will not enter into, any agreement with any other Person (other than an Obligor or an Additional Guarantor) (i) relating to the Depositary Accounts (or the Monies deposited therein or credited thereto) pursuant to which it has agreed to comply with entitlement orders made by such Person or (ii) that is inconsistent with the provisions of this Indenture. The Depositary Bank hereby represents that it has not entered into any other agreement with either Obligor or the Collateral Agent purporting to limit or condition the obligation of the Depositary Bank to comply with entitlement orders as set forth in this Section 6.1(d). The Depositary Bank hereby represents that it is a "securities intermediary" and each Depositary Account is a "securities account" as such terms are defined in the Uniform Commercial Code. The Depositary Bank hereby acknowledges that the "securities intermediary's jurisdiction" of it with respect to the Accounts (and the Monies deposited therein or credited thereto) is the State of New York. 60 69 Section 6.2 Establishment of Accounts. The Depositary Bank hereby establishes the following special, segregated depositary accounts (the "Depositary Accounts") in the form of non-interest bearing accounts thereof (and each such Depositary Account shall be a "securities account" as such term is defined in Section 8-501(a) of the Uniform Commercial Code), which shall be maintained at all times in accordance with Section 6.1 until the Debt Termination Date: (a) Revenue Account; and (b) Debt Service Reserve Account. The Depositary Bank shall not change the name or account number of any of the foregoing Depositary Accounts without the prior written consent of the Collateral Agent and, unless an Indenture Default or an Indenture Event of Default shall have occurred and be continuing, the Issuer. Certain sub-accounts within certain of the Depositary Accounts may be established and created from time to time in accordance with this Indenture. Section 6.3 Security Interest. (a) As collateral security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations, each of the Obligors hereby pledges, assigns, hypothecates and transfers to the Collateral Agent for the benefit of the Secured Parties, and grants to the Collateral Agent a Lien on and security interest in and to, each Depositary Account and all Financial Assets from time to time credited thereto, including all Monies at any time on deposit in or credited to any Depositary Account, including all income or gain earned thereon and any proceeds thereof. All amounts on deposit in the Depositary Accounts and all Cash Equivalents held therein shall constitute Collateral and shall not constitute payment of any Bonds or Guarantor Loans until applied as provided in this Indenture; provided that the security interest with respect to the Debt Service Reserve Account shall be for the exclusive benefit of the Holders. (b) The Depositary Bank hereby waives any right of set-off or recoupment, or security interest or Lien, that it may have or obtain with respect to or in or on the Depositary Accounts or any Monies deposited therein or credited thereto. Section 6.4 Termination. The rights and powers granted herein to the Collateral Agent with respect to the Depositary Accounts have been granted in order to perfect its security interests in the Depositary Accounts, are powers coupled with 61 70 an interest and will not be affected by the bankruptcy of either Obligor or by the lapse of time. The obligations of the Depositary Bank hereunder shall continue in effect until the termination of the Intercreditor Agreement pursuant to Section 6.10 thereof. Section 6.5 Revenue Account. (a) The following amounts shall be deposited into the Revenue Account directly, or if received by either Obligor, as soon as practicable upon receipt, in either case in accordance with this Section 6.5(a): (i) all Project Revenues received by either Obligor; (ii) any proceeds received from the sale of assets related to the Project (other than Assets Specifically Held for Resale or sales of the ownership interest in, or assets owned by, Unrestricted Subsidiaries) by the Subsidiary Guarantor in accordance with the terms of the Finance Documents; (iii) except as otherwise provided in Section 3.3, all Loss Proceeds, proceeds received in connection with a Title Event or proceeds received in connection with a PPA Buy-Out as received by either Obligor; and (iv) any income from the investment of Monies on deposit in or credited to any of the Depositary Accounts pursuant to Section 6.8. If any of the foregoing amounts required to be deposited with the Depositary Bank in accordance with the terms of this Indenture are received by either Obligor or any Affiliate thereof, such Obligor shall or shall cause any such Affiliate to hold such payments in trust for the Collateral Agent and shall promptly remit such payments to the Depositary Bank for deposit in the Revenue Account in the form received (with any necessary endorsements). (b) The Collateral Agent and each Obligor hereby irrevocably authorize the Depositary Bank to make withdrawals and transfers of Monies (via wire transfer or otherwise in the discretion of the Depositary Bank), to the extent then on deposit in or credited to the Revenue Account, upon the delivery of an Officer's Certificate of the Issuer to the Depositary Bank setting forth the Monies to be withdrawn from the Revenue Account and the Monies to be transferred pursuant to this clause (b); provided that no Monies shall be withdrawn and transferred from the Revenue Account to make any Restricted Payments unless permitted pursuant to the terms of Section 6.7. 62 71 (c) Each Obligor shall be permitted to establish one local account in the locality of the Project (or as otherwise deemed appropriate by each Obligor in its reasonable business judgment) or in the locality of the principal executive office of either Obligor which may be funded with amounts transferred from the Revenue Account; provided that the amounts on deposit therein shall in no event exceed an amount equal to sixty (60) days of Operating and Maintenance Expenses (as reasonably projected by the Obligors); provided further that each Obligor shall be permitted to establish certain accounts required pursuant to the terms of the Project Documents in effect as of the Closing Date. Notwithstanding anything herein to the contrary, each Unrestricted Subsidiary or the Issuer on behalf of each Unrestricted Subsidiary shall be permitted to establish one local account in the location deemed appropriate by the Issuer or such Unrestricted Subsidiary in its reasonable business judgment; provided that the amounts on deposit therein shall consist solely of revenues or other income of such Unrestricted Subsidiary. Section 6.6 Debt Service Reserve Account. (a) On the Closing Date, the Issuer will furnish to the Depositary Bank one or more (in any combination) of the following in an aggregate amount equal to at least the then current Debt Service Reserve Required Balance: (i) Acceptable Credit Support, (ii) United States dollars in immediately available funds and (iii) Cash Equivalents. After the Closing Date the Debt Service Reserve Account may accumulate cash deposits from (i) net interest and other investment income earned on Monies deposited therein or credited thereto and (ii) direct cash deposits. (b) On each date on which the Issuer is required to pay principal of, premium (if any) and interest on the Bonds, the Issuer shall at the direction of the Issuer first instruct the Depositary Bank to withdraw or transfer for such purpose (and only for such purpose) Monies then on deposit in or credited to the Revenue Account. To the extent that Monies then on deposit in or credited to the Revenue Account are insufficient to fund such withdrawal and transfer, the Depositary Bank shall at the direction of the Issuer either (i) transfer Monies on deposit in or credited to the Debt Service Reserve Account or (ii) draw on any Acceptable Credit Support in an amount equal to such insufficiency in the Revenue Account. The Depositary Bank shall apply the Monies received from the provider of such Acceptable Credit Support to pay principal of, premium (if any) and interest on the Bonds. (c) If any Acceptable Credit Support ceases to qualify as Acceptable Credit Support, the Issuer shall either (i) replace such non-qualifying support with Accept- 63 72 able Credit Support within thirty (30) days or (ii) deposit Monies in the Debt Service Reserve Account within thirty (30) days in an amount so that the aggregate balance in the Debt Service Reserve Account shall be at least equal to the then applicable Debt Service Reserve Required Balance. (d) At any time upon or after delivery of Acceptable Credit Support, the Issuer may deliver to the Depositary Bank a certificate setting out the Issuer's calculation of the excess of (i) the aggregate amount of Monies on deposit in the Debt Service Reserve Account plus the aggregate amount then available to be drawn under all Acceptable Credit Support theretofore delivered to the Depositary Bank over (y) the Debt Service Reserve Required Balance. The Depositary Bank shall, in accordance with the instructions specified therefor in such request, within two (2) Business Days of the receipt of such certificate, transfer from the Debt Service Reserve Account to the Issuer Monies or reduce the amount available to be drawn on or demanded under such Acceptable Credit Support(s) in an amount equal to such excess. (e) Unless the Bond Trustee shall have been notified in writing that an Event of Default shall have occurred and is continuing or would result therefrom, if on the last Business Day of any calendar month, the credit balance of the Debt Service Reserve Account exceeds the Debt Service Reserve Required Balance, then upon the written request of the Issuer delivered to the Bond Trustee no less than two (2) Business Days prior to the such last Business Day, the Bond Trustee shall transfer from the Debt Service Reserve Account to the Issuer an amount equal to such excess in accordance with the instructions specified therefor in such request. (f) The amount on deposit in the Debt Service Reserve Account at any time shall be deemed to be equal to the aggregate amount of cash on deposit therein at such time,plus the aggregate fair market value of all Cash Equivalents on deposit therein at such time,plus the amount available to be drawn or demanded under all Acceptable Credit Support held by the Bond Trustee at such time. Section 6.7 Restricted Payments. Restricted Payments may be made on any date on which each of the Payment Conditions has been satisfied; provided, that if Monies are withdrawn from the Debt Service Reserve Account (or Acceptable Credit Support available thereto) on any scheduled Payment Date and Restricted Payments were made during the six (6) month period prior to such date, then, immediately following such scheduled Payment Date, an amount equal to the lesser of (a) any Restricted Payments made during the prior period or (b) the amount of Monies 64 73 withdrawn from the Debt Service Reserve Account (or Acceptable Credit Support available thereto) on such date, shall be refunded to the Debt Service Reserve Account by means of a cash deposit or increase in the Acceptable Credit Support available thereto; provided; however that the amount of such refund shall not exceed the amount required to be deposited so that the balance in the Debt Service Reserve Account (taking into account any Acceptable Credit Support) equals the Debt Service Reserve Required Balance. Section 6.8 Investment of Monies. Monies on deposit in or credited to any Depositary Account shall be invested and reinvested in Cash Equivalents (a) if the maturity of the Bonds has not been accelerated, at the specific written direction (which may be in the form of a standing instruction) of an Authorized Officer of the Issuer to the Depositary Bank and (b) if the maturity of the Bonds has been accelerated, at the written direction of the Collateral Agent; provided, however, that (i) if a the maturity of the Bonds has not been accelerated and an Authorized Officer of the Issuer shall not have timely furnished such a written direction or (ii) if a Default or an Event of Default shall have occurred and be continuing and the Collateral Agent shall not have timely furnished such a written direction, the Depositary Bank shall invest such Monies only in Cash Equivalents described in clause (i) of the definition of Cash Equivalents with a maturity of thirty (30) days or less. Such investments shall mature in such amounts and have maturity dates, or be subject to redemption or capable of being sold or otherwise liquidated at the option of the holder thereof, on or prior to maturity as needed for the purposes described herein. Upon the acceleration of the maturity of the Bonds, the Depositary Bank shall, if instructed in writing by the Majority Holders of all Bonds of each Series as to which the Event of Default which gave rise to such acceleration applies, at any time and from time to time liquidate any or all of such investments prior to the maturity thereof as needed to cure the Event of Default which gave rise to such acceleration. In the event any such investments are redeemed prior to the maturity thereof, the Depositary Bank or the Bond Trustee shall not be liable for any loss or penalty relating thereto in the absence of its or the Bond Trustee's gross negligence or willful misconduct. Any income or gain realized from such investments shall be deposited (i) first, into the Debt Service Reserve Account until the Monies on deposit therein or credited thereto, together with the amount available Acceptable Credit Support, are equal to the then current Debt Service Reserve Required Balance, and without any further action on the part of the Issuer, (ii) second, into the Revenue Account. Any loss shall be charged to the applicable Depositary Account. The Depositary Bank shall not be liable for any loss, fee, tax or other charge other than by reason of its gross negligence or willful misconduct. For purposes of any income tax payable on 65 74 account of any income or gain on any investment in Cash Equivalents, such income or gain shall be for the account of the applicable Obligor. The Depositary Bank shall have no obligation to invest and reinvest any cash or other Monies held in a Depositary Account in the absence of timely and specific written investment direction by the Issuer or as otherwise required by this Indenture. In no event shall the Depositary Bank be liable for the selection of investments or for investment losses incurred thereon by reason of investment performance, liquidation prior to stated maturity or otherwise. The Depositary Bank shall have no liability in respect of losses incurred as a result of the liquidation of any investment prior to its stated maturity or the failure of any party to provide timely written investment direction except to the extent such losses were due to the gross negligence or bad faith on the part of the Depositary Bank. Section 6.9 Disposition of Monies Upon Retirement of Bonds and Additional Bonds. (a) Upon the payment in full of the principal of, premium (if any) and interest on any Series of Bonds or any issuance of Additional Bonds such that such Series of Bonds or issuance of Additional Bonds is no longer outstanding, all Monies on deposit in or credited to the Debt Service Reserve Account shall upon the written direction of the Issuer be transferred to the Revenue Account. (b) Upon termination of the Intercreditor Agreement and after payment in full of the principal of, premium (if any), interest on and all other amounts due in respect of all Secured Obligations and all other amounts required to be paid hereunder and under the other Finance Documents, all Monies remaining on deposit in or credited to any Depositary Account shall at the written direction of the Issuer be paid by the Depositary Bank to the Issuer. Section 6.10 Account Balance Statements. The Depositary Bank shall, on a monthly basis and at such other times as the Collateral Agent or the Issuer may from time to time reasonably request, provide to the Collateral Agent, the Bond Trustee and the Issuer account balance statements in respect of each of the Depositary Accounts. Such balance statements shall also include deposits and transfers to, withdrawals from and the net investment income or gain received and collected for, each Depositary Account. Section 6.11 Trigger Events. (a) On and after any date on which the Depositary Bank shall receive written notice from the Collateral Agent pursuant to Section 5.2 of the Intercreditor Agreement that a Trigger Event has occurred and 66 75 only until the Depositary Bank has received written notice from the Collateral Agent that the subject Trigger Event has been cured or waived in accordance with the Intercreditor Agreement, the Depositary Bank shall thereafter accept all notices and instructions required to be given to the Depositary Bank pursuant to the terms of this Indenture only from the Collateral Agent and not from any other Person and the Depositary Bank shall not withdraw, transfer, pay or otherwise distribute any Monies on deposit in or credited to any of the Depositary Accounts except pursuant to such notices and instructions from the Collateral Agent. (b) On any date on which the Depositary Bank has received written notice that a Trigger Event has occurred, the Depositary Bank shall provide a statement of all Monies on deposit in or credited to the Depositary Accounts as of such date to the Collateral Agent, the Bond Trustee and the Issuer. (c) On and after any date on which the Depositary Bank has received written notice that a Trigger Event has occurred until the Depositary Bank has received notice from the Collateral Agent that the subject Trigger Event has been cured or waived in accordance with the Intercreditor Agreement, the Depositary Bank shall distribute all Monies then on deposit in or credited to any Depositary Account in accordance with the terms of this Indenture and the Intercreditor Agreement. ARTICLE 7 ACTS OF HOLDERS Section 7.1 Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders (collectively, an "Act" of such Holders, which term also shall refer to the instruments or records evidencing or embodying the same), including any Act for which a specified percentage of the principal amount of the Bonds is required, may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing or, alternatively, may be embodied in and evidenced by the record of Holders of Bonds voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders duly called and held in accordance with the provisions of this Article 7, or a combination of such instruments and any such records. Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or records are delivered to the Bond Trustee and, when specifically required herein, to the Issuer. Proof of execution of 67 76 any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and conclusive in favor of the Bond Trustee and the Issuer, if made in the manner provided in this Section 7.1. Any record of any meeting of Holders shall be proved in the manner set forth in Section 7.7. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction authorized to take acknowledgments of deeds or administer oaths that the Person executing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution, and where such execution is by an officer of a corporation, limited liability company, association or partnership, on behalf of such corporation, limited liability company, association or partnership, such certificate or affidavit shall also constitute sufficient proof of such officer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Bond Trustee deems sufficient. (c) The principal amount and serial numbers of Bonds held by any Person, and the date or dates of holding the same, shall be proved by the Securities Register and the Bond Trustee shall not be affected by notice to the contrary. (d) Any Act by the Holder of any Bond (i) shall bind every future Holder of the same Bond and the Holder of every Bond issued upon the transfer thereof or the exchange therefor or in lieu thereof, whether or not notation of such action is made upon such Bond and (ii) shall be valid notwithstanding that such Act is taken in connection with the transfer of such Bond to any other Person, including the Issuer or any Affiliate thereof. (e) Until such time as written instruments shall have been delivered with respect to the requisite percentage of principal amount of Bonds for the Act contemplated by such instruments, any such instrument executed and delivered by or on behalf of a Holder of Bonds may be revoked with respect to any or all of such Bonds by written notice by such Holder (or its duly appointed agent) or any subsequent Holder (or its duly appointed agent), proven in the manner in which such instrument was proven unless such instrument is by its terms expressly irrevocable. In determining whether the requisite percentage or a majority in principal amount of Holders of Bonds has joined in any Act of Holders, (i) the percentage of Holders of Bonds voting and (ii) the manner in which such Holders of Bonds have voted shall be as notified in writing to the Bond Trustee by the Issuer. 68 77 (f) Bonds of any Series authenticated and delivered after any Act of Holders may, and shall if required by the Bond Trustee, bear a notation in form approved by the Bond Trustee as to any action taken by such Act of Holders. If the Issuer shall so determine, new Bonds so modified as to conform, in the opinion of the Bond Trustee and the Issuer, to such action, may be prepared and executed by the Issuer and authenticated and delivered by the Bond Trustee in exchange for Outstanding Bonds, each at no cost to the Holders of such Bonds. (g) The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to sign any instrument evidencing or embodying an Act of Holders If a record date is fixed, those Persons who were Holders at such record date (or their duly appointed agents), and only those Persons, shall be entitled to sign any such instrument evidencing or embodying an Act of Holders or to revoke any such instrument previously signed, whether or not such Persons continue to be Holders after such record date. No such instrument shall be valid or effective if signed more than ninety (90) days after such record date, and may be revoked as provided in clause (e) of this Section 7.1. Section 7.2 Purposes for Which Holders' Meeting May Be Called. A meeting of Holders may be called at any time and from time to time pursuant to this Article 7 for any of the following purposes: (a) to give any notice to the Issuer or to the Bond Trustee, or to give any directions to the Bond Trustee, or to waive or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Holders pursuant to Article 5; (b) to remove the Bond Trustee and appoint a successor Bond Trustee pursuant to Article 10; (c) to consent to the execution of an indenture or indentures supplemental hereto pursuant to Article 8; (d) to instruct the Bond Trustee as to the vote to be cast by the Bond Trustee in any intercreditor vote pursuant to the Intercreditor Agreement; or 69 78 (e) to take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of the Bonds under any other provision of this Indenture or under Applicable Law. Section 7.3 The Issuer and Holders May Call Meeting. In case the Issuer or the Holders of at least ten percent (10%) in aggregate principal amount of the Outstanding Bonds shall have requested the Bond Trustee to call a meeting of Holders of Bonds, by written request setting forth in general terms the action proposed to be taken at the meeting, and the Bond Trustee shall not have mailed notice of such meeting within twenty (20) days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Issuer or the Holders of Bonds in the amount specified above may determine the time and place in the Borough of Manhattan, the City of New York, for such meeting and may call such meeting to take any action authorized in Section 7.2 by giving notice thereof as provided in Section 12.5(b). Section 7.4 Persons Entitled to Vote at Meeting. To be entitled to vote at any meeting of Holders, a Person shall be (a) a Holder of one or more Bonds with respect to which such meeting is being held or (b) a Person appointed by an instrument in writing as proxy for the Holder or Holders of such Bonds by a Holder of one or more such Outstanding Bonds. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Bond Trustee and its counsel and any representatives of the Issuer and its counsel. Section 7.5 Determination of Voting Rights; Conduct and Adjournment of Meeting. (a) Notwithstanding any other provision of this Indenture, the Bond Trustee may make such reasonable regulations for any meeting of Holders, in regard to proof of the holding of Bonds and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 7.1 or other proof. Except as otherwise permitted or required by any such regulations, the holding of Bonds shall be proved in the manner specified in Section 7.1 and the appointment of any proxy shall be proved in the manner specified in said Section 7.1 or by having the signature of the Person executing the proxy witnessed or guaranteed by any bank, banker, trust company or firm satisfactory to the Bond Trustee. 70 79 (b) The Issuer or the Holders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Holders of a majority in principal amount of the Bonds represented at the meeting and entitled to vote. (c) Subject to the provisions of Section 7.7, at any meeting each Holder of a Bond or a proxy shall be entitled to one vote for each $1,000 principal amount of Bonds held or represented by it; provided, however, that no vote shall be cast or counted at any meeting in respect of any Bond challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Bonds held by him or instruments in writing as aforesaid duly designating him as the Person to vote on behalf of other Holders of Bonds. Any meeting of Holders duly called pursuant to Section 7.4 may be adjourned from time to time, and the meeting may be held as so adjourned without further notice. At any meeting, the presence of Persons holding or representing Bonds with respect to which such meeting is being held in an aggregate principal amount sufficient to take action upon the business for the transaction of which such meeting was called shall be necessary to constitute a quorum; provided, however, that if less than a quorum shall be present at any meeting, the Persons holding or representing a majority of the Bonds represented at the meeting may adjourn such meeting with the same effect, for all intents and purposes, as though a quorum had been present. Section 7.6 Counting Votes and Recording Action of Meeting. The vote upon any resolution submitted to any meeting of Holders of Bonds of any Series shall be by written ballots on which shall be subscribed the signatures of the Holders of Bonds of such Series or of their representatives by proxy and the serial numbers and principal amounts of the Bonds held or represented by them. The permanent chairman of the meeting shall appoint two (2) inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Holders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken at such meeting and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 7.3. The record shall show the serial numbers of the Bonds voting in favor of or against any resolution. The record shall 71 80 be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Issuer and the other to the Bond Trustee to be preserved by the Bond Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated. Section 7.7 Bonds Owned by Certain Persons Deemed Not Outstanding. In determining whether the Holders of the requisite aggregate principal amount of Bonds have concurred in any request, demand, authorization, direction, notice, consent, waiver or other act under this Indenture, Bonds which are owned by the Issuer, the Subsidiary Guarantor, NRG, any Member or, in each case, any of their respective Affiliates shall be disregarded and deemed not to be Outstanding for the purpose of any such determination except that for the purposes of determining whether the Bond Trustee shall be protected in relying on any such direction, consent or waiver, only Bonds for which the Bond Trustee has received written notice of such ownership as conclusively evidenced by the Securities Register shall be so disregarded. The Issuer shall furnish the Bond Trustee, upon its reasonable request, with an Officer's Certificate listing the above-described Persons. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this Section 7.7 if the pledgee shall establish to the satisfaction of the Bond Trustee that the pledgee has the right to vote such Bonds and that the pledgee is not an Affiliate of the Issuer, the Subsidiary Guarantor, NRG or any Member. Subject to the provisions of Section 3.15 of the Trust Indenture Act, in case of a dispute as to such right, any decision by the Bond Trustee, taken upon the advice of counsel, shall be full protection to the Bond Trustee. ARTICLE 8 SUPPLEMENTAL INDENTURES Section 8.1 Amendments and Supplements to Indenture Without Consent of Holders. Subject to the Intercreditor Agreement, this Indenture may be amended or supplemented (together with necessary conforming amendments to any other Finance Document the terms of which affect the rights of the Holders hereunder or thereunder) by the Issuer and the Bond Trustee at any time and from time to time without the consent of the Holders by a Supplemental Indenture authorized by a resolution of the Management Committee of the Issuer filed with, and in form satisfactory to, the Bond Trustee, solely for one or more of the following purposes: 72 81 (a) to establish the form and terms of Bonds of any Series permitted by Article 2; or (b) to evidence the succession of another entity to the Issuer and the assumption by any such successor of the covenants of the Issuer herein contained; or (c) to evidence the succession of a new Bond Trustee hereunder pursuant to Section 10.9; or (d) to add to the covenants of the Issuer such further covenants, restrictions, conditions or provisions as the Management Committee shall consider to be for the protection of the Holders of Bonds, and to make the occurrence, or the occurrence and continuance of a default in any such additional covenants, restrictions, conditions or provisions an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided that in respect of any such additional covenant, restriction, condition or provision such Supplemental Indenture may provide for a particular period of grace after such default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for immediate enforcement upon such an Event of Default or may limit the remedies available to the Bond Trustee due solely to such an Event of Default or may limit the right of the Majority Holders to waive such an Event of Default; or (e) to convey, transfer and assign to the Bond Trustee properties or assets to secure the Bonds, and to correct or amplify the description of any property at any time subject to this Indenture or the Security Documents or to assure, convey and confirm unto the Bond Trustee any property subject or required to be subject to this Indenture or the Security Documents; or (f) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to qualify, requalify or continue the qualification of this Indenture (including any supplemental indenture) under the Trust Indenture Act, or under any similar United States federal statute hereafter enacted, and to add to this Indenture such other provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which this instrument was executed or any corresponding provision in any similar United States federal statute hereafter enacted; or 73 82 (g) to permit or facilitate the issuance of Bonds in uncertificated form; or (h) to change or eliminate any provision of this Indenture or the Security Documents; provided, however, that if such change or elimination shall adversely affect the interests of the Holders of Bonds of any Series, such change or elimination shall not become effective with respect to such Series; or (i) to cure any ambiguity, to correct or supplement any provision in the Indenture or the Security Documents that may be defective or inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture or the Security Documents, provided such action shall not adversely affect the interest of the Holders of any Series in any material respect; or (j) to provide for the issuance of Exchange Bonds, as contemplated by the Registration Rights Agreement, and to make such other changes to the Indenture or the Security Documents as the Management Committee of the Issuer determines are necessary or appropriate in connection therewith, provided such action shall not adversely affect the interests of the Holders of Bonds of any Series in any material respect; or (k) prior to the closing date of the Acquisition, to amend, modify or supplement the schedules attached hereto; provided that the Issuer provides an Officer's Certificate certifying that such amendment, modification or supplement would not reasonably be expected to result in a Material Adverse Effect. Section 8.2 Amendments and Supplements to Indenture With Consent of Holders. Subject to the Intercreditor Agreement, this Indenture may be amended or supplemented (together with necessary conforming amendments to any other Finance Document the terms of which affect the rights of the Holders hereunder or thereunder) by the Issuer when authorized by a Resolution (a copy of which shall be delivered to the Bond Trustee) and the Bond Trustee at any time and from time to time, with the consent of the Majority Holders, for the purpose of adding any mutually agreeable provisions to or changing in any manner or eliminating any of the provisions of, this Indenture, except with respect to: (a) change any scheduled Payment Date, or the dates or circumstances of payment of premium, if any, on any Bond, or change the principal amount thereof or the interest thereon or any premium payable upon the redemption thereof, or change 74 83 the place of payment where, or the coin or currency in which, any Bond or the premium, if any, or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment of principal or interest on or after the scheduled Payment Date for such payment (or, in the case of redemption, on or after the Redemption Date) or such payment of premium, if any, on or after the date such premium becomes due and payable in respect of such Bonds; or (b) except to the extent expressly permitted by this Indenture, the Guarantor Loan Agreement or any of the Security Documents, permit the creation of any Lien prior to or pari passu with the Lien of the Security Documents with respect to any of the Collateral, terminate the Lien of the Security Documents on any Collateral or deprive any Holder of the security afforded by the Lien of the Security Documents; or (c) reduce the percentage in principal amount of the Outstanding Bonds, the consent of whose Holders is required for any such Supplemental Indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture; or (d) modify any of the provisions of Section 5.6 or of this Section 8.2. Subject to the Intercreditor Agreement, the matters of this Indenture described in clauses (a) through (d) of the preceding sentence may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time only with the consent of the One Hundred Percent Holders. Notice of any such amendment shall be given by the Issuer to any Rating Agency then maintaining a Rating for the Bonds. A Supplemental Indenture that changes or eliminates any covenant or other provision of this Indenture or any Security Document which has expressly been included solely for the benefit of one or more particular Series of Bonds, or which modifies the rights of the Holders of Bonds of such Series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Bonds of any other Series. Section 8.3 Amendment of Guarantor Loan Agreement or Guarantor Notes. The Issuer and the Bond Trustee may without the consent of or notice to the Holders consent to any amendment or modification of the Guarantor Loan Agreement or 75 84 Guarantor Note to take any action corresponding to those actions set forth in Section 8.1 with respect to the Subsidiary Guarantor or the Guarantor Loan Agreement. Except as otherwise provided in this Section 8.3, neither the Issuer nor the Bond Trustee shall consent to any other amendment or modification of the Guarantor Loan Agreement or Guarantor Note or grant any waiver or consent thereunder without the written approval or consent of the Majority Holders. Any amendment or change to the Guarantor Loan Agreement or Guarantor Note which changes any provision of the Guarantor Loan Agreement or Guarantor Note (together with necessary conforming amendments to any other Finance Documents the terms of which affect the rights of the Secured Parties thereunder) corresponding to the provisions described in Section 8.2 shall only be made with the consent of the One Hundred Percent Holders. Section 8.4 Bond Trustee Authorized to Join in Amendments and Supplements; Reliance on Counsel. The Bond Trustee is authorized to join with the Issuer in the execution and delivery of any Supplemental Indenture or amendment permitted by this Article 8 and in so doing shall be entitled to receive and shall be fully protected in conclusively relying upon an Opinion of Counsel stating that such Supplemental Indenture or amendment is so permitted and has been duly authorized by the Issuer and that all things necessary to make it a valid and binding agreement have been done. The Bond Trustee may, but shall not be obligated to execute and deliver any such supplement, modification or amendment which modifies its rights, powers, duties, immunities or indemnities hereunder as determined by the Bond Trustee in its sole discretion. Section 8.5 Effect of Supplemental Indentures. Upon the execution of any Supplemental Indenture under this Article 8, this Indenture shall be modified in accordance therewith, and such Supplemental Indenture shall form a part of this Indenture for all purposes, and every Holder of Bonds therefor or thereafter authenticated and delivered hereunder shall be bound thereby. Section 8.6 Conformity with Trust Indenture Act. Every Supplemental Indenture executed pursuant to Article 8 shall conform to the requirements of the Trust Indenture Act as then in effect. Section 8.7 Reference in Bonds to Supplemental Indentures. Bonds authenticated and delivered after the execution of any Supplemental Indenture pursuant to this Article 8 may, and shall if required by the Issuer, bear a notation in form approved by the Issuer and the Bond Trustee as to any matter provided for in 76 85 such Supplemental Indenture and, in such case, suitable notation may be made upon Outstanding Bonds after proper presentation and demand. If the Issuer shall so determine, new Bonds so modified as to conform, in the opinion of the Issuer, to any such Supplemental Indenture may be prepared and executed by the Issuer and authenticated and delivered by the Bond Trustee in exchange for Outstanding Bonds. ARTICLE 9 SATISFACTION AND DISCHARGE; DEFEASANCE Section 9.1 Satisfaction and Discharge of Bonds and Indenture. (a) Except as otherwise provided with respect to the Bonds of any Series in the Supplemental Indenture relating thereto, the Bonds of such Series shall, on or prior to the scheduled Payment Date with respect to the final installment of principal thereof, be deemed to have been paid for all purposes of this Indenture, and the entire Indebtedness of the Issuer in respect thereof shall be deemed to have been satisfied and discharged, upon satisfaction of the following conditions: (i) the Issuer shall have irrevocably deposited or caused to be deposited with the Bond Trustee, in trust, money in an amount which shall be sufficient to pay when due the principal of and premium, if any, and interest due and to become due on the Bonds of such Series on and prior to the scheduled Payment Date with respect to the final installment of principal thereof or upon redemption; (ii) if any such deposit of money shall have been made prior to the scheduled Payment Date with respect to the final installment of principal or the Redemption Date of such Bonds, the Issuer shall have delivered to the Bond Trustee a an Officer's Certificate stating that such money shall be held by the Bond Trustee, in trust; (iii) in the case of redemption of Bonds, the Officer's Certificate with respect to such redemption pursuant to Article 3 shall have been given to the Bond Trustee; and (iv) there shall have been delivered to the Bond Trustee an Opinion of Counsel to the effect that such satisfaction and discharge of the Indebtedness of the Issuer with respect to the Bonds of such Series shall not be deemed to be, or result in, a taxable event with respect to the Holders of such 77 86 Series for purposes of United States federal income taxation unless the Bond Trustee shall have received documentary evidence that each Holder of such Series either is not subject to, or is exempt from, United States federal income taxation. Upon satisfaction of the aforesaid conditions with respect to the Bonds of any Series, the Bond Trustee shall, upon receipt of a Officer's Certificate of the Issuer, execute proper instruments acknowledging satisfaction and discharge of the Series of Bonds. In the event that Bonds which shall be deemed to have been paid as provided in this Section 9.1(a) do not mature and are not to be redeemed within the sixty (60) day period commencing on the date of the deposit with the Bond Trustee of moneys, the Issuer shall, as promptly as practicable, give a notice, in the same manner as a notice of redemption with respect to such Bonds, to the Holders of such Bonds to the effect that such Bonds are deemed to have been paid and the circumstances thereof. (b) Except as set forth in Section 9.3, this Indenture shall cease to be of further effect and the Bond Trustee, on written demand and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when: (i) either: (A) all Bonds theretofore authenticated and delivered (other than Bonds which have been destroyed, lost or stolen and which have been replaced or paid as set forth in Section 2.10 and Bonds deemed to have been paid in accordance with clause (a) of this Section 9.1) have been delivered to the Bond Trustee for cancellation; or (B) all Bonds not theretofore delivered to the Bond Trustee for cancellation shall be deemed to have been paid in accordance with clause (a) of this Section 9.1; (ii) the Issuer shall have paid or caused to be paid all other sums then due and payable by it hereunder; and (iii) the Issuer shall have delivered to the Bond Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions 78 87 precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Section 9.2 Defeasance. (a) Subject to clause (d) of this Section 9.2, Section 9.3 and Section 9.7, the Issuer may at any time terminate: (i) all of its obligations under the Bonds and this Indenture (the "Legal Defeasance Option"); or (ii) its obligations under any provision of Article 4 (except with respect to Section 4.2) and the operation of clauses (d) (except with respect to Section 4.2), (c), (d), (e) and (i) of Section 5.1 (the "Covenant Defeasance Option"); provided that the Issuer may exercise the Legal Defeasance Option notwithstanding the prior exercise of the Covenant Defeasance Option. (b) If the Issuer elects to exercise the Legal Defeasance Option and all applicable conditions set forth in clause (d) of this Section 9.2 are satisfied, payment of the Bonds may not be accelerated because of any Indenture Event of Default. If the Issuer elects to exercise the Covenant Defeasance Option and all applicable conditions set forth in clause (d) of this Section 9.2 are satisfied, payment of the Bonds may not be accelerated because of an Event of Default specified in clause (d) (except with respect to Section 4.2), (c), (d), (e), (i) of Section 5.1). (c) If the Issuer elects to exercise the Legal Defeasance Option or the Covenant Defeasance Option and all applicable conditions set forth in clause (d) of this Section 9.2 are satisfied, the Bond Trustee shall, upon written request of the Issuer, (i) acknowledge in writing the discharge of such obligations that the Issuer terminates pursuant to this Section 9.2 and (y) execute proper instruments acknowledging the discharge of such obligations. (d) the Issuer may exercise its Legal Defeasance Option or its Covenant Defeasance Option only if the following conditions are satisfied: (i) the Issuer irrevocably deposits (such deposit, the "Defeasance Deposit") in trust with the Bond Trustee Monies or US Government Obligations for the payment of principal of, premium (if any) and interest on the 79 88 Bonds to the Final Maturity Date thereof or the Redemption Date therefor, as the case may be; (ii) the Issuer delivers to the Bond Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that Defeasance Deposit will provide cash at such times and in such amounts as will be sufficient to pay principal, premium (if any) and interest when due on all the Bonds to the Final Maturity Date thereof or the Redemption Date therefor, as the case may be; (iii) the Issuer delivers to the Bond Trustee an Opinion of Counsel to the effect that, or that a court should hold that, such deposit would not constitute a preference that could be avoided under Section 547 of the Federal Bankruptcy Code should the Issuer become the debtor in a case under the Federal Bankruptcy Code; (iv) no Indenture Default or Indenture Event of Default (other than an Indenture Default or Indenture Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Bonds) shall have occurred and be continuing on the date of and after giving effect to the Defeasance Deposit; (v) the Defeasance Deposit does not constitute a default under any other agreement binding on the Issuer; (vi) the Issuer delivers to the Bond Trustee an Opinion of Counsel to the effect that, or a court should hold that, the trust resulting from the Defeasance Deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940, as amended from time to time; (vii) in the case of the Legal Defeasance Option, the Issuer shall have delivered to the Bond Trustee an Opinion of Counsel to the effect that, or that a court should hold that, the Holders will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred, which Opinion of Counsel shall be based upon an Internal Revenue Service ruling or a change in the applicable United 80 89 States federal income tax law or United States Treasury regulations since the Closing Date; (viii) in the case of the Covenant Defeasance Option, the Issuer shall have delivered to the Bond Trustee an Opinion of Counsel to the effect that the Holders will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance and will be subject to United States federal income tax purposes on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (ix) the Issuer delivers to the Bond Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Bonds as contemplated in this Section 9.2 have been complied with; and (x) the Issuer delivers to the Bond Trustee an Opinion of Counsel to the effect that the Holders shall have a perfected security interest under Applicable Law in the Defeasance Deposit. Section 9.3 Survival of Obligations. Notwithstanding the satisfaction and discharge of this Indenture pursuant to Section 9.1 or any defeasance pursuant to Section 9.2, the obligations of the Issuer and the Bond Trustee under this Article 9 and under Section 2.5, Section 2.7, Section 2.10, Section 2.14 and Section 10.7 shall survive such satisfaction and discharge. Section 9.4 Application of Trust Money. Subject to Section 9.7, the money deposited with the Bond Trustee pursuant to this Article 9 shall not be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of and premium, if any, and interest on the Bonds or portions of principal amount thereof in respect of which such deposit was made. Section 9.5 Unclaimed Monies. Monies deposited with the Bond Trustee pursuant to this Article 9 which remain unclaimed two (2) years following the date payment thereof becomes due shall, at the request of the Issuer, if at such time, to the knowledge of the Bond Trustee, no Indenture Event of Default shall have occurred and be continuing, be paid to the Issuer, and the Holders of the Bonds for which such deposit was made shall thereafter be limited to a claim against the Issuer; provided, however, that the Bond Trustee, prior to making payment to the Issuer pursuant to 81 90 this Section 9.5, may, at the expense of the Issuer, cause a notice to be published once in a newspaper or financial journal of general circulation in the Borough of Manhattan, the City of New York, stating that the monies remaining unclaimed will be returned to the Issuer after a specified date. Section 9.6 Indemnity for US Government Obligations. The Issuer shall pay and shall fully indemnify the Bond Trustee against any tax, fee or other charge imposed or assessed against US Government Obligations deposited pursuant to this Article 9 or the principal and interest received with respect to such US Government Obligations, other than any such tax, fee or other charge that by law is for the account of the Holders of the Outstanding Bonds. Section 9.7 Reinstatement. If the Bond Trustee or the Paying Agent is unable to apply any monies or US Government Obligations in accordance with this Article 9 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer's obligations under this Indenture and the Bonds shall be revived and reinstated as though no deposit of monies or US Government Obligations shall have occurred pursuant to this Article 9 until such time as the Bond Trustee or the Paying Agent is permitted to apply such monies or US Government Obligations in accordance with this Article 9; provided, however, that, if the Issuer has made any payment of principal of, premium or interest on any Bonds following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Bonds to receive such payment from the monies or US Government Obligations held by the Bond Trustee or the Paying Agent. ARTICLE 10 THE BOND TRUSTEE Section 10.1 Certain Duties and Responsibilities of Bond Trustee. (a) Except during the continuance of an Indenture Event of Default: (i) the Bond Trustee shall undertake to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Bond Trustee; and 82 91 (ii) in the absence of bad faith on its part, the Bond Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Bond Trustee and conforming to the requirements of this Indenture; provided, however, that, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Bond Trustee, the Bond Trustee shall be under a duty to examine the same to determine whether they conform to the requirements of this Indenture. (b) Subject to the Intercreditor Agreement, in case an Indenture Event of Default has occurred and is continuing, the Bond Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Bond Trustee from liability for its own its own grossly negligent acts or omissions, or its own willful misconduct, except that: (i) this clause (c) shall not be construed to limit the effect of clause (a) of this Section 10.1; (ii) the Bond Trustee shall not be liable for any error of judgment made in good faith by one or more Responsible Officers of the Bond Trustee, unless it shall be proved that the Bond Trustee was negligent in ascertaining the pertinent facts or the action or failure to act by such Responsible Officer was unreasonable; (iii) the Bond Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the Intercreditor Agreement or the direction of the Majority Holders relating to the time, method and place of conducting any proceeding for any remedy available to the Bond Trustee, or exercising any trust or power conferred upon the Bond Trustee, under this Indenture; and (iv) no provision of this Indenture shall require the Bond Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repay- 83 92 ment of such funds or indemnity satisfactory to it against such risk or liability is not assured to it. (d) Whether or not herein or therein expressly so provided, every provision of this Indenture and the other Finance Documents to which it is a party relating to the conduct or affecting the liability of or affording protection to the Bond Trustee (and its officers, directors, employees, agents, successors and assigns) shall be subject to the provisions of this Section 10.1 and, notwithstanding anything to the contrary, the Intercreditor Agreement. (e) The Bond Trustee shall not be responsible for insuring any Project or for collecting any insurance monies and shall have no responsibility for the financial, physical or other condition of the Project. (f) Promptly upon request, the Bond Trustee shall comply with all reasonable written requests for information from any Holder or from the Initial Purchaser. Section 10.2 Certain Rights of Bond Trustee. (a) The Bond Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, notice, other evidence of Indebtedness or other paper or document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper party or parties. (b) Any request or direction of the Issuer shall be sufficiently evidenced by a written instrument signed by an Authorized Officer of the Issuer and any resolution of the Management Committee of the Issuer shall be sufficiently evidenced by a copy thereof certified by a secretary or assistant secretary of the Issuer. (c) Whenever in the administration of this Indenture the Bond Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting to take any action hereunder, the Bond Trustee (unless other evidence is herein specifically prescribed to be relied upon) may, in the absence of bad faith on its part, request and rely upon an Officer's Certificate. (d) The Bond Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. 84 93 (e) The Bond Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Bond Trustee security or indemnity (acceptable to the Bond Trustee) against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. (f) The Bond Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, notice, other evidence of Indebtedness or other paper or document, but the Bond Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (g) The Bond Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by agents, attorneys, custodians or nominees and the Bond Trustee shall not be responsible for any misconduct or negligence on the part of any agent, attorney custodian or nominee appointed in good faith by it hereunder. (h) The Bond Trustee shall be under no obligation to take any action pursuant to any request or direction, if it shall receive conflicting requests or directions from any party so authorized; provided that the Bond Trustee informs such parties as to the existence of such conflicting requests or directions. (i) The Bond Trustee shall be under no obligation to take any action which is discretionary with the Bond Trustee under this Indenture or any other Finance Document. (j) The Bond Trustee shall have no responsibility with respect to the recording, re-recording, filing or re-filing under the laws of any jurisdiction of this Indenture or any other Security Document, or any document or statement that may be recorded, re-recorded, filed or re-filed under any such laws to perfect or protect the security interests created by or pursuant to this Indenture, any other Security Document or any other document or to the payment of fees, charges, or Taxes in connection therewith or to give any notice thereof. 85 94 Section 10.3 Notice of Defaults. (a) If payment on any Bond is not made when it becomes due and payable, the Bond Trustee shall promptly notify the Issuer that it has failed to make such payment. Subject to the Intercreditor Agreement, within thirty (30) days after the occurrence of any Indenture Event of Default of which a Responsible Officer of the Bond Trustee has actual knowledge, the Bond Trustee shall give to all Holders, in the manner provided for in Section 12.5(b), notice of such Indenture Event of Default, unless such Indenture Event of Default shall have been cured or waived. (b) Except as otherwise expressly provided herein, the Bond Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein, or of any other documents executed in connection with the Bonds, or as to the existence of an event of default thereunder, and shall not be deemed to have notice of an Indenture Event of Default unless and until a Responsible Officer of the Bond Trustee shall have (i) been notified in writing in accordance with the terms hereof or (ii) shall have received notice thereof from the Collateral Agent pursuant to Section 2.2 of the Intercreditor Agreement. The receipt by the Bond Trustee of notice pursuant to either clause (i) or clause (ii) shall constitute for purposes of this Indenture "actual knowledge" on behalf of the Bond Trustee. (c) The Bond Trustee shall give to all Holders any notices received by it pursuant to the Intercreditor Agreement (other than those specifically for the Bond Trustee only). Section 10.4 Not Responsible for Recitals or Issuance of Bonds. The recitals, representations, warranties, and other statements contained herein, in the other Finance Documents, and in the Bonds, except the Bond Trustee's certificate of authentication, shall be taken as the statements of the Issuer, and the Bond Trustee assumes no responsibility for their correctness. The Bond Trustee makes no representations as to the validity or sufficiency of this Indenture or any of the other Finance Documents or of the Bonds. The Bond Trustee shall not be accountable for the use or application by the Issuer of the Bonds or the proceeds of the issuance and sale thereof. Section 10.5 May Hold Bonds. The Bond Trustee or any other agent of the Issuer, in its individual or any other capacity, may become the owner or pledgee of Bonds and may deal with the Issuer with the same rights it would have if it were not Bond Trustee or such other agent. 86 95 Section 10.6 Monies Held in Trust. Money held by the Bond Trustee in trust hereunder need not be segregated from other funds except to the extent required by Applicable Law. The Bond Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Issuer. Section 10.7 Compensation; Reimbursement; Indemnification. (a) The Issuer hereby agrees: (i) to pay to the Bond Trustee, as agreed upon from time to time in writing, reasonable compensation for all services rendered by it hereunder or in connection with the Finance Documents (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (ii) except as otherwise expressly provided herein, to reimburse the Bond Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Bond Trustee in accordance with any provision of this Indenture or in connection with the Finance Documents (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its gross negligence or bad faith; and (iii) to indemnify each of the Bond Trustee and its officers, directors, employees, representatives and agents and any predecessor Bond Trustee for, defend and hold it and them harmless against, any and all loss, liability, claim, damage, or expense (including Taxes other than Taxes based on the income of the Bond Trustee) incurred without gross negligence or bad faith on its or their part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself or themselves against any claim or liability in connection with the exercise or performance of any of its or their powers or duties hereunder. (b) The rights, privileges, protections, immunities and benefits given to the Bond Trustee, including, without limitation, its right to be indemnified, are extended to and shall be enforceable by, the Bond Trustee in each of its capacities hereunder (including as Paying Agent and Registrar) and to each agent, custodian and other Person employed to act hereunder. All indemnifications and releases from liability 87 96 granted hereunder to the Bond Trustee shall extend to its officers, directors, employees, agents, successors and assigns. (c) The obligations of the Issuer under this Section 10.7 shall survive payment in full of the Bonds, the resignation or removal of the Bond Trustee and the termination of this Indenture. (d) When the Bond Trustee or any predecessor Bond Trustee incurs expenses or renders services in connection with the performance of its obligations hereunder (including its services as an Authorized Agent) after an Indenture Event of Default occurs, the expenses and compensation for such services are intended to constitute expenses of administration under applicable bankruptcy, insolvency or other similar United States Federal or state law to the extent provided in Section 503(b)(5) of the Federal Bankruptcy Code. Section 10.8 Eligibility. There shall at all times be a Bond Trustee hereunder which shall (a) be a corporation which complies to the eligibility requirements of the Trust Indenture Act and (b) have a combined capital and surplus of at least $100,000,000. If such corporation or other entity publishes reports of condition at least annually, pursuant to Applicable Law or to the requirements of said supervising or examining authority, then for purposes of this Section 10.8, the combined capital and surplus of such corporation or other entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Bond Trustee shall cease to be eligible in accordance with the provisions of this Section 10.8, it shall resign immediately in the manner and with the effect hereinafter specified in this Article 10. None of the Issuer, any other obligor upon the Bonds or any Affiliate of any of the foregoing shall serve as Bond Trustee hereunder. Section 10.9 Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Bond Trustee and no appointment of a successor Bond Trustee pursuant to this Article 10 shall become effective until the acceptance of appointment by the successor Bond Trustee in accordance with the applicable requirements of Section 10.10. (b) The Bond Trustee may resign at any time by giving written notice thereof to the Issuer. If the instrument of acceptance by a successor Bond Trustee required by Section 10.10 shall not have been delivered to the Bond Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Bond Trustee may 88 97 petition, at the expense of the Issuer, any court of competent jurisdiction for the appointment of a successor Bond Trustee. (c) The Bond Trustee may be removed at any time by Act of the Majority Holders, delivered to the Bond Trustee and the Issuer. If the instrument of acceptance by a successor Bond Trustee required by Section 10.10 shall not have been delivered to the Bond Trustee within thirty (30) days after such removal, the removed Bond Trustee may petition, at the expense of the Issuer, any court of competent jurisdiction for the appointment of a successor Bond Trustee. (d) If at any time any of the following shall occur: (i) the Bond Trustee shall fail to comply with the provisions of the Trust Indenture Act Section 310(b) after written request therefor by the Issuer or by any Holder who has been a bona fide Holder for at least six (6) months, except when the Bond Trustee's duty to resign is stayed in accordance with the provisions of Trust Indenture Act Section 310(b); (ii) the Bond Trustee shall cease to be eligible under Section 10.8 and shall fail to resign after written request therefor by the Issuer or by any Holder of a Bond; or (iii) the Bond Trustee shall be adjudged a bankrupt or insolvent or a receiver of the Bond Trustee or of its property shall be appointed or any public officer shall take charge or control of the Bond Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; then, in any such case, (A) the Issuer by a resolution of its Management Committee may remove the Bond Trustee, or (B) subject to the requirements of Section 315(e) of the Trust Indenture Act, any Holder who has been a bona fide Holder of a Bond for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Bond Trustee and the appointment of a successor Bond Trustee. (e) If the Bond Trustee shall resign, be removed or become incapable of action, or if a vacancy shall occur in the office of Bond Trustee for any reason, the Issuer, by a resolution of its Management Committee, shall promptly appoint a successor Bond Trustee and shall comply with the applicable requirements of 89 98 Section 10.10. If, within thirty (30) days after such resignation, removal or incapability, or the occurrence of such vacancy, the Issuer has not appointed a successor Bond Trustee, then a successor Bond Trustee may be appointed by Act of the Majority Holders delivered to the Issuer and the retiring Bond Trustee, the successor Bond Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 10.10, become the successor Bond Trustee with respect to the Bonds and to that extent supersede the successor Bond Trustee appointed by the Issuer. If no successor Bond Trustee shall have been so appointed by the Issuer or the Holders and have accepted appointment in the manner required by Section 10.10, subject to the requirements of Section 315(e) of the Trust Indenture Act, any Holder who has been a bona fide Holder of a Bond for at least six (6) months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Bond Trustee. (f) The Issuer shall, at its own expense, give notice of each resignation and each removal of the Bond Trustee and each appointment of a successor Bond Trustee to all Holders in the manner provided in Section 12.5(b) and shall give such notice to each of the Rating Agencies. Each notice required to be given pursuant to this Section 10.9(f) shall include the name of the successor Bond Trustee and the address of its principal corporate trust office. Section 10.10 Acceptance of Appointment by Successor Bond Trustee. (a) In case of the appointment hereunder of a successor Bond Trustee, every such successor Bond Trustee so appointed shall execute, acknowledge and deliver to the Issuer and to the retiring Bond Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Bond Trustee shall become effective and such successor Bond Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Bond Trustee; provided that, on the request of the Issuer or the successor Bond Trustee, such retiring Bond Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Bond Trustee all the rights, powers and trusts of the retiring Bond Trustee and shall duly assign, transfer and deliver to such successor Bond Trustee all property and money held by such retiring Bond Trustee hereunder. (b) Upon request of the Collateral Agent or the Issuer, any successor Bond Trustee shall execute any and all instruments for more fully and certainly vesting in 90 99 and confirming to such successor Bond Trustee all such rights, powers and trusts under the other Finance Documents to which the Bond Trustee is a party. (c) Upon request of any successor Bond Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Bond Trustee all such rights, powers and trusts referred to in clause (a) of this Section 10.10. (d) No successor Bond Trustee shall accept its appointment unless at the time of such acceptance such successor Bond Trustee shall be qualified and eligible under this Article 10. Section 10.11 Merger, Conversion, Consolidation or Succession to Business. Any corporation or other entity into which the Bond Trustee may be merged or converted or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which the Bond Trustee shall be a party, or any corporation or other entity succeeding to all or substantially all the corporate trust business of the Bond Trustee, shall be the successor of the Bond Trustee hereunder, provided such corporation or other entity shall be otherwise qualified and eligible under this Article 10, without the execution and filing of any instrument or any further act on the part of any of the parties hereto. In case any Bonds shall have been authenticated, but not delivered, by the Bond Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Bond Trustee may adopt such authentication and deliver the Bonds so authenticated with the same effect as if such successor Bond Trustee had itself authenticated such Bonds. Section 10.12 Authorization. The Bond Trustee is hereby authorized to execute, deliver and perform on behalf of the Holders the Intercreditor Agreement and each of the other Finance Documents to which the Bond Trustee is or is intended to be a party, and each Holder agrees to be bound by all of the agreements of the Bond Trustee contained therein. Section 10.13 Disqualification; Conflicting Interests. If the Bond Trustee has or shall acquire a conflicting interest within the meaning of Section 310(b) of the Trust Indenture Act, the Bond Trustee shall either eliminate such interest or resign, to the extent, within the time periods, and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture. 91 100 Section 10.14 Trustee's Application for Instructions from the Company. Any application by the Bond Trustee for written instructions from the Issuer may, at the option of the Bond Trustee, set forth in writing any action proposed to be taken or omitted by the Bond Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Bond Trustee shall not be liable for any action taken by, or omission of, the Bond Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than five (5) Business Days after the date any officer of the Issuer actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Bond Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted. Section 10.15 Appointment of Co-trustee. (a) It is the purpose of this Indenture that there shall be no violation of any law of any jurisdiction, denying or restricting the right of banking corporations or associations to transact business as Trustee in such jurisdiction. It is recognized that in case of litigation under this Indenture or any Transaction Document, and in particular in case of the enforcement of any such document on default, or in case the Bond Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies herein granted to the Bond Trustee or hold title to the properties, in trust, as herein granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Bond Trustee appoint an additional individual or institution as a separate or co-trustee. The following provisions of this Section 10.15 are adopted to these ends. (b) In the event that the Bond Trustee appoints an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by this Indenture to be exercised by or vested in or conveyed to the Bond Trustee with respect thereto shall be exercisable by and vested in such separate or co-trustee but only to the extent necessary to enable such separate or co-trustee to exercise such powers, rights and remedies, and every covenant and obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them. (c) Should any instrument in writing be required by the separate trustee or co-trustee so appointed by the Bond Trustee for more fully and certainly vesting in 92 101 and confirming to him or it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Issuer. In case any separate trustee or co-trustee, or a successor to either, shall die, become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by the Bond Trustee until the appointment of a new trustee or successor to such separate trustee or co-trustee. ARTICLE 11 HOLDERS' LISTS AND REPORTS BY BOND TRUSTEE Section 11.1 Names and Addresses of Holders. If the Bond Trustee is at any time not the Registrar, the Issuer will give the Bond Trustee prompt written notice of the appointment of a Registrar and of the location, and any change in the location of the Securities Register, and the Bond Trustee shall have the right to inspect the Security Register at all reasonable times and to obtain copies thereof, and the Bond Trustee shall have the right to rely upon such Security Register as to the names and addresses of the Holders of the Bonds and the principal amounts and numbers of such Bonds. Section 11.2 Bond Trustee to Furnish Other Information. On or before March 15 of every year, so long as any Bonds are Outstanding hereunder, the Bond Trustee shall transmit to the Holders a brief report, dated as of the preceding December 31, to the extent required by Section 313 of the Trust Indenture Act in accordance with the procedures set forth in said Section. A copy of such report at the time of its mailing to Holders shall be filed with the Commission and each stock exchange, if any, on which the Bonds are traded. ARTICLE 12 MISCELLANEOUS PROVISIONS Section 12.1 Third Party Beneficiaries. Except as provided in Section 12.6, nothing in this Indenture or in the Bonds, express or implied, shall give or be construed to give any Person, other than the parties hereto and the Holders of the Bonds, any benefit or any legal or equitable right, remedy or claim under this Indenture. 93 102 Section 12.2 Severability. In case any provision in or obligation under this Indenture or the Bonds shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any jurisdiction, shall not in any way be affected or impaired thereby. Section 12.3 Substitute Notice. If for any reason it shall be impossible to make publication of any notice required hereby in a newspaper or financial journal of general circulation in the Borough of Manhattan, the City of New York, then such publication or other notice in lieu thereof with the approval of the Bond Trustee shall constitute a giving of such notice. Section 12.4 Notice to Rating Agencies. Upon the occurrence of any Indenture Event of Default of which a Responsible Officer of the Bond Trustee has actual knowledge hereunder, the Bond Trustee shall promptly give notice thereof to the Issuer and each Rating Agency then assigning a Rating to the Bonds. Section 12.5 Notices. (a) Except as otherwise expressly provided herein, (i) all notices and other communications provided for hereunder shall be provided in writing (including telex or facsimile communication) and shall be sent by telecopy or telex with the original of such communication dispatched by registered airmail (or, if inland, registered first-class mail) with postage prepaid to the Issuer, the Bond Trustee, the Collateral Agent and the Rating Agencies at their respective addresses specified on Schedule III hereto, or at such other address as shall be designated by such Person in a written notice to the other parties hereto and (ii) any notice given to a party by mail or by courier shall be deemed delivered upon receipt thereof (unless the party refuses to accept delivery, in which case the party shall be deemed to have accepted delivery upon presentation) and any notice given to a party by telecopy shall be deemed effective on the date it is actually sent to the intended recipient by confirmed telecopy transmission to the telecopier number specified on Schedule III. (b) Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder, at its address as it appears in the Securities Register, not later than the latest date (if any) and not earlier than the earliest date (if any) prescribed for the giving of such notice. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and 94 103 such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Bond Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the matter herein provided shall be conclusively presumed to have been duly given. Section 12.6 Successors and Assigns. All of the covenants, promises and agreements in this Indenture by or on behalf of the Issuer or the Bond Trustee shall bind and inure to the benefit of their respective successors and assigns, regardless of whether so expressed. Section 12.7 Section Headings. Captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Indenture. Section 12.8 Counterparts. This Indenture 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 Indenture by signing any such counterpart. Section 12.9 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) THIS INDENTURE IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). (b) Any legal action or proceeding against the Issuer with respect to this Indenture may be brought in the courts of the State of New York in the County of New York or of the United States for the Southern District of New York and, by execution and delivery of this Indenture, the Issuer hereby irrevocably submits and accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Issuer agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon the Issuer, and may be enforced in any other jurisdiction, by a suit upon such judgment, a certified copy of which shall be conclusive evidence of the 95 104 judgment. The Issuer hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 111 Eighth Avenue, New York, N.Y. 10011, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notice and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such agent, the Issuer agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Bond Trustee. The Issuer further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Issuer, at its address referred to in Section 12.5(a), such service to become effective five (5) days after such mailing. Nothing herein shall affect the right of the Bond Trustee or any other Person to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Issuer in any other jurisdiction. (c) The Issuer hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Indenture in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (d) WITH REGARD TO THIS INDENTURE, EACH PARTY HERETO HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY. Section 12.10 Legal Holidays. In any case where the Redemption Date or the scheduled Payment Date of any Bond or of any installment of principal thereof or payment of interest thereon, or any date on which any defaulted interest is proposed to be paid, shall not be a Business Day, then (notwithstanding any other provision of this Indenture, any relevant Supplemental Indenture or such Bond) payment of interest and/or principal, and/or premium, if any, need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Redemption Date or on the scheduled Payment Date, or on the date on which the defaulted interest is proposed to be paid, and, except as provided in any Supplemental Indenture, if such payment is timely made, no interest shall accrue for the period from and after such Redemption Date or scheduled Payment Date, or date 96 105 for the payment of defaulted interest, as the case may be, to the date of such payment. Section 12.11 Limitation of Liability. (a) Notwithstanding any other provisions hereof, the obligations of the Issuer hereunder are solely the obligations of the Issuer and no recourse shall be had against NRG, the Members or any employee, officer, director, member, shareholder, Affiliate, agent or servant of the Issuer or NRG (each a "Non-Recourse Person") with respect to the Bonds or this Indenture, any of the obligations of the Issuer hereunder or any obligation of the Issuer for the payment of any amount payable hereunder for any claim based on, arising out of or relating to the Bonds or this Indenture; provided, however, that nothing in this Section 12.11 shall be deemed to affect or diminish (i) the express obligations of any such Non-Recourse Person under any Transaction Document to which such Non-Recourse Person is a party, (ii) the rights and remedies of the Bond Trustee and the Holders against any such Non-Recourse Person under any Transaction Document to which any such Non-Recourse Person is a party, (iii) the rights and remedies of the Bond Trustee and the Holders with respect to the Collateral or (iv) the rights and remedies of the Bond Trustee and the Holders against any such Non-Recourse Person that arise as a result of such Person's fraud or willful misconduct. (b) Anything in this Indenture to the contrary notwithstanding, in no event shall the Bond Trustee (or its officers, directors, employees, agents, successors and assigns) be liable under or in connection with this Indenture for any special, indirect or consequential loss or damage of any kind whatsoever, including lost profits, whether or not the likelihood of such loss or damage was known to the Bond Trustee and regardless of the form of action. Section 12.12 Entire Agreement. This Indenture, together with any other agreements executed in connection herewith, is intended by the parties hereto as a final expression of their agreement as to the matters covered hereby and is intended as a complete and exclusive statement of the terms and conditions hereof. Section 12.13 All Payments in US Dollars. All payments under this Indenture or the Bonds shall be made exclusively in such coin or currency of the United States which, at the time of payment thereof, is legal tender for the payment of public and private debts. 97 106 Section 12.14 Trust Indenture Act. Whenever this Indenture refers to a provision of the Trust Indenture Act, such provision is incorporated by reference in and made a part of this Indenture. If any provision of this Indenture limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the provision of the Trust Indenture Act shall be deemed to apply in this Indenture as so modified or shall be excluded, as the case may be. Section 12.15 Communication Among Holders. Holders may communicate with other Holders with respect to their rights under this Indenture or the Bonds in accordance with Section 312(b) of the Trust Indenture Act. The Issuer, the Bond Trustee and all other Persons shall have the protection of Section 312(c) of the Trust Indenture Act. Section 12.16 Officers' Certificates and Opinions of Counsel. (a) Except as otherwise expressly provided in this Indenture, upon any application or request by the Issuer to the Bond Trustee that the Bond Trustee take any action under any provision of this Indenture, the Issuer shall furnish to the Bond Trustee an Officer's Certificate of the Issuer stating that all conditions precedent (if any) provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent (if any) have been complied with; provided, however, that, in the case of any particular application or request as to which the furnishing of documents, certificates or opinions is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. (b) Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (i) a statement that each Authorized Representative signing such certificate or opinion has read such covenant or condition; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 98 107 (iii) a statement that, in the opinion of each such Authorized Representative, such examination or investigation has been made as is necessary to enable each such individual to express an informed opinion as to whether such covenant or condition has been complied with; (iv) a statement as to whether, in the opinion of each such Authorized Representative, such condition or covenant has been complied with; and (v) in the case of an Officer's Certificate of the Issuer, a statement that no Default or Event of Default has occurred and is continuing (unless such Officer's Certificate relates to a Default or Event of Default). Section 12.17 Form of Certificates and Opinions Delivered to Bond Trustee. (a) In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons may certify or give an opinion as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but shall not be required to, be consolidated and form one instrument. (b) Any Officer's Certificate or opinion of an Authorized Representative of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows or has reason to believe that the certificate or opinion of or representations by such counsel with respect to the matters upon which such Officer's Certificate or opinion of such officer is based are erroneous. (c) Any certificate of counsel or Opinion of Counsel may be based, insofar as it relates to factual matters or information which is in the possession of the Issuer, upon a certificate or opinion of, or representations by, an Authorized Representative of the Issuer, unless such counsel knows or in the exercise of reasonable care should know that the certificate or opinion of or representations by such Authorized Representative with respect to the matters upon which such certificate or such Opinion of Counsel is based are erroneous. Any Opinion of Counsel stated to be 99 108 based on another Opinion of Counsel shall be accompanied by such other Opinion of Counsel. 109 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as a deed as of the date first above written. NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Matacyznski ---------------------------------- Name: Craig A. Matacyznski Title: President LOUISIANA GENERATING LLC (solely with respect to Sections 6.1, 6.3, 6.5 and 6.7) By: /s/ Craig A. Matacyznski ---------------------------------- Name: Craig A. Matacyznski Title: Vice President THE CHASE MANHATTAN BANK as Bond Trustee By: /s/ Annette M. Marsula ---------------------------------- Name: Annette M. Marsula Title: [Illegible] THE CHASE MANHATTAN BANK as Depositary Bank By: /s/ Annette M. Marsula ---------------------------------- Name: Annette M. Marsula Title: Vice President 110 SCHEDULE I AMORTIZATION OF PRINCIPAL
Series A Series B Payment Principal Principal Date Repayment Repayment ---- --------- --------- September 15, 2000 $ 11,250.00 $ -- March 15, 2001 $ 12,500.00 $ -- September 15, 2001 $ 12,750.00 $ -- March 15, 2002 $ 12,750.00 $ -- September 15, 2002 $ 12,750.00 $ -- March 15, 2003 $ 12,750.00 $ -- September 15, 2003 $ 12,750.00 $ -- March 15, 2004 $ 7,500.00 $ -- September 15, 2004 $ 7,500.00 $ -- March 15, 2005 $ 7,500.00 $ -- September 15, 2005 $ 7,500.00 $ -- March 15, 2006 $ 7,500.00 $ -- September 15, 2006 $ 7,500.00 $ -- March 15, 2007 $ 7,500.00 $ -- September 15, 2007 $ 7,500.00 $ -- March 15, 2008 $ 12,500.00 $ -- September 15, 2008 $ 12,500.00 $ -- March 15, 2009 $ 13,750.00 $ -- September 15, 2009 $ 13,750.00 $ -- March 15, 2010 $ 17,500.00 $ -- September 15, 2010 $ 17,500.00 $ -- March 15, 2011 $ 21,250.00 $ -- September 15, 2011 $ 21,250.00 $ -- March 15, 2012 $ 22,500.00 $ -- September 15, 2012 $ 22,500.00 $ -- March 15, 2013 $ 22,500.00 $ -- September 15, 2013 $ 23,750.00 $ -- March 15, 2014 $ 23,750.00 $ -- September 15, 2014 $ 26,250.00 $ -- March 15, 2015 $ 26,250.00 $ --
Schedule I-1 111
Series A Series B Payment Principal Principal Date Repayment Repayment ---- --------- --------- September 15, 2015 $ 27,500.00 $ -- March 15, 2016 $ 27,500.00 $ -- September 30, 2016 $ -- $ 22,500.00 March 15, 2017 $ -- $ 22,500.00 September 15, 2017 $ -- $ 21,000.00 March 15, 2018 $ -- $ 19,500.00 September 15, 2018 $ -- $ 19,500.00 March 15, 2019 $ -- $ 18,000.00 September 15, 2019 $ -- $ 18,000.00 March 15, 2020 $ -- $ 16,500.00 September 15, 2020 $ -- $ 16,500.00 March 15, 2021 $ -- $ 16,500.00 September 15, 2021 $ -- $ 16,500.00 March 15, 2022 $ -- $ 16,500.00 September 15, 2022 $ -- $ 16,500.00 March 15, 2023 $ -- $ 15,000.00 September 15, 2023 $ -- $ 15,000.00 March 15, 2024 $ -- $ 15,000.00 September 15, 2024 $ -- $ 15,000.00 ========= =========== $500,000.00 $300,000.00
Schedule I-2 112 SCHEDULE II ACCOUNT INFORMATION
ACCOUNT NAME ACCOUNT NO. - ------------ ----------- Revenue Account C29902 A Service Reserve Account C29902 B
Schedule II-1 113 SCHEDULE III NOTICE ADDRESSES 1. NRG South Central Generating LLC 1221 Nicollet Mall, Suite 700 Minneapolis, Minnesota 55403 Attention: General Counsel Telecopier No.: (612) 373-5392 Telephone No.: (612) 373-5300 2. Louisiana Generating LLC P.O. Box 15540 Baton Rouge, Louisiana 70895 Attention: Alan Williams Telecopier No.: (225) 296-1746 Telephone No.: (225) 291-3060 3. The Chase Manhattan Bank, as Bond Trustee Capital Markets Fiduciary Services 450 West 33rd Street, 15th Floor New York, NY 10001 Attention: Annette M. Marsula International Project Finance Service Delivery Telecopier No.: (212)946-8178 Telephone No.: (212)946-7557 4. The Chase Manhattan Bank, as Collateral Agent Capital Markets Fiduciary Services 450 West 33rd Street, 15th Floor New York, NY 10001 Attention: Annette M. Marsula International Project Finance Service Delivery Telecopier No.: (212)946-8178 Telephone No.: (212)946-7557 Schedule III-1 114 5. The Chase Manhattan Bank, as Depositary Bank Capital Markets Fiduciary Services 450 West 33rd Street, 15th Floor New York, NY 10001 Attention: Annette M. Marsula International Project Finance Service Delivery Telecopier No.: (212)946-8178 Telephone No.: (212)946-7557 6. Moody's Investor Service 99 Church Street New York, New York Attention: 7. Standard & Poor's 55 Water Street New York, New York 10041 Attention: Corporate Ratings 8. PricewaterhouseCoopers LLP 650 Third Avenue South, Suite 1300 Minneapolis, MN 55402 Attention: David Schroeder 9. NRG Power Marketing Inc. 1221 Nicollet Mall, Suite 700 Attention: General Counsel Telecopier No.: (612) 373-5392 Telephone No.: (612) 373-5300 10. NRG Central U.S. LLC 1221 Nicollet Mall, Suite 700 Attention: General Counsel Telecopier No.: (612) 373-5392 Telephone No.: (612) 373-5300 Schedule III-2 115 11. South Central Generation Holding LLC 1221 Nicollet Mall, Suite 700 Attention: General Counsel Telecopier No.: (612) 373-5392 Telephone No.: (612) 373-5300 Schedule III-3 116 SCHEDULE IV ASSETS SPECIFICALLY HELD FOR RESALE 1. Cajun II Farmland. A certain tract or parcel of land located in Sections 3, 4, 37, & 38, Township 4 South, Range 11 East, in the Pointe Coupee Parish, Louisiana, designated as CAJUN II - FARMLAND TRACT, on a map of survey prepared by Neel-Schaffer, Inc. Brown & Butler, dated September 4, 1996, last revised March 3, 2000, entitled "ALTA/ACSM Land Title Survey of a 2428.6++ Acre Tract in Sections 31, 32, 86 and 87, T-4-S, R-10-E, and Sections 3, 4, 5, 6, 35, 37 and 38, T-4-S, R-11-E, Pointe Coupee Parish, Louisiana"LESS AND EXCEPT: a 13.00 acre tract for the Pointe Coupee Parish Prison located in the Northwest corner of said Cajun II Farmland Tract, fronting 650' on Louisiana Highway 981 and having a depth of +/-875' as shown on the map of survey. 2. Cajun II Ballpark. A certain 15 acre tract or parcel of land, located in Sections 31 & 32, Township 4 South -Range 10 East, Pointe Coupee Parish, Louisiana, and being more particularly described as follows: From a POINT OF REFERENCE being the Northeast corner of Section 87, T-4-S, R-10-E proceed S 0/44'39" E a distance of 1657.62' to a point and corner; thence proceed N 69/52'18" W a distance of 330.50' to a point and corner; thence proceed N 63/15'05"W a distance of 335.83' to a point and corner; thence proceed S 21/47'53"W a distance of 5991.98' to the POINT OF BEGINNING; thence from the POINT OF BEGINNING, continue S 21/47'53" W a distance of 1143.40' to a point and corner on the northerly right-of-way line of the Union Pacific Railway Company; thence proceed N 51/00'40" W along said northerly right-of-way line a distance of 240.80' to a point and corner; thence proceed along a curve to the right, being 25' east of and parallel to the centerline of a railroad spur, having a radius of 930.37', the long chord of which bears N 8/19'39" W - 945.49', a distance of 991.79' to a point and corner; thence proceed N 19/23'19" E a distance of 254.68' parallel to said centerline of a railroad spur to a point and corner; thence proceed S 68/12'07" E a distance of 715.28' to the POINT OF BEGINNING and containing 15.00 acres. 3. Cajun I Lease Tract C. A certain tract or parcel of land designated as Lease Site "C"containing 20.97 acres being located in Section Sixteen (16), Township Four South (T-4-S), Range Eleven East (R-11-E) southeastern land district, west of the Mississippi River, in the Parish of Pointe Coupee, State of Louisiana more particularly described on a survey entitled: "Map Showing Lease Site"C", Cajun 1 property being a portion of Tract "A", Cajun 1 property & "Nina" Plantation" by Schedule IV-1 117 Patin Engineers & Surveyors, Inc. certified by Celtus Langlois, State of Louisiana registered professional land surveyor number 4723 dated March 24, 2000. 4. Oxbow Properties - DeSoto Parish. All lands in Red River and DeSoto Parishes, Louisiana, acquired by Bayou Pierre Venture from Benthura Corporation by Act of Sale dated March 2, 1976, said Act recorded in Red River Parish, Louisiana on March 18, 1976, in Registry Number 130282, Conveyance Book 152, Page 179, and recorded in DeSoto Parish, Louisiana on March 24, 1976, in Registry Number 384830, Conveyance Book 364, page 110, and containing 6,774 net acres, more or less,LESS AND EXCEPT: that portion of lands thereafter sold by Bayou Pierre Venture to Phillips Petroleum Company by Act of Sale dated July 2, 1976, said Act recorded in Red River Parish, Louisiana, on July 21, 1976, in Registry Number 131140, Conveyance Book 153, Page 777, and recorded in DeSoto Parish, Louisiana, on July 21, 1976, in Registry Number 387661, Conveyance Book 358, page 629, and containing 3,443 net acres, more or less, the remaining property containing 3,331 acres, more or less. 5. Oxbow Properties - Red River Parish. a. 60 acres in Section 20, T12N, R10W purchased from Clarence Taylor; b. 20 acres in Section 20, T12S, R10W expropriated from Mrs. Ben Thomas; c. 200 acres in Section 20, T12N, R10W expropriated from Ira Campbell and Avonia Campbell Trusts; d. 240 acres of which 200 acres being located in Section 29, T12N, R10W purchased from M.J. Bearden and J.M. Vinson, and 40 acres being located in Section 20, T2N, R10W LESS AND EXCEPT: 120 acres in Section 29 sold to Phillips Coal Co.; e. 90 acres in Section 29, T12N, R10W purchased from heirs of Mariah Allen; f. 80 acres in Section 29, T12N, R10W purchased from John Stuart; g. 30 acres in Section 29, T12N, R10W purchased from heirs of Sandy & Sally Horton; h. 161.5 acres in Section 29, T12N, R10W purchased from Thomas Stephens; i. 7.3 acres in Section 29, T12N, R10W purchased from Thomas Stephens, Mary Jane Bearden, & Jean Marine Vinson; and j. 810 acres in Sections 29, 30, 31 & 32, T12N, R10W. Schedule IV-2 118 6. Mineral rights to a seven acre parcel of land at 112 Telly Street, New Roads, Louisiana. All right, title, and interest of lessor or grantor in and to that certain Oil, Gas, & Mineral Lease made granted by Cajun Electric Power Cooperative, Inc. dated November 10, 1977, recorded on November 16, 1997 in Conveyance Book 147, Entry No. 291, official records of the Clerk and Recorder for the Parish of Point Coupee, and affecting the following described property: A certain lot or parcel of land, situated in Sections 50 and 51, Township 4 South, Range 10 East, Parish of Pointe Coupee, State of Louisiana, and designated thereon as TRACT A-1 and TRACT A-2 on a map of survey prepared by Rohan B. Lafleur, Registered Land Surveyor, dated April 16, 1980, a copy of which is attached to an act of sale by Cajun Electric power Cooperative, Inc. to Pointe Coupee Electric Membership Corporation recorded on June 17, 1982 in Conveyance Book 230, Entry No. 135, in the office of the Clerk and Recorder for the Parish of Pointe Coupee. Tract A-1 and Tract A-2 having a combined front of 549.91 feet on the north right of way limits of Louisiana Highway No. 1 which runs along False River, a depth on the west boundary line of Tract A-1 of 560.10 feet, a depth on the east boundary line of Tract A-2 of 510.00 feet and having a combined width on their north boundary line of 563.76 feet and being bounded as follows: in front or South by the north right of way limits of La. Highway No. 1; in the rear or North by the south right of way limits of a 60-feet-wide street shown on the map of survey; on the West by the east right of way limits of Fairfield Avenue and on the East by property of others; Tract A-1 containing 4.26 acres, and Tract A-2 containing 2.56 acres. 7. 520 MW General Electric steam turbine generator: All component parts of an eighteen-stage General Electric G-2 design, tandem-compound, opposed flow high pressure-reheat section, four-flow low pressure, steam turbine generator with 30 inch last stage buckets. The turbine generator serial number is 270T138. 8. 848 steel rotary dump railcars bearing the designation CEPX and the following Interstate Commerce Commission Registration numbers, respectively: 0100, 0150, 0175, 0200, 0250, 0225 0275, 0300, 0325, 0350, 1000, 1002, through 1018, inclusive, 1020, 1022 through 1027, inclusive, 1029 through 1078, inclusive, 1080 through 1102, inclusive, 1104 through 1131, inclusive, 1133 through 1135, inclusive, 1138 through 1191, inclusive, 1193 through 1194, inclusive, 1196 through 1217, inclusive, 1219 through 1242, inclusive, 1245 through 1259, inclusive, 1261 through 1278, inclusive, 1280 through 1288, inclusive, 1290 through 1292, inclusive, 1294 through 1299, inclusive, 1301 through Schedule IV-3 119 1305, inclusive, 1307 through 1334, inclusive, 1336 through 1352, inclusive, 1354 through 1386, inclusive, 1388 through 1405, inclusive, 1407 through 1444, inclusive, 1446 through 1465, inclusive, 1467, 1469 through 1483, inclusive, 1485, 1487 through 1606, inclusive, 1608, 1610 through 1627, inclusive, 1629 through 1642, inclusive, 1644 through 1648, inclusive, 1650 through 1685, inclusive, 1687 through 1711, inclusive, 1713 through 1731, inclusive, 1733 through 1739, inclusive, 1741 through 1745, inclusive, 1747 through 1814, inclusive, and 1816 through 1877, inclusive. 9. Specific Delivery Facilities - Substations, Microwaves and Transmission Lines: Ashland Provencal Bayou Lourse Ruston East Bayou Ramos Scanlan Belleplace Semere Road Black River Serpent Cane River Sulphur Chalkey Talisheek Chickasaw Terrell Road Creole Trussells Crossing DeRidder Tupper Derouen Vatican Duboin Veazie East Leesville Vignes French Branch Waterloo French Settlement BCI Gilbert BCII
Schedule IV-4 120 Greenwood Big Cane Judice Carroll Krotz Springs Clarence Landry Colfax LeBlanc Darlington Ledoux Greenburg Log Cabin HQ Marion Mandeville Many Mansfield Minden Motgomery Moss Bluff OC N. Crowley Quinton Oaklawn Slidell Patoutville St. Landry Persimmon Mill Wilmer Pinecliff Zachary Plaisance Chalkey-Creole Transmission Line Potter
10. Towboats and barges: a. Cepco 1 Tow Boat Built in 1980 Length 70', width 28', depth 10' Schedule IV-5 121 b. Cepco 2 Tow Boat Built in 1980 Length 66.5', width 26', depth 10.5' c. Scrap Barge Built in 1990 Length 115', width 35', depth 12' d. Shuttle Barge Built in 1978 Length 40', width 40' e. Work Barge Built in 1990 Length 110', width 30', draft 5' 11. Solid Waste Closure Trust Fund created by Trust Agreement, dated as of June 23, 1989, between Cajun Electric Power Cooperative, Inc., as grantor, and Hibernia National Bank, as trustee. 12. Corporate Headquarters - East Baton Rouge Parish. Two (2) certain lots or parcels of ground, together with all the buildings and improvements thereon, situated in the Parish of East Baton Rouge, Louisiana, and being more particularly described on that certain "Map Showing Survey of a Resubdivision of Lots 188A, 190, 191, 192 and 193, Southpark 2nd Filing, into Lots 188B and 190A, and Relative Location of Lot B-1, Southpark Subdivision, located in Section 76, T-7-S, R-1-E, Greensburg Land District of Louisiana, East Baton Rouge Parish," prepared by Ray Ingram, R.L.S. of Barbay Associates, dated September 23, 1980, which is recorded in the Official Records of the Clerk and Recorder in and for East Baton Rouge Parish, Louisiana as Original 975, Bundle 9396, and being more particularly described as LOT B-1, containing 2.6636 acres, more or less, and LOT 188B, containing 2.8217 acres, more or less, subject to the servitudes and building setback lines of record and as shown on said survey map. 13. NRG New Roads Holdings LLC (Unrestricted Subsidiary). Schedule IV-6 122 SCHEDULE 4.16 LIENS None. Schedule 4.16 123 SCHEDULE 4.17 GUARANTEES None. Schedule 4.17 124 SCHEDULE 4.21 INVESTMENTS None. Schedule 4.21-1 125 APPENDIX A "Acceptable Credit Support" shall mean (a) a letter of credit from a commercial bank or other financial institution whose long-term unsecured debt obligations are rated at least "A" from S&P and "A2" from Moody's or (b) an unconditional guarantee by NRG or an Affiliate thereof (other than either Obligor or any Additional Guarantor) subject to NRG or such Affiliate maintaining at least a "Baa3" rating from Moody's and at least a "BBB-" with a stable outlook rating from S&P. "Accredited Investors" shall have the meaning given to that term in Section 2.5.4. "Acquired Assets" has the meaning set forth in the Acquisition Agreement. "Acquisition" shall mean the acquisition of the Project in accordance with the Acquisition Agreement in all material respects. "Acquisition Agreement" means the Fifth Amended and Restated Asset Purchase and Reorganization Agreement, dated as of September 21, 1999 among the Subsidiary Guarantor, Ralph K. Mabey, as Chapter 11 Trustee of Cajun and, as to certain sections of the agreement only, NRG. "Act" when used with respect to any Holder, shall have the meaning given that term in Section 7.1. "Additional Bonds" shall mean any Bonds issued pursuant to Section 2.3. "Additional Guarantor" shall mean a Person owning, acquiring, operating, maintaining, constructing or developing nonnuclear electric generating or district energy assets located in the United States that the Issuer or one or more of its Subsidiaries (other than Unrestricted Subsidiaries) acquires or creates in accordance with the terms set forth herein that is designated by the Issuer's Management Committee as an Additional Guarantor pursuant to a Resolution but only to the extent such Subsidiary complies with the requirements of Section 4.18 hereof or Section 3.16 of the Guarantor Loan Agreement, as applicable; provided that such term shall in no event include any Subsidiary designated by the Issuer as an Unrestricted Subsidiary. Any such designation by the Issuer's Management Committee shall be evidenced to the Bond Trustee by filing with the Bond Trustee a certified copy of the Resolution giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing conditions. Appendix A-1 126 "Additional Project Document" shall mean any material Project Document entered into after the Closing Date. "Affiliate" shall mean, with respect to a Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such first Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent Members" shall have the meaning given to that term in Section 2.5.5(a). "Annual Audited Financial Statements" shall mean, for any Person, audited financial statements of such Person prepared in accordance with GAAP. "Applicable Law" shall mean, with respect to any Person, property or matter, any of the following applicable thereto: any statute, law, regulation, ordinance, rule, judgment, rule of common law, order, decree, arbitral decision, Governmental Approval, approval, concession, grant, franchise, license, agreement, directive, guideline, policy, requirement, or other governmental restriction or any similar form of decision of, or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether in effect as of the date of this Indenture or thereafter and in each case as amended (including, without limitation, any pertaining to land use or zoning restrictions). "Applicable Procedures" shall have the meaning given to that term in Section 2.7.2(a). "Approved Restoration Plan" shall mean a plan which provides for the repair, replacement or rebuilding of all or any material portion of the Project and which is accompanied by a certificate of an Authorized Officer of an Obligor certifying that (a) after taking into consideration the availability of Loss Proceeds and such other proceeds available for the repair, replacement or restoration of such Project, there will be adequate cash flow including, without limitation, any Loss Proceeds, during the period of repair, replacement or restoration to pay all ongoing expenses, including Debt Service, if any, and (b) no Material Adverse Effect would reasonably be expected to result from such repair, replacement or restoration. "Assets Specifically Held for Resale" shall mean the assets listed on Schedule IV. "Auditors" shall mean PricewaterhouseCoopers LLP or such other nationally recognized firm of independent certified public accountants as the Obligors may from time to time appoint as auditors of such Person. Appendix A-2 127 "Authenticating Agent" shall have the meaning given to that term in Section 2.6.2. "Authorized Agent" shall have the meaning given to that term in Section 2.6.3(a). "Authorized Officer" or "Authorized Representative" shall mean (a) in the case of any corporation or limited liability company, the chief executive officer, the president, the chief financial officer, a vice president, the treasurer or an assistant treasurer or any director of such corporation or limited liability company; (b) in the case of any general or limited partnership, any Person authorized by the general partner (or such other Person that is responsible for the management of such partnership) to take the applicable action on behalf of such partnership or any officer (with a title specified in clause (a) above) or Authorized Officer of such partnership's managing general partner (or such other Person that is responsible for the management of such managing general partner) and (c) with respect to the Holders under Article 5 of the Indenture, the Bond Trustee. "Beauregard" shall mean Beauregard Electric Cooperative, Inc. "Bond" or "Bonds" shall mean any of the Initial Bonds and, when issued, any of the Additional Bonds issued pursuant to this Indenture. "Bond Proceeds" shall mean all net proceeds received by the Issuer from the issuance of Bonds. "Bond Trustee" shall mean The Chase Manhattan Bank, its successors and assigns, in its capacity as trustee under this Indenture. "Business Day" shall mean any day that is not a Saturday, Sunday or legal holiday in the State of New York, or a day on which banking institutions chartered by the State of New York, or the United States, are legally required or authorized to close. "Cajun" shall mean Cajun Electric Power Cooperative Inc. "Cash Equivalents" shall mean, as to any Person: (a) direct obligations of the United States, or any agency thereof, (b) obligations fully guaranteed by the United States or any agency thereof, (c) certificates of deposit or bankers acceptances issued by commercial banks (including the Bond Trustee or any of its Affiliates) organized under the laws of the United States or of any political subdivision thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Economic Community having a combined capital and surplus of at least $250,000,000 and having long-term unsecured debt securities then rated "A" or better by S&P and "A-2" or better by Moody's (but at the time of invest- Appendix A-3 128 ment not more than $25,000,000 may be invested in such certificates of deposit from one bank), (d) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (a) and (b) above, entered into with any financial institution meeting the qualifications specified in clause (c) above, (e) open market commercial paper of any corporation incorporated or doing business under the laws of the United States or of any political subdivision thereof having a rating of at least "A-1" from S&P and "P-1" from Moody's (but at the time of investment not more than $25,000,000 may be invested in such commercial paper from any one company), (f) auction rate securities or money market preferred stock having one of the two highest ratings obtainable from S&P and Moody's (or, if at any time neither S&P nor Moody's may be rating such obligations, then from another nationally recognized rating service acceptable to the Bond Trustee), (g) investments in money market funds or money market mutual funds sponsored by any securities broker dealer of recognized national standing or an Affiliate thereof), having an investment policy that requires substantially all the invested assets of such fund to be invested in investments described in any one or more of the following clauses having a rating of "A" or better by S&P and "A-2" or better by Moody's (including money market funds for which the Depositary Bank in its individual capacity or any of its Affiliates is investment manager or adviser) or (h) a deposit of any bank (including the Bond Trustee), trust company or financial institution authorized to engage in the banking business having a combined capital and surplus of at least US$500,000,000, whose long-term, unsecured debt is rated "A" or higher by S&P and "A2" or higher by Moody's. "Cash Flow Available for Debt Service" shall mean, for any period, (a) the sum of all (i) Project Revenues for such period plus(ii) all other revenues of the Obligors and any Additional Guarantor (including investment income from Cash Equivalents and any payments received under Hedging Agreements (other than interest rate protection agreements)) received during such period minus(b) the sum of all (x) Operating and Maintenance Expenses for such period (other than nonrecurring expenses in connection with the issuance of Permitted Indebtedness) plus (y) all capital expenditures (unless funded with Permitted Indebtedness (other than the Working Capital Facility), additional equity contributions made explicitly for this purpose, or Restricted Payments otherwise permitted to be made pursuant to this Indenture) plus (z) any payments made under Hedging Agreements (other than interest rate protection agreements), in each case for the Obligors and any Additional Guarantor on a consolidated basis. "Certificated Bonds" shall mean a Bond issued in certificated form to a Person other than the Depositary. "Change of Control" shall mean the acquisition, directly or indirectly, beneficially or of record or otherwise, by any Person or group (within the meaning of the Exchange Act and Appendix A-4 129 the rules of the Commission thereunder as in effect on the date hereof) other than NRG or its Controlled Subsidiaries of Control of the Issuer; provided that there shall be no Change of Control if either (i) after the occurrence of either of such events, the Rating Agencies confirm in writing that no Ratings Downgrade will occur or (ii) Holders representing not less than 66-2/3% of the aggregate principal amount of the Outstanding Bonds approve the occurrence of such event. "Change of Control Offer" shall have the meaning given to that term in Section 3.1(b). "Claiborne" shall mean Claiborne Electric Cooperative, Inc. "Clearstream" shall mean Clearstream Banking, societe anonyme (formerly Cedelbank, societe anonyme). "Closing Date" shall mean the date of issuance and delivery of the Initial Bonds. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and any successor statute and all rules and regulations promulgated thereunder. "Collateral" shall mean the Issuer Collateral and the Guarantor Collateral. "Collateral Agent" shall mean The Chase Manhattan Bank, its successors and assigns solely in its capacity as collateral agent under the Intercreditor Agreement and the other Finance Documents to which it is a party. "Commission" shall mean the United States Securities and Exchange Commission or, if at any time after the date of this Indenture such Commission is not existing and performing the duties now assigned to under Applicable Law, the body performing such duties at such time. "Concordia" shall mean Concordia Electric Cooperative, Inc. "Consumer Price Index" shall mean the consumer price index computed and issued by the Bureau of Labor Statistics of the U.S. Department of Labor. "Control" shall mean the power to direct or cause the direction of the management and policies of a Person whether through the ownership of voting securities, by contract or otherwise. Appendix A-5 130 "Corporate Trust Office" shall mean the principal office of the Bond Trustee or Security Registrar at which the corporate trust business of the Bond Trustee or Registrar, as the case may be, shall at any particular time be principally administered, which at the time of the execution of this Indenture is, in each case, located at 450 W. 33rd Street, New York, New York 10001, Attention: Capital Markets Fiduciary Services. "Covenant Defeasance Option" shall have the meaning given to that term in Section 9.2(a)(ii). "Debt Service" shall mean, on a consolidated basis of the Issuer and its Subsidiaries (other than Unrestricted Subsidiaries) without duplication, the sum of (a) all principal, interest, premium (if any) and other amounts due with respect to the Bonds and all other Permitted Indebtedness (other than Subordinated Indebtedness, fees payable in connection with the issuance of Permitted Indebtedness and principal payments under the Working Capital Facility, provided that such amounts remain available to be drawn under the Working Capital Facility or are refinanced under a replacement working capital facility) plus (b) payments required to be made under any interest rate protection agreements for such period less payments to be received under any interest rate protection agreements for such period. "Debt Service Coverage Ratio" shall mean for any period the ratio of (a) Cash Flow Available for Debt Service for such period to (b) the aggregate of all Debt Service due during such period. "Debt Service Reserve Account" shall mean the account described in Section 6.2. "Debt Service Reserve Required Balance" shall mean an amount equal to the next scheduled payment of principal and interest due on the Outstanding Bonds. "Debt Termination Date" shall have the meaning given to that term in Section 1.1 of the Intercreditor Agreement. "Debtor Relief Law" shall mean any applicable liquidation, dissolution, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization, readjustment of debt or similar laws affecting the rights or remedies of creditors generally, as in effect from time to time. "Default" shall mean, individually and collectively, an Indenture Default and a Guarantor Default. "Defeasance Deposit" shall have the meaning given to that term in Section 9.2(d). Appendix A-6 131 "Depositary" shall have the meaning given to that term in Section 2.5.5(a). "Depositary Accounts" shall have the meaning given to that term in Section 6.2. "Depositary Bank" shall mean The Chase Manhattan Bank, as depositary bank under the Intercreditor Agreement or any successor thereto pursuant to the terms thereof. "Dixie" shall mean Dixie Electric Membership Corp. "DTC" shall mean The Depository Trust Company, having a principal office at 55 Water Street, New York, New York, 10041-0099, together with any Person succeeding thereto by merger, consolidation or acquisition of all or substantially all of its assets, including substantially all of its securities payment and transfer operations. "DTC Letter of Representations" shall mean the Letter of Representations, dated the date hereof, among the Issuer, DTC and the Bond Trustee. "Electricity Membership Cooperatives" or "EMCs" shall mean Beauregard, Claiborne, Concordia, Dixie, Jefferson Davis, Northeast, Pointe Couppe, SLECA, SLEMCO, Valley and Washington-St. Tammy. "Environmental Laws" shall mean any and all Laws (as well as obligations, duties and requirements relating thereto under common law) relating to: (a) noise, emissions, discharges, spills, releases or threatened releases of pollutants, contaminants, Environmentally Regulated Materials, materials containing Environmentally Regulated Materials, or hazardous or toxic materials or wastes into ambient air, surface water, groundwater, watercourses, publicly or privately-owned treatment works, drains, sewer systems, wetlands, septic systems or onto land surface or subsurface strata; (b) the use, treatment, storage, disposal, handling, manufacture, processing, distribution, transportation, or shipment of Environmentally Regulated Materials, materials containing Environmentally Regulated Materials or hazardous and/or toxic wastes, material, products or by-products (or of equipment or apparatus containing Environmentally Regulated Materials); (c) pollution or the protection of human health, the environment or natural resources; or (d) zoning and land use. "Environmentally Regulated Materials" shall mean (a) hazardous materials, hazardous wastes, hazardous substances, extremely hazardous wastes, restricted hazardous wastes, toxic substances, toxic pollutants, contaminants, pollutants or words of similar import, as used under Environmental Laws, including but not limited to the following: the Hazardous Materials Transportation Act, 49 U.S.C. 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., the Comprehensive Environmental Response, Appendix A-7 132 Compensation, and Liability Act of 1980, 42 U.S.C. 9601 et seq., the Clean Water Act, 33 U.S.C. 1231 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. 2601 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 3808 et seq., and the Oil Pollution Act, 33 U.S.C. Section 2701 et seq., and their State and local counterparts or equivalents; (b) petroleum and petroleum products including crude oil and any fractions thereof; (c) natural gas, synthetic gas and any mixtures thereof; (d) radon; (e) any other hazardous, radioactive, toxic or noxious substance, material, pollutant, or solid, liquid or gaseous waste; and (f) any substance that, whether by its nature or its use, is now or hereafter subject to regulation under any Environmental Law or with respect to which any Federal, State or local Environmental Law or governmental agency requires environmental investigation, monitoring or remediation. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean (a) a corporation which is a member of a controlled group of corporations with either Obligor within the meaning of Section 414(b) of the Code, (b) a trade or business (including a sole proprietorship, partnership, trust, estate or corporation) which is under common control with either Obligor within the meaning of Section 414(c) of the Code or Section 4001(b)(1) of ERISA, (c) a member of an affiliated service group with either Obligor within the meaning of Section 414(m) of the Code or (d) an entity described in Section 414(o) of the Code. "Escalated" shall mean that the applicable amount shall be increased annually on the anniversary of the Closing Date using the Consumer Price Index published most recently prior to such date and assuming as a base the Consumer Price Index published most recently prior to the Closing Date. "Escrow Account" shall mean the account established pursuant to the Escrow Agreement. "Escrow Agreement" shall mean the Escrow Agreement, dated as of the Closing Date, between the Issuer, the Subsidiary Guarantor, and The Chase Manhattan Bank. "Euroclear" shall mean Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System, or any successor thereto, as operator thereof. "Event of Default" shall mean, individually and collectively, an Indenture Event of Default and a Guarantor Event of Default. Appendix A-8 133 "Event of Loss" shall mean any event that causes all or a material part of the Project to be damaged, destroyed or rendered unfit for normal use for any reason whatsoever, or any compulsory transfer or taking, or transfer under threat of compulsory transfer or taking, of any material part of the Project by any Governmental Authority. "EWG" shall mean an "exempt wholesale generator" under Section 32(a)(i) of PUHCA. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Exchange Bonds" shall have the meaning given to that term in Section 1 of the Registration Rights Agreement. "Federal Bankruptcy Code" shall mean Title 11 of the United States Code, as amended from time to time. "Final Maturity Date" shall mean September 15, 2024. "Final Offering Circular" shall mean the confidential offering circular of the Issuer, dated March 27, 2000, issued with respect to the Initial Bonds. "Finance Documents" shall mean, collectively, the Indenture, any Supplemental Indenture, the Guarantor Loan Agreement, the Guarantee, the Intercreditor Agreement, the Working Capital Facility, the Purchase Agreement, the Bonds, the Guarantor Note, the Security Documents, the Registration Rights Agreement, the Escrow Agreement and all other documents related to any of the foregoing or otherwise related to the issuance of the Bonds. "Financial Asset" shall have the meaning assigned to that term under the Uniform Commercial Code as in effect from time to time in the State of New York. "GAAP" shall mean generally accepted accounting principles as in effect in the United States from time to time. "Global Bonds" shall have the meaning given to such term in Section 2.5.3. "Governmental Approvals" means all governmental approvals, authorizations, consents, decrees, licenses, permits, waivers, privileges and filings with all Governmental Authorities. Appendix A-9 134 "Governmental Authority" means the government of any federal, state, municipal or other political subdivision in which the Project is located (or of any other relevant jurisdiction as required by the Finance Documents), and any other government or political subdivision thereof exercising jurisdiction over the Project or any party to any of the Project Documents, including all agencies and instrumentalities of such governments and political subdivisions. "Guarantee" shall mean the Guarantee, dated as of the Closing Date between the Subsidiary Guarantor and the Collateral Agent for the benefit of the Holders. "Guarantee Obligation" shall mean, with respect to any Person, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing in any manner any Indebtedness or similar obligation of any other Person. "Guarantor Collateral" shall mean (a) the Guarantor Security Agreement Collateral, (b) a pledge of the membership interests in the Subsidiary Guarantor, (c) the Mortgaged Property, (d) the Power Marketing Security Agreement Collateral and (e) any other collateral set forth in the Guarantor Security Agreement, the Mortgage, or the Guarantor Pledge Agreement. "Guarantor Default" shall mean an event or condition that, with the giving of notice, lapse of time or failure to satisfy the specified conditions, or any combination thereof, would become a Guarantor Event of Default. "Guarantor Event of Default" shall have the meaning given to that term in Section 4.1 of the Guarantor Loan Agreement. "Guarantor Loan" shall have the meaning given to that term in Section 2.1 of the Guarantor Loan Agreement. "Guarantor Loan Agreement" shall mean the Guarantor Loan Agreement, dated as of the Closing Date, between the Issuer and the Subsidiary Guarantor. "Guarantor Note" shall have the meaning given to that term in Section 2.1 of the Guarantor Loan Agreement. "Guarantor Pledge Agreement" shall mean the Pledge Agreement, dated as of the Closing Date, between the Issuer and the Collateral Agent for the benefit of the Secured Parties with respect to the membership interests in the Subsidiary Guarantor. Appendix A-10 135 "Guarantor Security Agreement" shall mean the Assignment and Security Agreement, dated of the Closing Date, between the Subsidiary Guarantor and the Collateral Agent. "Guarantor Security Agreement Collateral" shall have the meaning given to that term in Section 2.1 of the Guarantor Security Agreement. "Guarantor Security Documents" shall mean the Guarantor Security Agreement, the Guarantor Pledge Agreement, the Mortgage and all other Security Documents securing the obligations of the Subsidiary Guarantor under the Guarantee and the Guarantor Note. "Hedging Agreement" shall mean any interest rate protection agreement, foreign currency exchange agreement, power or fuel price protection agreement or other interest currency exchange rate or commodity price hedging arrangement entered into in the ordinary course of business and not for speculative purposes. "Holder" shall mean, with respect to any Bond, the Person in whose name such Bond is registered in the Securities Register; provided that the Issuer or any Affiliate thereof shall not be deemed a Holder with respect to any matter herein or any other Finance Document requiring a vote of the Holders. "Indebtedness" of any Person shall mean, at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments (excluding "deposit only" endorsements on checks payable to the order of such Person), (c) all obligations of such Person to pay the deferred purchase price of property or services (except trade and other accounts payable and similar obligations arising in the ordinary course of business shall not be included as Indebtedness), (d) all obligations of such Person as lessee under capital leases to the extent required to be capitalized on the books of such Person in accordance with GAAP and (e) all obligations of others of the type referred to in clause (a) through (d) above guaranteed by such Person, whether or not secured by a lien or other security interest on any asset of such Person. "Indenture" shall mean this Trust Indenture, dated as of the Closing Date, between the Issuer, the Subsidiary Guarantor, the Bond Trustee and the Depositary Bank. "Indenture Default" shall mean an event or condition that, with the giving of notice, lapse of time or failure to satisfy certain specified conditions, or any combination thereof, would become an Indenture Event of Default. "Indenture Event of Default" shall have the meaning given that term in Section 5.1. Appendix A-11 136 "Independent Engineer" shall mean Stone & Webster, its successors and assigns or such other independent engineer as the Bond Trustee may engage who is reasonably acceptable to the Issuer. "Independent Insurance Consultant" shall mean Marsh USA Inc., its successors and assigns or such other independent insurance consultant as the Bond Trustee may engage who is reasonably acceptable to the Issuer. "Independent Market Consultant" shall mean Pace Global Energy Service, its successors and assigns or such other independent market consultant as the Bond Trustee may engage who is reasonably acceptable to the Issuer. "Initial Purchasers" shall mean Chase Securities Inc., Lehman Brothers Inc., Credit Suisse First Boston Corporation and Salomon Smith Barney Inc. "Initial Bond" or "Initial Bonds" shall mean any of the (a) $500,000,000 NRG South Central Generating LLC 8.962% Senior Secured Series A Bonds due 2016 and (b) $300,000,000 NRG South Central Generating LLC 9.479% Senior Secured Series B Bonds due 2024. "Intercreditor Agreement" shall mean the Collateral Agency and Intercreditor Agreement, dated as of the Closing Date, among the Bond Trustee, the Collateral Agent, the Depositary Bank, the Working Capital Agent, the Subsidiary Guarantor and the Issuer. "Involuntary PPA Buy-Out" shall mean a buy-out of a power purchase agreement that is not voluntarily sought by an Obligor, but into which the Obligor is legally or practically required to enter by force of law or regulation, or by an actual or threatened condemnation, expropriation or other taking of the Project, or by a threatened bankruptcy proceeding on the part of the purchaser under the affected power purchase agreement. "Issuer" shall mean NRG South Central Generating LLC, a Delaware limited liability company. "Issuer Collateral" shall mean (a) the Issuer Security Agreement Collateral, (b) the Guarantee, (c) a pledge of the membership interests in the Issuer owned by the Members and (d) any other collateral set forth in the Issuer Security Agreement or the Issuer Pledge Agreement. Appendix A-12 137 "Issuer Pledge Agreement" shall mean the Pledge Agreement, dated as of the Closing Date, among the Members and the Collateral Agent for the benefit of the Secured Parties with respect to the membership interests in the Issuer owned by the Members. "Issuer Security Agreement" shall mean the Assignment and Security Agreement, dated of the Closing Date, between the Issuer and the Collateral Agent. "Issuer Security Agreement Collateral" shall have the meaning given to that term in Section 2.1 of the Issuer Security Agreement. "Jefferson Davis" shall mean Jefferson Davis Electric Cooperative, Inc. "Joint Operating Assets" shall mean the 42% ownership interest of Gulf States Utilities in Big Cajun II, Unit 3. "Legal Defeasance Option" shall have the meaning given to that term in Section 9.2(a)(i). "Lien" shall mean any mortgage debenture, mortgage, deed of trust, pledge, charge, hypothecation, assignment, mandatory deposit arrangement with any Person owning Indebtedness of such Person, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever which has the substantial effect of constituting a security interest, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same effect as any of the foregoing and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction, domestic or foreign. "Loss Proceeds" shall mean all net proceeds from an Event of Loss, including, without limitation, insurance proceeds or other amounts actually received on account of an Event of Loss. "Majority Holders" shall mean Holders holding greater than fifty percent (50%) in aggregate principal amount of the Outstanding Bonds. "Management Committee" shall mean, with respect to any corporation or limited liability company, either the management committee of such entity or other management body of such limited liability company or any committee of such management committee or management body duly authorized to act therefor. Appendix A-13 138 "Material Adverse Effect" shall mean a material adverse effect on (a) the financial condition, operations, business or prospects of the Obligors and any Additional Guarantors, taken as a whole, (b) the validity or priority of the Liens on the Collateral, (c) the ability of either Obligor or any Additional Guarantor to perform its material obligations under the Finance Documents or (d) the ability of the Collateral Agent to enforce any of the payment obligations of either Obligor or any Additional Guarantor under the Indenture, the Guarantee or the Bonds. "Maturity Date" shall mean, with respect to any Bond, the date on which the principal of such Bond or an installment of principal becomes due and payable as herein or therein provided, whether at stated maturity, acceleration, redemption or otherwise. "Members" shall mean NRG Central U.S. LLC, a Delaware limited liability company, and South Central Generation Holding LLC, a Delaware limited liability company. "Monies" shall mean all cash, payments, Cash Equivalents and other amounts (including instruments evidencing such amounts) on deposit in or credited to any Depositary Account. "Moody's" shall mean Moody's Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and assigns. "Mortgage" shall mean the Mortgage, dated as of the Closing Date, between the Subsidiary Guarantor and the Collateral Agent. "Mortgaged Property" shall have the meaning given to that term in the Mortgage. "Multiemployer Plan" shall mean a plan that is a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which either Obligor or any ERISA Affiliate is making, or has an obligation to make, contributions or had made, or has been obligated to make, contributions since the Closing Date. "Non-Recourse Obligations" means Indebtedness or other obligations or liabilities (i) as to which neither Obligor nor any Additional Guarantor (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise) other than pursuant to a pledge by the Issuer of an equity interest in the obligor of the Indebtedness or (c) constitutes the lender and (ii) no default with respect to which (including any rights any Person may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any Indebtedness of either Obligor or any Appendix A-14 139 Additional Guarantor to declare a default on such Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity. "Non-Recourse Person" shall have the meaning given to that term in Section 12.11. "Northeast" shall mean Northeast Louisiana Power Cooperative, Inc. "NRG" shall mean NRG Energy, Inc., a Delaware corporation. "NRG Operating Services" shall mean NRG Operating Services, Inc., a Delaware corporation. "NRG Power Marketing" shall mean NRG Power Marketing Inc., a Delaware corporation. "Obligor" shall mean the Issuer and the Subsidiary Guarantor. "Officer's Certificate" shall mean, with respect to any Person, a certificate executed by an Authorized Representative of such Person. "One Hundred Percent Holders" shall mean Holders holding one hundred percent (100%) in aggregate principal amount of the Outstanding Bonds. "One-Third Holders" shall mean Holders holding no less than thirty-three and one third percent (33 1/3%) in aggregate principal amount of the Outstanding Bonds. "Operating and Maintenance Expenses" shall mean (a) all amounts disbursed by or on behalf of an Obligor for operation, maintenance, repair, or improvement of the Project including, without limitation, premiums on insurance policies, property and other Taxes, and payments under the relevant operating and maintenance agreements, leases, royalty and other land use agreements, and any other payments required under the Project Documents or for the administration or performance of the Transaction Documents and (b) all fees and other amounts due and owing to the Bond Trustee, Collateral Agent and Depositary Bank. "Opinion of Counsel" shall mean a written opinion of counsel for any Person either expressly referred to herein or otherwise reasonably satisfactory to the Bond Trustee, which may include, without limitation, counsel for the Issuer, whether or not such counsel is an employee of the Issuer. Appendix A-15 140 "Outstanding Bonds" or "Outstanding" when used in connection with any Bonds shall mean, as of the time in question, all Bonds authenticated and delivered under this Indenture, except (a) Bonds theretofore cancelled or required to be cancelled under Section 2.12 and (b) Bonds for which provision for payment shall have been made pursuant to this Indenture and (c) Bonds in substitution for which other Bonds have been authenticated and delivered pursuant to this Indenture. "Pay-Off Date" shall have the meaning given to that term in Section 4.3(b) of the Guarantor Loan Agreement. "Paying Agent" shall have the meaning given to that term in Section 2.6.1(b). "Payment Conditions" shall mean: (a) delivery to the Bond Trustee of an Officer's Certificate from an Authorized Officer of the Issuer certifying that no Default or Event of Default shall have occurred and be continuing; (b) delivery to the Bond Trustee of an Officer's Certificate from an Authorized Officer of the Issuer certifying that (i) if as of such date the Projected Contract Revenues are fifty percent (50%) or more of the Total Projected Revenue for the succeeding four (4) fiscal quarters, (x) the Debt Service Coverage Ratio for the most recently completed historical four (4) fiscal quarters (in the case of the first four (4) fiscal quarters following the Closing Date, Projected Debt Service Coverage Ratios shall be used as needed) equals or exceeds 1.4 to 1.0 and (y) the Projected Debt Service Coverage Ratio for the succeeding four (4) fiscal quarters (taken as a whole) equals or exceeds 1.4 to 1.0, commencing with the fiscal quarter in which such distribution date occurs; (ii) if as of such date the Projected Contracted Revenues are twenty-five (25%) percent or more, but less than fifty percent (50%), of the Total Projected Revenues for the succeeding four (4) fiscal quarters, (x) the Debt Service Coverage Ratio for the most recently completed historical four (4) fiscal quarters (in the case of the first four (4) fiscal quarters following the Closing Date, Projected Debt Service Coverage Ratios shall be used as needed) and (y) the Projected Debt Service Coverage Ratio for the succeeding six (6) fiscal quarters (taken as a whole) equals or exceeds 1.55 to 1.0, commencing with the fiscal quarter in which such distribution date occurs; and (iii) if as of such date the Projected Contracted Revenues are less than twenty-five (25%) of the Total Projected Revenue for the succeeding four (4) fiscal quarters, (x) the Debt Service Coverage Ratio for the most recently completed historical four (4) fiscal quarters (in the case of the first four (4) fiscal quarters following the Closing Date, Projected Debt Service Coverage Ratios shall be used as needed) equal or exceeds 1.7 to 1.0 and (y) the Projected Debt Service Coverage Ratio for the Appendix A-16 141 succeeding eight (8) fiscal quarters (taken as a whole) equals or exceeds 1.7 to 1.0, commencing with the fiscal quarter in which such distribution date occurs; and (c) the balance in the Debt Service Reserve Account, including any Acceptable Credit Support, equals or exceeds the Debt Service Reserve Required Balance. "Payment Date" shall mean, with respect to the Bonds or any other Secured Obligations, any date on which any principal of, premium (if any), interest on or fees, indemnities, costs and other amounts payable in connection with the Bonds or such other Secured Obligations are due and payable to the Holders or to the Secured Parties holding such other Secured Obligations. "PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Pension Plan" shall mean any pension plan within the meaning of Section 3(2) of ERISA, including any multiemployer pension plan which is subject to the provisions of Title I and IV of ERISA or Section 412 of the Code and which (a) is established, sponsored, maintained or administered by either Obligor or any ERISA Affiliate or for which either Obligor or any ERISA Affiliate has an obligation to contribute or any liability or in which either Obligor or any ERISA Affiliate participates or (b) has at any time since the Closing Date been established, sponsored, maintained, or administered on behalf of employees of either Obligor or any of its current or former ERISA Affiliates or for which either Obligor or any of its current or former ERISA Affiliates had an obligation to contribute or any liability or in which either Obligor or any of its current or former ERISA Affiliates participated. "Permitted Asset Sale" shall mean any of the following: (a) any transaction specified in the power purchase agreements; (b) disposition of the Assets Specifically Held for Resale; (c) transfers of assets among the Issuer, the Subsidiary Guarantor and any Additional Guarantor; (d) sales and dispositions in the ordinary course of business not in excess of $20,000,000 (Escalated) in the aggregate for each Obligor and any Additional Guarantor in any fiscal year; (e) any sales or dispositions of surplus, obsolete or worn-out equipment or inventory in the ordinary course of business; (f) any sales or dispositions required for compliance with Applicable Law or necessary Governmental Approvals; (g) with respect to the Issuer, sales of noncontrolling ownership interests in the Subsidiary Guarantor or Additional Guarantors so long as the Guarantee and Guarantor Loan Agreement or other guarantee and loan agreement with regard to the Subsidiary Guarantor or Additional Guarantors remains in effect; (h) with respect to the Issuer, sales or disposition of ownership interests in Unrestricted Subsidiaries; (i) any sales or dispositions of assets otherwise permitted under the Indenture or other Finance Document; or (j) any other sale or other Appendix A-17 142 disposition of assets so long as the Rating Agencies shall have confirmed that such sale or disposition will not result in a Ratings Downgrade; provided that under no circumstances (other than pursuant to clauses (a) through (i) above) shall the Subsidiary Guarantor sell or otherwise dispose of the Project. "Permitted Guarantor Indebtedness" shall have the meaning given to that term in Section 3.13 of the Guarantor Loan Agreement. "Permitted Indebtedness" shall mean, individually and collectively, Permitted Issuer Indebtedness and Permitted Guarantor Indebtedness. "Permitted Issuer Indebtedness" shall have the meaning given to that term in Section 4.15. "Permitted Liens" shall mean any of the following: (a) Liens created by the Finance Documents; (b) Liens existing on the Closing Date as set forth on Schedule 4.16 hereof or Schedule 3.15 of the Guarantor Loan Agreement; (c) Liens to secure Permitted Indebtedness other than Subordinated Indebtedness and Permitted Indebtedness incurred pursuant to clauses (f) (except Liens securing Hedging Agreements which relate to Indebtedness that is secured by Liens otherwise permitted by the Finance Documents) or (g) (excluding commercial letters of credit) of Section 3.13 of the Guarantor Loan Agreement so long as the Bonds are secured on an equal and ratable basis with the obligation so secured until such obligation is no longer secured; (d) carriers', warehousemen's, repairmen's, mechanics' and materialmen's Liens and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than forty-five (45) days or are being contested in good faith by appropriate proceedings; (e) Liens for taxes, assessments or governmental charges not yet delinquent which are the subject of a good faith contest and for which adequate reserves have been established; (f) Liens arising by action of law; (g) Liens related to workers' compensation, unemployment insurance and other social security laws or regulations or other statutory obligations of any Obligor or Additional Guarantor; (h) judgment Liens in respect of judgments that do not give rise to an Event of Default under clause (j) of Section 5.1 hereof or clause (i) of Section 4.1 of the Guarantor Loan Agreement; (i) Liens that are incidental to the business of the Obligors or any Additional Guarantor, are not for borrowing money and are not material, taken as a whole, to the business of the Obligors and Additional Guarantors; (j) other easements, zoning restrictions, rights-of-way and similar charges or encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligation and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Issuer, the Subsidiary Guarantor or any Additional Guarantor; and (k) Liens in favor of either Obligor or any Additional Guarantor. Appendix A-18 143 "Person" shall mean any individual, sole proprietorship, corporation, partnership, joint venture, limited liability partnership, limited liability company, trust, unincorporated association, institution, Governmental Authority or any other entity; wherever organized. "Plan" shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA, subject to Title I of ERISA, which (a) is established, sponsored, maintained or administered by either Obligor or any ERISA Affiliate, or for which either Obligor or any ERISA Affiliate has an obligation to contribute or any liability or in which either Obligor or any ERISA Affiliate participates or (b) has since the Closing Date been established, sponsored, maintained or administered for employees of either Obligor or any of its current or former ERISA Affiliates or for which either Obligor or any of its current or former ERISA Affiliates had an obligation to contribute or any liability or in which either Obligor or any of its current or former ERISA Affiliates participated. "Pledge Agreements" shall mean the Guarantor Pledge Agreement and the Issuer Pledge Agreement. "Point Couppe" shall mean the Point Couppe Electric Membership Cooperative. "Power Marketing Security Agreement" shall mean the Assignment and Security Agreement, dated as of the Closing Date, between NRG Power Marketing and the Collateral Agent. "Power Marketing Security Agreement Collateral" shall have the meaning given to that term in Section 2.1 of the Power Marketing Security Agreement. "PPA Buy-Out" shall mean a Voluntary PPA Buy-Out or an Involuntary PPA Buy-Out. "Private Exchange Bonds" shall have the meaning given to that term in Section 1 of the Registration Rights Agreement. "Preliminary Offering Circular" shall mean the confidential preliminary offering circular of the Issuer, dated March 14, 2000, issued with respect to the Initial Bonds. "Proceeding" shall have the meaning given to that term in Section 5.4(d). "Project" shall mean, collectively, the Acquired Assets, including but not limited to (a) the two 110 MW gas-fired units at Big Cajun I located in New Roads, Louisiana and all related switchyard, equipment, tools, supplies, fuel inventory, and other assets and related Appendix A-19 144 real property, together with all servitudes and rights of way and (b) the coal-fired Units 1 and 2 at Big Cajun II located in New Roads, Louisiana and all related equipment, switchyard, fuel inventory, tools, supplies, inventory and other assets and related real property, together with all servitudes and rights of way and the Subsidiary Guarantor's 58% ownership interest in the coal-fired Big Cajun II, Unit 3. "Project Documents" shall mean all Third Party Consents related to the Project Document, each Additional Project Document entered into with respect to the Project and any other fuel supply agreement, operation and maintenance agreement, power purchase agreement, power marketing agreement, transmission agreement, management agreement, administrative services agreement, acquisition agreement or any other agreement entered into by either Obligor or assigned to either Obligor by Cajun in connection with the ownership or operation of the Project. "Project Revenues" shall mean the revenues calculated on a cash basis and recognized pursuant to the terms of the relevant Project Documents, including, without limitation, refunds or returns of any amounts previously paid for Operating and Maintenance Expenses but shall in no event include any revenues of any Unrestricted Subsidiary. "Projected Contracted Revenues" shall mean revenues derived from power purchase agreements for the purchase and sale of energy and capacity for specified or formula prices which have a remaining contract term of at least two (2) years, calculated on a consolidated basis of the Issuer and its Subsidiaries (other than Unrestricted Subsidiaries). "Projected Debt Service Coverage Ratio" shall mean for any period a projection of the Debt Service Coverage Ratio over the period specified, prepared by the Issuer in good faith based upon assumptions consistent in all material respects with the Transaction Documents, historical operating results, if any, and the Issuer's good faith projections of future Project Revenues and Operating and Maintenance Expenses of the Obligors and any Additional Guarantor in light of the then existing or reasonably expected regulatory and market environments in the markets in which the Project or other assets owned by such Person is or will be operated and upon the assumption that no early redemption or prepayment of the Bonds of any Series will be made prior to the stated maturity of such Series of Bonds. Whenever this Indenture provides for the determination of a Projected Debt Service Coverage Ratio, the Projected Debt Service Coverage Ratio shall be set forth in an Officer's Certificate of the Issuer filed with the Bond Trustee stating that, based upon reasonable investigation and review, the Projected Debt Service Coverage Ratio is based on the criteria set forth in the preceding sentence. "PUHCA" shall mean the Public Utility Holding Company Act of 1935, as amended. Appendix A-20 145 "Purchase Agreement" shall mean the Purchase Agreement dated March 24, 2000 between the Initial Purchasers, the Issuer and the Subsidiary Guarantor. "Qualified Institutional Buyer" shall mean a "qualified institutional buyer" within the meaning of Rule 144A. "Ratings" shall mean the credit ratings assigned to the Bonds by the Rating Agencies. "Rating Agencies" shall mean Moody's and S&P or if any such entity shall cease to rate securities of the type equivalent to the Bonds, another nationally recognized rating agency or agencies then rating bonds as shall be selected by the Obligors as a substitute therefor. "Ratings Downgrade" shall mean a lowering or withdrawal by a Rating Agency of the then current Ratings of the Bonds. "Redemption Account" shall have the meaning given that term in Section 3.3 hereof. "Redemption Date" shall mean any date for redemption of Bonds established pursuant to Article 3. "Redemption Premium" shall mean (i) an amount, calculated one day prior to a Redemption, equal to the excess, if any, of the Discounted Present Value calculated for any Bond subject to redemption pursuant to Article 3 less the unpaid principal amount of such Bond or (ii) as otherwise provided in a Supplemental Indenture; provided that the Redemption Premium shall not be less than zero. For purposes of this definition, the "Discounted Present Value" of any Bond subject to redemption pursuant to Article 3 shall be equal to the discounted present value of all principal and interest payments scheduled to become due in respect of such Bond after the date of such redemption, calculated using a discount rate equal to the sum of (a) the yield to maturity on the United States treasury security having an average life equal to the remaining average life of such Bond and trading in the secondary market at the price closest to par and (b) 50 basis points; provided, however, that if there is no United States treasury security having an average life within one month of the remaining average life of such Bond, such discount rate shall be calculated using a yield to maturity interpolated or extrapolated on a straight-line basis (rounding to the nearest month, if necessary) from the yields to maturity for two (2) United States treasury securities having average lives most closely corresponding to the remaining average life of such Bond and trading in the secondary market at the price closest to par. Appendix A-21 146 "Redemption Price" shall mean an amount equal to the sum of (a) the principal amount of Bonds being redeemed pursuant to Article 3 and (b) unless otherwise specifically provided in this Indenture or any relevant Supplemental Indenture, all interest accrued and unpaid thereon through but excluding the Redemption Date. "Registrar" shall have the meaning given to that term in Section 2.6.1(a). "Registration Default" shall have the meaning given to that term in Section 3 of the Registration Rights Agreement. "Registration Rights Agreement" shall mean the Exchange and Registration Rights Agreement, dated as of the Closing Date, among the Issuer, the Subsidiary Guarantor and the Initial Purchasers, for the benefit of the Holders of the Initial Bonds. "Regular Record Date" shall mean, (a) with respect to each Payment Date except a Payment Date in connection with an optional or mandatory redemption, the fifteenth (15th) day of the month, whether or not a Business Day, immediately preceding such Payment Date, and (b) with respect to each Payment Date in connection with an optional or mandatory redemption, the fifteenth (15th) day, whether or not a Business Day, preceding such Payment Date. "Regulation D" shall mean Regulation D under the Securities Act. "Regulation S" shall mean Regulation S under the Securities Act. "Regulation S Restricted Period" shall mean, with respect to any Bond, the period of forty (40) consecutive days beginning on and including the first day after the later of (a) the day on which such Bond is first offered to Persons other than distributors (as defined in Regulation S) in reliance on Regulation S and (b) the closing date of the offering of such Bond. "Resolution" shall mean a copy of a resolution certified by the secretary or an assistant secretary of the Issuer to have been adopted by the Management Committee of the Issuer and to be in full force and effect on the date of such certification. "Responsible Officer" shall mean, when used with respect to the Bond Trustee, any officer in the Corporate Trust Office, including the president, vice president, assistant vice president, secretary, assistant secretary, treasurer, assistant treasurer, trust officer or any other officer of the Bond Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate Appendix A-22 147 trust matter is referred because of such Person's knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture. "Restricted Global Bond" shall have the meaning given to that term in Section 2.5.2. "Restricted Payment" shall mean with respect to any Person, (a) the declaration and payment of distributions, dividends or any other similar payment made in cash, property, obligations or other securities, (b) any payment of the principal of or interest on any Subordinated Indebtedness or (c) the making of any loans or advances to any Affiliate (other than Permitted Indebtedness); provided that (w) distributions or other payments by an Obligor or Additional Guarantor to another Obligor or Additional Guarantor, (x) distributions of proceeds from the sale of Assets Specifically Held for Resale, (y) payments from the Issuer or the Subsidiary Guarantor to NRG Energy of any proceeds from treasury locks entered into by the Issuer or the Subsidiary Guarantor on or prior to the Closing Date, or (z) distributions representing returns of the Working Capital Equity shall not constitute Restricted Payments. "Revenue Account" shall mean the account described in Section 6.2. "Rule 144" shall mean Rule 144 under the Securities Act. "Rule 144A" shall mean Rule 144A under the Securities Act. "S&P" shall mean Standard & Poor's Ratings Services, a division of McGraw-Hill Companies Inc., its successors and assigns. "Secured Obligations" shall mean all amounts owing to any Secured Party pursuant to the terms of any Finance Document, including, without limitation, (a) the principal of and interest on the Bonds (and any and all renewals, extensions and refinancing thereof) and all other obligations and liabilities (including, without limitation, indemnities and interest on all of the foregoing) owed to the Secured Parties incurred under, arising under out of or in connection with the Bonds (and any and all renewals, extensions and refinancing thereof), the Working Capital Facility or any other Finance Document; (b) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve the security interests in the Collateral in accordance with the terms of the Security Documents; and (c) in the event of any proceeding for the collection or enforcement of the Secured Obligations, after an Event of Default shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by any Secured Party or its rights under any of the Finance Documents, together with reasonable attorneys' fees and court costs. Appendix A-23 148 "Secured Parties" shall mean, collectively, the Bond Trustee, the Collateral Agent, the Depositary Bank, the Holders, the Working Capital Facility Agent, the Working Capital Facility Banks and, solely with respect to the Guarantor Loans, the Issuer, and any holder of senior Indebtedness other than the Bonds or the Guarantor Loans and any other Person that becomes a secured party under any Finance Document; provided that in no event shall any holder of any Subordinated Indebtedness be deemed a Secured Party. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Securities Register" shall have the meaning given to that term in Section 2.6.1(a). "Security Agreements" shall mean the Issuer Security Agreement, the Guarantor Security Agreement and the Power Marketing Security Agreement. "Security Documents" shall mean, collectively, the Intercreditor Agreement, the Pledge Agreements, the Indenture (with respect to the Depositary Accounts, the Security Agreements, the Mortgage and any other document providing for any lien, pledge, encumbrance, mortgage or security interest on any or all of the Collateral. "Series" shall have the meaning given to that term in Section 2.1. "SLECA" shall mean South Louisiana Electric Cooperative Association. "SLEMCO" shall mean Southwest Louisiana Electric Membership Corp. "Special Record Date" shall have the meaning given to that term in Section 2.14. "Subordinated Indebtedness" shall mean any Indebtedness of the Issuer that is (a) payable solely from and exclusively from the funds that would otherwise have been available to make Restricted Payments from the Issuer, the Subsidiary Guarantor or any Additional Guarantor, (b) fully subordinated in all rights and remedies or terms substantially similar to the subordination provisions set forth on Exhibit I and (c) unsecured. "Subsidiary" shall mean, as to any Person, (a) any corporation fifty percent (50%) or more of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (b) any partnership, limited liability company, unincorporated association, joint venture or other entity in which such Person Appendix A-24 149 and/or one or more Subsidiaries of such Person has fifty percent (50%) or more equity interest at the time. "Subsidiary Guarantor" shall mean Louisiana Generating LLC, a Delaware limited liability company. "Supplemental Indenture" shall mean an indenture supplemental to this Indenture entered into by the Issuer and the Bond Trustee for the purpose of establishing, in accordance with this Indenture, the title, form and terms of the Bonds. "Tax" and "Taxes" shall include all taxes, including without limitation, income, windfall, profits, gains, franchise, gross receipts, transfer, license, environmental, customs duty, capital stock, severance, stamp, payroll, sales, employment, unemployment, disability, use, property, withholding, excise, production, value added, occupancy and other taxes, duties or assessments of any nature whatsoever, together with interest, penalties and additions imposed with respect to such amounts and any interest in respect of such penalties and additions. "Tax Returns" shall include all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Governmental Authority relating to Taxes. "Termination Event" shall mean: (a) any "Reportable Event" described in Section 4043(b) of ERISA, other than an event for which the 30 day notice requirement is met under Section .13, .14, .18, .19 or .20 of PBGC Regulation Section 2615; (b) the withdrawal of either Obligor or any ERISA Affiliate from a Pension Plan during a plan year in which it was a "substantial employer" within the meaning of Section 4001(a)(2) of ERISA; (c) the filing of intent to terminate a Pension Plan, the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA, the appointment of a trustee with respect thereto, or the termination of a Pension Plan; (d) the institution of proceedings to terminate a Pension Plan or to appoint a trustee with respect to a Pension Plan by the PBGC; (e) any other event or condition which would constitute grounds under Section 4042(a) of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (f) the imposition of a lien pursuant to Section 412 of the Code or Section 302 or 4068 of ERISA; (g) the complete or partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan; (h) any event or condition which results in the reorganization or insolvency of a Multiemployer Plan under Section 4241 or 4245 of ERISA; or (i) any event or condition which results in the termination of a Multiemployer Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings to terminate a Multiemployer Plan under Section 4042 of ERISA. Appendix A-25 150 "Third Party Consent" shall mean each consent entered into by a party (other than the Obligors) with respect to certain Project Documents. "Title Event" shall mean the existence of any defect of title or Lien or encumbrance on the Project which entitles the Collateral Agent or either Obligor to make a claim under the title insurance policy in effect with respect to the Project. "Total Projected Revenues" shall mean, for any period, all revenues of the Issuer and its Subsidiaries (other than Unrestricted Subsidiaries), calculated on a consolidated basis, plus any payments received under Hedging Agreements (other than interest rate protection agreements) for that period. "Transaction Documents" shall mean the Project Documents and the Finance Documents. "Transfer Restriction Legend" shall mean a legend substantially in the form of Exhibit D. "Trigger Event" shall have the meaning given to that term in Section 1.1 of the Intercreditor Agreement. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended. "Unaudited Financial Statements" shall mean, for any Person, with respect to any fiscal period, the unaudited balance sheet of such Person as of the last day of such fiscal period, the related statements of income and cash flows for such period and (in the case of any period which does not terminate on the last day of a fiscal year) for the portion of the fiscal year ending with the last day of such period, setting forth, in each case, in comparative form, corresponding unaudited figures from the preceding fiscal year. "Uniform Commercial Code" or "UCC" shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York. "Unrestricted Global Bond" shall have the meaning given to such term in Section 2.5.3. "Unrestricted Subsidiary" shall mean (i) any Subsidiary of the Issuer that is designated by the Issuer's Management Committee as an Unrestricted Subsidiary pursuant to a Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness or other liabilities or obligations other than Non-Recourse Obligations; (b) is not party to any Appendix A-26 151 agreement, contract, arrangement or understanding with either Obligor or any Additional Guarantor unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to such Obligor or Additional Guarantor than those that might be obtained at the time from Persons who are not Affiliates of the Issuer; and (c) is a Person with respect to which neither Obligor nor any Additional Guarantor has any direct or indirect obligation (x) to subscribe for additional equity interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results. Any such designation by the Issuer's Management Committee shall be evidenced to the Bond Trustee by filing with the Bond Trustee a certified copy of the Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture, and for all other purposes such Subsidiary will be deemed to be an Additional Guarantor and shall comply with the requirements of Section 4.18 hereof and any Indebtedness of such Subsidiary shall be deemed to be incurred by an Additional Guarantor as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under of the loan agreement entered into by the Additional Guarantor, the Issuer shall be in default of such Section). The Management Committee of the Issuer may at any time designate any Unrestricted Subsidiary to be an Additional Guarantor; provided that such designation shall be deemed to be an incurrence of Indebtedness by an Additional Guarantor of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under of the loan agreement entered into by the Additional Guarantor, (ii) the requirements of Section 4.18 hereof are complied with and (ii) no Default or Event of Default would occur or be in existence following such designation. "U.S. Government Obligations" shall mean direct obligations (or certificates representing an ownership interest in such obligations) of the United States (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States is pledged and which are not callable at the Issuer's option. "Valley" shall mean Valley Electric Membership Corp. "Voluntary PPA Buy-Out" shall mean a buy-out of a power purchase agreement that is not an Involuntary PPA Buy-Out. "Washington-St. Tammy" shall mean Washington-St. Tammany Electric Cooperative, Inc. Appendix A-27 152 "Working Capital Equity" shall mean an amount drawn under the Working Capital Facility which equals the amount of equity contributions made to the Issuer from NRG or the Members solely to fund working capital requirements of the Obligors during the period immediately following the Closing Date through the earlier of (a) the date that is three (3) months after the Closing Date or (b) the date on which such draw is made under the Working Capital Facility; provided that such amount shall only be equal to the amount of equity contributions made in excess of $261,000,000. "Working Capital Facility" shall mean a revolving credit facility created pursuant to a working capital agreement to be entered into among the Issuer, any guarantors party thereto, the Working Capital Facility Banks and the Working Capital Facility Agent. "Working Capital Facility Agent" shall mean the agent appointed under the Working Capital Facility, its successors and assigns, in its capacity as administrative agent under the Working Capital Facility. "Working Capital Facility Banks" shall mean each financial institution party to the Working Capital Facility. Appendix A-28 153 EXHIBIT A FORM OF FACE OF SERIES [A] [B] BOND [Global Securities Legend] THIS BOND IS A RESTRICTED GLOBAL BOND WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), OR A NOMINEE OF DTC. THIS BOND IS EXCHANGEABLE FOR BONDS HELD BY A PERSON OTHER THAN DTC OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS BOND (OTHER THAN A TRANSFER OF THIS BOND AS A WHOLE BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE OF DTC TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY) MAY BE MADE EXCEPT IN LIMITED CIRCUMSTANCES.(1) UNLESS THIS RESTRICTED GLOBAL BOND IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO FUNDING COMPANY OR ITS AGENT FOR EXCHANGE OR PAYMENT, OR ANY DEFINITIVE BOND IS ISSUED IN THE NAME OR NAMES AS DIRECTED IN WRITING BY DTC, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE BEARER HEREOF, DTC, HAS AN INTEREST HEREIN. [Transfer Restricted Securities Legend] THIS BOND (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS BOND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS BOND IS HEREBY NOTIFIED THAT THE SELLER OF THIS BOND MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. (1) This paragraph should be included only if the Bond is a Global Bond. Exhibit A-1 154 THE HOLDER OF THIS BOND, BY ITS ACCEPTANCE HEREOF, AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS BOND MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS BOND FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.(2) (2) These paragraphs should be included only if the Bond is a Transfer Restricted Security. Exhibit A-2 155 NRG SOUTH CENTRAL GENERATING LLC [8.962% Senior Secured Series A Bonds Due 2016] [9.479% Senior Secured Series B Bonds Due 2024] CUSIP Number: [ ] Principal Amount: $[500,000,000] $[300,000,000] Maturity Date: [March 15, 2016] [September 15, 2024] Issue Date: March 30, 2000 Interest Rate: [8.962%] [9.479%] Registered Holder: Cede & Co. NRG SOUTH CENTRAL GENERATING LLC, a Delaware limited liability company (the "the Issuer"), which term includes any successor or assign under the Indenture referred to below), for value received hereby promises to pay to Cede & Co., or its registered assigns, on each date (each a "Payment Date") the principal sum corresponding to such Payment Date set forth on Schedule I of the Indenture, or on such earlier date as the entire principal hereof may become due in accordance with the provisions of the Indenture, and to pay interest in arrears on each March 15 and September 15 (each an "Interest Payment Date"), commencing September 15, 2000, on said principal sum at the rate of [8.962%] [9.479%] per annum. Interest shall accrue from and including the most recent date to which interest has been paid or duly provided for, from March 30, 2000 until payment of said principal sum has been made or duly provided for. The interest payable on any such Interest Payment Date will, subject to certain conditions set forth herein, be paid to the person in whose name this Bond is registered at the end of the fifteenth day next preceding each Interest Payment Date. Such payments shall be made exclusively in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. The statements in the legend set forth above, if any, are an integral part of the terms of this Bond and by acceptance hereof the holder of this Bond agrees to be subject to and bound by the terms and provisions set forth in such legend, if any. Exhibit A-3 156 REFERENCE IS MADE TO THE FURTHER PROVISIONS SET FORTH UNDER THE TERMS AND CONDITIONS OF THE BONDS ENDORSED ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. Unless the certificate of authentication hereon has been executed by the Bond Trustee referred to on the reverse hereof by manual signature, this Bond shall not be entitled to any benefit under the Indenture or be valid for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed. Dated: [ ] NRG SOUTH CENTRAL GENERATING LLC By:______________________________ Name: Title: This is one of the Bonds described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK as Bond Trustee By:______________________________ Authorized Signatory Exhibit A-4 157 EXHIBIT B FORM OF TERMS AND CONDITIONS OF BONDS Principal Amount: $[500,000,000] $[300,000,000] Interest Rate: [8.962%] [9.479%] Payment Dates: March 15 and September 15 (commencing September 15, 2000) Minimum Denominations: US$100,000 and integral multiples of $1,000 in excess thereof. Other Terms: 1. General. This Bond is one of a duly authorized issue of debt securities (the "Bonds") of NRG SOUTH CENTRAL GENERATING LLC (the "the Issuer") issued pursuant to an Indenture (the "Indenture") dated as of March 30, 2000, between the Issuer and THE CHASE MANHATTAN BANK, as Bond Trustee. All capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in Appendix A of the Indenture. The Holders of the Bonds will be entitled to the benefits of, be bound by, and be deemed to have notice of, all of the provisions of the Indenture. A copy of the Indenture is on file and may be inspected at the Corporate Trust Office of the Bond Trustee in The City of New York, at the offices of the paying agents listed at the foot of this Bond and at the principal office of the Issuer set forth in Section 18 hereto. 2. Payments and Paying Agencies. (a) All payments on this Bond shall be made exclusively in immediately available funds and in such coin or currency of the United States of America which, at the time of payment, is legal tender for the payment of public and private debts. (b) The Person in whose name any Bond is registered at the close of business on any Regular Record Date immediately preceding any Payment Date shall be entitled to receive the principal, premium (if any) and/or interest payable on such Payment Date notwithstanding the cancellation of such Bond upon any transfer or exchange thereof subsequent to such Regular Record Date and prior to such Payment Date; provided, however, that if and to the extent there is a default in the payment of the principal, premium (if any) Exhibit B-1 158 and/or interest due with respect to any Bond on such Payment Date, such defaulted principal, premium (if any) and/or interest shall be paid to the Holder in whose names Outstanding Bonds are registered at the close of business on a subsequent date (each such date, a "Special Record Date") determined by the Bond Trustee as provided in Section 2.4 of the Indenture. (c) If any date for the payment of principal of, premium (if any) or interest on the Bond is not a Business Day, such payment shall be due on the first Business Day thereafter. Any payment made on such next succeeding Business Day shall have the same force and effect as if made on the date on which such payment is due, and no interest shall accrue for the period after such date. (d) Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. 3. Amendments and Supplements to Indenture. (a) Without Consent of Holders. Subject to the Intercreditor Agreement, the Indenture may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time, without the consent of the Holders by a Supplemental Indenture authorized by a resolution of the Management Committee of the Issuer filed with, and in form satisfactory to, the Bond Trustee, solely for one or more of the following purposes: (i) to add additional covenants of the Issuer or any of the other obligors on the Bonds, to surrender any right or power herein conferred upon the Issuer or any of the other obligors on the Bonds or to confer upon the Holders any additional rights, remedies, benefits, powers or authorities that may lawfully be conferred; (ii) to increase the assets securing the Issuer's obligations under the Indenture; (iii) to provide for the issuance of Additional Bonds on the conditions set forth in Section 2.3 of the Indenture; (iv) for any purpose not inconsistent with the terms of the Indenture to cure any ambiguity or to correct or supplement any provision contained herein or in any Supplemental Indenture which may be defective or inconsistent with any other provision contained herein or in any Supplemental Indenture; Exhibit B-2 159 (v) in connection with, and to reflect, any amendments to the provisions hereof required by the Rating Agencies in circumstances where confirmation of the Ratings are required under the Indenture in connection with the issuance of Additional Bonds or the taking of other actions by the Issuer; provided, however, that such amendments are not, in the judgment of the Bond Trustee, to the prejudice of the Bond Trustee or the Holders; (vi) to provide for the issuance of Exchange Bonds and Private Exchange Bonds, as contemplated by the Registration Rights Agreement or similar exchange bonds in respect of Additional Bonds; (vii) to evidence the succession of another Person to the Issuer or any other obligor on the Bonds as permitted by the terms of the Finance Documents, and the assumption by any such successor of the covenants of the Issuer or such obligor contained herein and in the Bonds; (viii) to evidence and provide for the acceptance of appointment of a successor Bond Trustee under the Indenture; (ix) to mortgage, pledge, hypothecate or grant a security interest in favor of the Bond Trustee for the benefit of the Holders as additional security for the payment and performance of the Issuer's obligations under the Indenture; or (x) to comply with any requirements of the Commission or the Trust Indenture Act in order to effect and maintain the qualification of the Indenture under the Trust Indenture Act. (b) With Consent of Holders. Subject to the Intercreditor Agreement, the Indenture may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time, with the consent of the Majority Holders, for the purpose of adding any mutually agreeable provisions to or changing in any manner or eliminating any of the provisions of, the Indenture, except with respect to (a) the principal, premium (if any) or interest payable upon any Bonds, (b) the dates on which interest on or principal of any Bonds is paid, (c) the dates of maturity of any Bonds and (d) Article 8 of the Indenture. Subject to the Intercreditor Agreement, the matters of the Indenture described in clauses (a) through (d) of the preceding sentence may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time only with the consent of the One Hundred Percent Holders. Notice of any such Exhibit B-3 160 amendment shall be given by the Issuer to any Rating Agency then maintaining a Rating for the Bonds. 4. Mutilated, Lost, Destroyed or Stolen Bonds. (a) If any Bond shall become mutilated, the Issuer shall execute, and the Bond Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to the Bond Trustee of such mutilated Bond for cancellation, and the Issuer or the Bond Trustee may require reasonable indemnity therefor. If any Bond shall be reported lost, stolen or destroyed, evidence as to the ownership and the loss, theft or destruction thereof shall be submitted to the Bond Trustee. If such evidence shall be satisfactory to both the Bond Trustee and the Issuer and indemnity satisfactory to both shall be given, the Issuer shall execute, and thereupon the Bond Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and denomination. The cost of providing any substitute Bond under the provisions of Section 2.10 of the Indenture shall be borne by the Holder for whose benefit such substitute Bond is provided. If any such mutilated, lost, stolen or destroyed Bond shall have matured or be about to mature, the Issuer may, with the consent of the Bond Trustee, pay to the Holder thereof the principal amount of such Bond upon the maturity thereof and compliance with the aforesaid conditions by such Holder, without the issuance of a substitute Bond therefor, and likewise pay to the Holder the amount of the unpaid interest, if any, which would have been paid on a substitute Bond had one been issued. (b) Every substitute Bond issued pursuant to Section 2.10 of the Indenture shall constitute an additional contractual obligation of the Issuer, whether or not the Bond alleged to have been mutilated, destroyed, lost or stolen shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionally with any and all other Bonds duly issued hereunder. (c) All Bonds shall be held and owned upon the express condition that the foregoing provisions are, to the extent permitted by Applicable Law, exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other rights and remedies with respect thereto. 5. Bond Trustee. For a description of the duties and the immunities and rights of the Bond Trustee under the Indenture, reference is made to the Indenture, and the obligations of the Bond Trustee to the Holder hereof are subject to such immunities and rights. 6. Paying Agents; Authenticating Agents; Registrars. The Issuer has initially appointed the Bond Trustee as Paying Agent, Authenticating Agent and Registrar. The Exhibit B-4 161 Issuer may, subject to the terms of the Indenture, at any time appoint additional or other paying agents, authenticating agents and registrars and terminate the appointment thereof, provided, that while the Bonds are Outstanding, the Issuer will maintain offices or agencies for payment of principal of and interest on this Bond as herein provided in the Borough of Manhattan, The City of New York. Notice of any such termination or appointment and of any change in the office through which any paying agent, authenticating agent or registrar will act will be promptly given in the manner described in Section 8 hereof. 7. Enforcement. (a) Subject to the Intercreditor Agreement and the other provisions of Article 5 of the Indenture, a Holder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise for the appointment of a receiver or for the enforcement of any other remedy under or upon this Indenture, unless: (i) such Holder shall have previously given written notice to the Bond Trustee of a continuing Event of Default; (ii) Holders representing the percentage of aggregate principal amount of Outstanding Bonds needed to initiate the exercise of remedies shall have requested the Bond Trustee in writing to institute such suit, action or proceeding; (iii) the Bond Trustee shall have refused or neglected to institute any such suit, action or proceeding for sixty (60) days after receipt of such notice by the Bond Trustee; and (iv) no direction inconsistent with such written request has been given to the Bond Trustee during such sixty (60) day period by the Majority Holders. (b) Subject to the Intercreditor Agreement, it is understood and intended that one or more of the Holders shall not have any right in any manner whatsoever hereunder or under the Bonds to (i) surrender, impair, waive, affect, disturb or prejudice the Lien of the Security Documents on any property subject thereto or the rights of any other Holders, (ii) obtain or seek to obtain priority or preference over any other Holders or (iii) enforce any right under the Indenture, except in the manner provided herein or in the Indenture and for the equal, ratable and common benefit of all of the Holders. 8. Notices. Notices will be mailed to Holders at their registered addresses. Notice sent by first class mail, postage prepaid, shall be deemed to have been given on the date of such mailing. In addition, the Issuer will cause all such other publications of such notices as may be required from time to time by Applicable Law. Exhibit B-5 162 9. Redemption at the Option of the Issuer. The Bonds are, under certain conditions, subject to redemption at the option of the Issuer as set forth in Section 3.1 of the Indenture. 10. Redemption at the Option of the Holders. The Bonds are, under certain conditions, subject to redemption at the option of the Holders as set forth in Section 3.1 of the Indenture. 11. Mandatory Redemption. The Bonds are subject to mandatory redemption under certain circumstances as set forth in Section 3.2 of the Indenture. 12. Authentication. This Bond shall not be valid for any purpose until an Authorized Representative of the Bond Trustee manually signs the certificate of authentication hereon substantially in the form set forth at the end of the form of the Bond attached to the Indenture as Exhibit A. 13. Governing Law. This Bond is a contract made under the laws of the State of New York of the United States and shall for all purposes be governed by and construed in accordance with the laws of such State without regard to the conflict of law rules thereof (other than Section 5-1401 of the New York General Obligations Law). 14. Warranty by the Issuer. Subject to Section 12, the Issuer hereby certifies and warrants that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Bond, and to constitute the same a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms, have been done and performed and have happened in due and strict compliance with all Applicable Laws. 15. Bond Trustee Dealings with the Issuer. Subject to certain limitations imposed by the Act, the Bond Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Bonds and may otherwise deal with and collect obligations owed to it by the Issuer or its Affiliates and may otherwise deal with the Issuer or its Affiliates with the same rights it would have it if were not Bond Trustee. 16. No Recourse Against Others. A director, officer, employee, partner, affiliate, agent, servant or shareholder, as such, of the Issuer or the Bond Trustee shall not have any liability for any obligations of the Issuer under the Bonds or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. The Bonds shall be payable from, and recourse solely to, the Guarantees and the Collateral. By Exhibit B-6 163 accepting a Bond, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Bonds. 17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Bonds and has directed the Bond Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Bonds or as contained in any notice of redemption and reliance may be placed only on the other identification number placed thereon. The Issuer will promptly notify the Bond Trustee of any change in the CUSIP numbers. 18. Indentures. The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: NRG SOUTH CENTRAL GENERATING LLC at 1221 Nicollet Mall, Suite 700, Minneapolis, Minnesota 55403, Attention: General Counsel, Telecopier No.: (612) 373-5392 19. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (Tenants in Common), TEN ENT (Tenants by the Entireties), JT TEN (Joint Tenants with Rights of Survivorship and not as Tenants in Common), CUST (Custodian), and U/G/M/A (Uniform Gift to Minors Act). 20. Descriptive Headings. The descriptive headings appearing in these Terms and Conditions are for convenience of reference only and shall not alter, limit or define the provisions thereof. Exhibit B-7 164 EXHIBIT C FORM OF TRANSFER FOR VALUE RECEIVED, the undersigned hereby transfers to ------------------------------------------------------------------- ------------------------------------------------------------------- (PRINT NAME AND ADDRESS OF TRANSFEREE) U.S. $___________ principal amount of this Bond, and all rights with respect thereto, and irrevocably constitutes and appoints_____________________ as attorney to transfer this Bond on the books kept for registration thereof, with full power of substitution. Dated_________________________ ____________________________ Signed________________________ Note: (i) The signature on this transfer form must correspond to the name as it appears on the face of this Bond. (ii) A representative of the Holder should state the capacity in which he or she signs (e.g., executor). (iii) The signature of the person effecting the transfer shall conform to any list of duly authorized specimen signatures supplied by the registered holder or shall be certified by a bank which is a member of the Medallion Program or in such other manner as the Paying Agent, acting in its capacity as transfer agent or the Bond trustee, acting in its capacity as Registrar, may require. Exhibit C-1 165 EXHIBIT D FORM OF TRANSFER RESTRICTION LEGEND THIS BOND (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS BOND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS BOND IS HEREBY NOTIFIED THAT THE SELLER OF THIS BOND MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS BOND, BY ITS ACCEPTANCE HEREOF, AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS BOND MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS BOND FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. Exhibit D-1 166 EXHIBIT E FORM OF REGULATION S TRANSFER CERTIFICATE [date] [Name of Registrar] [Address of Registrar] Ladies and Gentlemen: Reference is hereby made to the Indenture, dated as of March 30, 2000, between NRG SOUTH CENTRAL GENERATING LLC, as the Issuer and THE CHASE MANHATTAN BANK, as Bond Trustee. Capitalized terms used but not defined herein shall have the respective meanings given to such terms in the Indenture or Regulation S, as the case may be. [Insert the following paragraph for any transfer made pursuant to Section 2.7.2(b): This certificate relates to US$__________ principal amount of Bonds which are held in the form of a beneficial interest in the Restricted Global Bond (CUSIP No.__________) with the Depositary in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such beneficial interest for a beneficial interest in the Unrestricted Global Bond (CUSIP No.__________) to be held with [Euroclear] [Clearstream] (Common Code No.__________) through the Depositary in the name of [insert name of transferee] (the "Transferee").] [Insert the following paragraph for any transfer made pursuant to Section 2.7.2(c): This certificate relates to US$__________ principal amount of Bonds which are held in the form of a beneficial interest in the Restricted Global Bond (CUSIP No.__________) with the Depositary in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such beneficial interest for a beneficial interest in the Unrestricted Global Bond (CUSIP No.__________) to be held [with [Euroclear] [Clearstream]] through the Depositary in the name of [insert name of transferee] (the "Transferee").] [Insert the following paragraph for any transfer made pursuant to Section 2.7.3(a): Exhibit E-1 167 This certificate relates to US$__________ principal amount of Bonds which are held in the form of one or more Certificated Bonds registered in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such Certificated Bonds for one or more Certificated Bonds to be registered in the name of [insert name of transferee] (the "Transferee").] [Insert the following paragraph for any transfer made pursuant to Section 2.7.3(c): This certificate relates to US$__________ principal amount of Bonds which are held in the form of one or more Certificated Bonds registered in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such Certificated Bonds for a beneficial interest in the Unrestricted Global Bond (CUSIP No.__________) to be held [with [Euroclear] [Clearstream]] through the Depositary in the name of [insert name of transferee] (the "Transferee").] In connection with such request for transfer and in respect of such Bonds, the Transferor does hereby certify that such transfer is being effected in accordance with the transfer restrictions set forth in the Indenture and the Bonds and pursuant to and in accordance with Regulation S, and accordingly the Transferor does hereby certify: (1) the offer of such Bonds was not made to a person in the United States; (2) either (a) at the time the buy order for such Bonds was originated, the Transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the Transferee was outside the United States or (b) the transaction was executed in, or through the facilities of, a designated offshore securities market and neither the Transferor nor any person acting on its behalf knew that the transaction was pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or 904(b) of the Securities Act, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. [Add the following for transfers made during the Regulation S Restricted Period: In addition, (A) if the provisions of Rule 903(b)(3) or Rule 904(b)(1) of the Securities Act are applicable to the transaction, the Transferor hereby certifies that the transfer is being Exhibit E-2 168 made in accordance with the requirements of Rule 903(b)(3) or Rule 904(b)(1), as the case may be, and (B) upon completion of the transaction, the Transferee will hold the transferred beneficial interest through Euroclear or Clearstream.] You and the Issuer are entitled to rely upon this certificate and are irrevocably authorized to produce this certificate or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. [Name of Transferor] By:______________________ Name: Title: Exhibit E-3 169 EXHIBIT F FORM OF RULE 144 TRANSFER CERTIFICATE [date] [Name of Registrar] [Address of Registrar] Ladies and Gentlemen: Reference is hereby made to the Indenture, dated as of March 30, 2000, between NRG SOUTH CENTRAL GENERATING LLC, as the Issuer and THE CHASE MANHATTAN BANK, as Bond Trustee. Capitalized terms used but not defined herein shall have the respective meanings given to such terms in the Indenture or Rule 144, as the case may be. [Insert the following paragraph for any transfer made pursuant to Section 2.7.2(c): This certificate relates to US$__________ principal amount of Bonds which are held in the form of a beneficial interest in the Restricted Global Bond (CUSIP No.__________) with the Depositary in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such beneficial interest for a beneficial interest in the Unrestricted Global Bond (CUSIP No.__________) to be held with the Depositary in the name of [insert name of transferee] (the "Transferee").] [Insert the following paragraph for any transfer made pursuant to Section 2.7.3(a): This certificate relates to US$__________ principal amount of Bonds which are held in the form of one or more Certificated Bonds registered in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such Certificated Bonds for one or more Certificated Bonds to be registered in the name of [insert name of transferee] (the "Transferee").] In connection with such request for transfer and in respect of such Bonds, the Transferor does hereby certify that such transfer has been effected in accordance with the transfer restrictions set forth in the Indenture and the Bonds, and that the Bonds are being transferred in a transaction permitted by Rule 144 under the Securities Act. Exhibit F-1 170 You and the Issuer are entitled to rely upon this certificate and are irrevocably authorized to produce this certificate or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. [Name of Transferor] By: Name: Title: Exhibit F-2 171 EXHIBIT G FORM OF RULE 144A TRANSFER CERTIFICATE [date] [Name of Registrar] [Address of Registrar] Ladies and Gentlemen: Reference is hereby made to the Indenture, dated as of March 30, 2000, between NRG SOUTH CENTRAL GENERATING LLC, as the Issuer and THE CHASE MANHATTAN BANK, as Bond Trustee. Capitalized terms used but not defined herein shall have the respective meanings given to such terms in the Indenture or Rule 144A, as the case may be. [Insert the following paragraph for any transfer made pursuant to Section 2.7.2(d): This certificate relates to US$__________ principal amount of Bonds which are held in the form of a beneficial interest in the Unrestricted Global Bond (CUSIP No.__________) with the Depositary in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such beneficial interest for a beneficial interest in the Restricted Global Bond (CUSIP No.__________) to be held with the Depositary in the name of [insert name of transferee] (the "Transferee").] [Insert the following paragraph for any transfer made pursuant to Section 2.7.3(a): This certificate relates to US$__________ principal amount of Bonds which are held in the form of one or more Certificated Bonds registered in the name of [insert name of transferor] (the "Transferor"). The Transferor has requested a transfer of such Certificated Bonds for one or more Certificated Bonds to be registered in the name of [insert name of transferee] (the "Transferee").] [Insert the following paragraph for any transfer made pursuant to Section 2.7.3(c): This certificate relates to US$__________ principal amount of Bonds which are held in the form of one or more Certificated Bonds registered in the name of [insert name of Exhibit G-1 172 transferor] (the "Transferor"). The Transferor has requested a transfer of such Certificated Bonds for a beneficial interest in the Unrestricted Global Bond (CUSIP No.__________) to be held [with [Euroclear] [Clearstream]] through the Depositary in the name of [insert name of transferee] (the "Transferee").] In connection with such request for transfer and in respect of such Bonds, the Transferor does hereby certify that such transfer is being effected in accordance with the transfer restrictions set forth in the Indenture and the Bonds and pursuant to and in accordance with Rule 144A, and accordingly the Transferor does hereby certify: (1) the Transferee is a person that the Transferor and any person acting on behalf of the Transferor reasonably believe is purchasing such Bonds for its own account, or for one or more accounts with respect to which the Transferee exercises sole investment discretion, and the Transferee and each such account is a "qualified institutional buyer" within the meaning of Rule 144A; and (2) the Transferor and any person acting on its behalf has taken reasonable steps to ensure that the Transferee is aware that the Transferor will be relying on Rule 144A in connection with the transaction; (3) the transaction satisfies all other requirements of Rule 144A and of any applicable securities laws of any state of the United States or any other jurisdiction. You and the Issuer are entitled to rely upon this certificate and are irrevocably authorized to produce this certificate or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. [Name of Transferor] By: Name: Title: Exhibit G-2 173 EXHIBIT H FORM OF REQUEST FOR INFORMATION FROM THE BOND TRUSTEE THE CHASE MANHATTAN BANK, as Bond Trustee Capital Markets Fiduciary Services 450 West 33rd Street, 15th Floor New York, NY 10001 Attention: Annette M. Marsula Pursuant to Section 1.4 of the Indenture, dated as of March 30, 2000 (the "Indenture"), by and between NRG SOUTH CENTRAL GENERATING LLC ("the Issuer") and THE CHASE MANHATTAN BANK, as Bond Trustee, [name of holder], as beneficial holder, hereby requests, which request is a continuing request until further notice to the contrary, that you deliver to us at [address of holder, Attention:] all information and copies of all documents that the Issuer is required to deliver to you pursuant to Rule 144A(d) under the Securities Act or pursuant to the Indenture. [Name of holder] hereby certifies that it is a beneficial holder of [8.962%] [9.479%] Senior Secured [Series A/Series B] Bonds due [2016/2024]. [Name of Holder] - ------------------------------ -------------------------------- Authorized Signature Date Exhibit H-1 174 FORM OF REQUEST FOR FINANCIAL INFORMATION FROM A SUBSIDIARY GUARANTOR NRG SOUTH CENTRAL GENERATING LLC 1221 Nicollet Mall, Suite 700 Minneapolis, Minnesota 55403 Attention: General Counsel Pursuant to Section 4.2 of the Indenture, dated as of March 30, 2000 (the "Indenture"), by and between NRG SOUTH CENTRAL GENERATING LLC ("the Issuer") and THE CHASE MANHATTAN BANK, as Bond Trustee, as beneficial Holder, hereby requests, which request is a continuing request until further notice to the contrary, that you deliver all financial information required to be delivered pursuant to the Indenture directly to us as [address of holder, Attention:]. [Name of holder] hereby certifies that it is a beneficial holder of [8.962%] [9.479%] Senior Secured [Series A/Series B] Bonds due [2016/2024]. [Name of Holder] - ------------------------------ -------------------------------- Authorized Signature Date Exhibit H-2 175 EXHIBIT I FORM OF SUBORDINATION PROVISIONS Section 1. NRG South Central Generating LLC, a limited liability company organized under the laws of Delaware] (the "Issuer"), hereby covenants and agrees, and [NAME OF SUBORDINATED LENDER] (the "Subordinated Lender"), likewise agrees, that, to the extent and in the manner set forth in this Agreement, [describe subordinated indebtedness] (the "Subordinated Indebtedness"), and the payment from whatever source of the principal of, and interest and premium (if any) on, the Subordinated Indebtedness, are hereby expressly made subordinate and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness (as hereinafter defined). All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto, whether directly or by reference to another agreement or document, in the Indenture dated as of March 30, 2000 (as amended, supplemented or modified and in effect from time to time, the "Indenture") among the Issuer, the Subsidiary Guarantor and The Chase Manhattan Bank, as trustee (in such capacity, together with its successors and assigns, the "Bond Trustee") for the Holders. For purposes hereof, "Senior Indebtedness" shall mean all indebtedness, liabilities and other obligations of the Issuer (including, but not limited to, all such obligations in respect of principal, premiums, interest, fees, reimbursement obligations, penalties, indemnities, legal expenses, costs and other expenses, whether due after acceleration or otherwise) to the Secured Parties (of whatsoever nature and howsoever evidenced) under or pursuant to the Finance Documents, in each case, direct or indirect, primary or secondary, fixed or contingent, now or hereafter arising out of or relating to any such agreement or document. The term "Senior Indebtedness" shall include any interest accruing after the date of any filing by the Issuer of any petition in bankruptcy or the commencing of any bankruptcy, insolvency or similar proceedings with respect to the Issuer, whether or not such interest is allowable as a claim in any such proceeding. Section 2. Each of the Secured Parties and the Subordinated Lender further agree that: (a) (i) Unless and until the Senior Indebtedness shall have been paid or otherwise satisfied in full, the Subordinated Lender shall not ask, demand, sue for, take or receive from the Issuer, directly or indirectly, in cash or other property or by set-off or in any other manner (including, without limitation, from or by way of the Collateral or any guaranty of payment or performance), payment of all or any of the Subordinated Indebtedness, except as permitted under the Indenture and shall be paid solely from cash available for application to Restricted Payments. For the purposes of these provisions, the Senior Indebtedness shall not be deemed to have been paid or satisfied in full until the Senior Indebtedness shall have Exhibit I-1 176 been indefeasibly so paid in cash to the Secured Parties (after the passage of any relevant preference periods). (ii) Upon any distribution of all or any of the assets of the Issuer to creditors of the Issuer upon the dissolution, winding up, liquidation, arrangement, reorganization or composition of the Issuer, whether in any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Issuer or otherwise, any payment or distribution of any kind (whether in cash, property or securities) which otherwise would be payable or deliverable upon or with respect to the Subordinated Indebtedness but for the provisions of this Agreement, including, without limitation, any such payment or distribution that may be payable or deliverable by reason of the payment of any other indebtedness of the Issuer being subordinated to the payment of the Subordinated Indebtedness shall be paid or delivered directly to the Collateral Agent for application (in the case of cash) to or as Collateral (in the case of non-cash property or securities) for the payment or prepayment of the Senior Indebtedness until the Senior Indebtedness has been paid or otherwise satisfied in full in cash. (iii) Each of the Secured Parties may demand specific performance of these terms of subordination, whether or not the Issuer shall have complied with any of the provisions hereof applicable to them at any time when the Subordinated Lender shall have failed to comply with any of such provisions applicable to it. The Subordinated Lender hereby irrevocably waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance. (iv) So long as any of the Senior Indebtedness shall remain unpaid or otherwise unsatisfied, the Subordinated Lender shall not commence or join with any creditor other than the Collateral Agent in commencing any proceeding referred to in subsection (ii) above for the payment of any amounts which otherwise would be payable or deliverable upon or with respect to the Subordinated Indebtedness. (v) Subject to the indefeasible payment or satisfaction in full in cash of all of the Senior Indebtedness, the Subordinated Lender shall be subrogated to the rights of the Secured Parties to receive payments or distributions of assets of the Issuer made on the Senior Indebtedness until the Subordinated Indebtedness has been satisfied in full. (vi) In the event that, notwithstanding the foregoing provisions of this Section 2, the Subordinated Lender shall have received, before all Senior Indebtedness is paid in full in cash or payment thereof is otherwise provided for, any such payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or Exhibit I-2 177 securities, including any such payment or distribution arising out of the exercise by the Subordinated Lender of a right of set-off or counterclaim and any such payment or distribution received by reason of any other indebtedness of the Issuer being subordinated to the Subordinated Indebtedness, then, and in such event, such payment or distribution shall be held in trust for the benefit of the Secured Parties, and shall be immediately paid over to the Collateral Agent, to the extent necessary to make payment in full in cash of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the Secured Parties. The foregoing provisions regarding subordination are for the benefit of the Secured Parties and shall be enforceable by them directly against the Subordinated Lender, and no Secured Party shall be prejudiced in its right to enforce subordination of any of the Subordinated Indebtedness by any act or failure to act by the Issuer or anyone in custody of its assets or property. Notwithstanding anything to the contrary contained in the foregoing provisions, the Subordinated Lender may receive and retain payments in respect of the Subordinated Indebtedness from the Issuer to the extent that such payments are permitted by the Indenture. (b) So long as any Senior Indebtedness remains outstanding, the following provisions shall apply: (i) If an Event of Default shall have occurred and be continuing, the Collateral Agent, on behalf of the Secured Parties, shall be permitted to take any and all actions to exercise any and all rights, remedies and options which it may have under the other Security Documents. (ii) The Subordinated Lender shall not, without the prior written consent of the Secured Parties, (x) exercise any rights or enforce any remedies or assert any claim with respect to the Collateral, (y) seek to foreclose any Lien or sell the Collateral, or (z) take any action, directly or indirectly, or institute any proceedings, directly or indirectly, with respect to any of the foregoing. (iii) The Subordinated Lender hereby waives: (x) notice of the existence, creation or non-payment of all or any of the Senior Indebtedness and (y) to the fullest extent permitted by law, any right it may have to require the Collateral Agent to marshall assets. (c) The Secured Parties may, at any time and from time to time, without any consent of or notice to the Subordinated Lender and without impairing or releasing the obligations of the Subordinated Lender: (I) amend, modify, extend, renew, waive or consent to in any manner, any provision of any agreement under which any of the Senior Indebted- Exhibit I-3 178 ness is outstanding in accordance with the terms thereof; (ii) sell, exchange, release, not perfect and otherwise deal with any property at any time pledged, assigned or mortgaged to secure the Senior Indebtedness in accordance with the Security Documents; (iii) release anyone liable in any manner under or in respect of the Senior Indebtedness; (iv) exercise or refrain from exercising any rights against the Issuer and others; and (v) apply any sums from time to time received to payment or satisfaction of the Senior Indebtedness. (d) After the payment in full of all amounts due in respect of the Senior Indebtedness, the holder or holders of the Subordinated Indebtedness shall be subrogated to the rights of the holders of the Senior Indebtedness to receive payments or distributions of cash, property or securities of the Issuer applicable to the Senior Indebtedness until the principal of, premium, if any, interest on and all other amounts due or to become due with respect to the Subordinated Indebtedness shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the holder or holders of the Subordinated Indebtedness would be entitled but for the provisions hereof, and no payment over pursuant to these provisions to the holders of the Senior Indebtedness by any holder of the Subordinated Indebtedness shall, as among the Issuer, its creditors other than holders of the Senior Indebtedness and the holder or holders of the Subordinated Indebtedness, be deemed to be a payment by the Issuer to or on account of the Senior Indebtedness. No payment or distributions to the holders of the Senior Indebtedness which such holder or holders of the Subordinated Indebtedness shall be entitled to receive pursuant to such subrogation shall, as among the Issuer, its creditors other than holders of the Senior Indebtedness and the holder or holders of the Subordinated Indebtedness be deemed to be a payment by the Issuer or on account of the Subordinated Indebtedness. Nothing contained in this instrument is intended to or shall impair as among the Issuer, its creditors other than the holders of the Senior Indebtedness, and the holders of the Subordinated Indebtedness, the obligation of the Issuer, which is absolute and unconditional, to pay to the holders of the Subordinated Indebtedness as and when the same shall become due and payable in accordance with its terms, or to affect the relative rights of the holders of the Subordinated Indebtedness and creditors of the Issuer other than the holders of the Senior Indebtedness. Section 3. The Subordinated Lender agrees not to take any action in respect of or to enforce any right of subrogation arising as a result of the Subordinated Lender paying over amounts to the holders of the Senior Indebtedness as provided herein, prior to payment in full in cash of the Senior Indebtedness. Section 4. The Subordinated Lender agrees that, if it shall fail to file claims or proofs of claim with respect to the Subordinated Indebtedness at least thirty (30) days prior to Exhibit I-4 179 the expiration of the period in which such claims or proofs of claim shall be required to be filed, the holders of the Senior Indebtedness are authorized to file such claims or proofs of claim on behalf of the Subordinated Lender as its attorney-in-fact. Exhibit I-5 EX-4.4 14 y57012ex4-4.txt FORM OF CERTIFICATE 1 Exhibit 4.4 [FORM OF GLOBAL BOND FOR 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016] NRG SOUTH CENTRAL GENERATING LLC 8.962% Senior Secured Series A-1 Bonds Due 2016 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL BOND SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL BOND SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE. CUSIP Number: [____________] ISIN Number: [____________] Principal Amount: $ Maturity Date: March 15, 2016 Issue Date: [__________], 2000 Interest Rate: 8.962% Registered Holder: Cede & Co.
NRG SOUTH CENTRAL GENERATING LLC, a Delaware limited liability company (the "the Issuer"), which term includes any successor or assign under the Indenture referred to below), for value received hereby promises to pay to Cede & Co., or its registered assigns, on each date (each a "Payment Date") the principal sum corresponding to such Payment Date set forth on Schedule I of the Indenture, or on such earlier date as the entire principal hereof may become due in accordance with the provisions of the Indenture, and to pay interest in arrears on 2 each March 15 and September 15 (each an "Interest Payment Date"), commencing September 15, 2000, on said principal sum at the rate of 8.962% per annum. Interest shall accrue from and including the most recent date to which interest has been paid or duly provided for, from March 30, 2000 until payment of said principal sum has been made or duly provided for. The interest payable on any such Interest Payment Date will, subject to certain conditions set forth herein, be paid to the person in whose name this Bond is registered at the end of the fifteenth day next preceding each Interest Payment Date. Such payments shall be made exclusively in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. The statements in the legend set forth above, if any, are an integral part of the terms of this Bond and by acceptance hereof the holder of this Bond agrees to be subject to and bound by the terms and provisions set forth in such legend, if any. REFERENCE IS MADE TO THE FURTHER PROVISIONS SET FORTH UNDER THE TERMS AND CONDITIONS OF THE BONDS ENDORSED ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. Unless the certificate of authentication hereon has been executed by the Bond Trustee referred to on the reverse hereof by manual signature, this Bond shall not be entitled to any benefit under the Indenture or be valid for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed. Dated: [___________], 2000 NRG SOUTH CENTRAL GENERATING LLC By: ------------------------------------ Name: Title: This is one of the Bonds described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK as Bond Trustee By: ------------------------------------ Authorized Signatory 2 3 TERMS AND CONDITIONS OF BONDS Principal Amount: $ Interest Rate: 8.962% Payment Dates: March 15 and September 15 (commencing September 15, 2000) Minimum Denominations: US$100,000 and integral multiples of $1,000 in excess thereof. Other Terms:
1. General. This Bond is one of a duly authorized issue of debt securities (the "Bonds") of NRG SOUTH CENTRAL GENERATING LLC (the "the Issuer") issued pursuant to an Indenture (the "Indenture") dated as of March 30, 2000, between the Issuer and THE CHASE MANHATTAN BANK, as Bond Trustee. All capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in Appendix A of the Indenture. The Holders of the Bonds will be entitled to the benefits of, be bound by and be deemed to have notice of, all of the provisions of the Indenture. A copy of the Indenture is on file and may be inspected at the Corporate Trust Office of the Bond Trustee in The City of New York, at the offices of the paying agents listed at the foot of this Bond and at the principal office of the Issuer set forth in Section 18 hereto. 2. Payments and Paying Agencies. (a) All payments on this Bond shall be made exclusively in immediately available funds and in such coin or currency of the United States of America which, at the time of payment, is legal tender for the payment of public and private debts. (b) The Person in whose name any Bond is registered at the close of business on any Regular Record Date immediately preceding any Payment Date shall be entitled to receive the principal, premium (if any) and/or interest payable on such Payment Date notwithstanding the cancellation of such Bond upon any transfer or exchange thereof subsequent to such Regular Record Date and prior to such Payment Date; provided, however, that if and to the extent there is a default in the payment of the principal, premium (if any) and/or interest due with respect to any Bond on such Payment Date, such defaulted principal, premium (if any) and/or interest shall be paid to the Holder in whose names Outstanding Bonds are registered at the close of business on a subsequent date (each such date, a "Special Record Date") determined by the Bond Trustee as provided in Section 2.4 of the Indenture. (c) If any date for the payment of principal of, premium (if any) or interest on the Bond is not a Business Day, such payment shall be due on the first Business Day thereafter. Any payment made on such next succeeding Business Day shall have the same force and effect as if made on the date on which such payment is due, and no interest shall accrue for the period after such date. 3 4 (d) Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. 3. Amendments and Supplements to Indenture. (a) Without Consent of Holders. Subject to the Intercreditor Agreement, the Indenture may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time, without the consent of the Holders by a Supplemental Indenture authorized by a resolution of the Management Committee of the Issuer filed with, and in form satisfactory to, the Bond Trustee, solely for one or more of the following purposes: (i) to add additional covenants of the Issuer or any of the other obligors on the Bonds, to surrender any right or power herein conferred upon the Issuer or any of the other obligors on the Bonds or to confer upon the Holders any additional rights, remedies, benefits, powers or authorities that may lawfully be conferred; (ii) to increase the assets securing the Issuer's obligations under the Indenture; (iii) to provide for the issuance of Additional Bonds on the conditions set forth in Section 2.3 of the Indenture; (iv) for any purpose not inconsistent with the terms of the Indenture to cure any ambiguity or to correct or supplement any provision contained herein or in any Supplemental Indenture which may be defective or inconsistent with any other provision contained herein or in any Supplemental Indenture; (v) in connection with, and to reflect, any amendments to the provisions hereof required by the Rating Agencies in circumstances where confirmation of the Ratings are required under the Indenture in connection with the issuance of Additional Bonds or the taking of other actions by the Issuer; provided, however, that such amendments are not, in the judgment of the Bond Trustee, to the prejudice of the Bond Trustee or the Holders; (vi) to provide for the issuance of Exchange Bonds and Private Exchange Bonds, as contemplated by the Registration Rights Agreement or similar exchange bonds in respect of Additional Bonds; (vii) to evidence the succession of another Person to the Issuer or any other obligor on the Bonds as permitted by the terms of the Finance Documents, and the assumption by any such successor of the covenants of the Issuer or such obligor contained herein and in the Bonds; (viii) to evidence and provide for the acceptance of appointment of a successor Bond Trustee under the Indenture; 4 5 (ix) to mortgage, pledge, hypothecate or grant a security interest in favor of the Bond Trustee for the benefit of the Holders as additional security for the payment and performance of the Issuer's obligations under the Indenture; or (x) to comply with any requirements of the Commission or the Trust Indenture Act in order to effect and maintain the qualification of the Indenture under the Trust Indenture Act. (b) With Consent of Holders. Subject to the Intercreditor Agreement, the Indenture may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time, with the consent of the Majority Holders, for the purpose of adding any mutually agreeable provisions to or changing in any manner or eliminating any of the provisions of, the Indenture, except with respect to (a) the principal, premium (if any) or interest payable upon any Bonds, (b) the dates on which interest on or principal of any Bonds is paid, (c) the dates of maturity of any Bonds and (d) Article 8 of the Indenture. Subject to the Intercreditor Agreement, the matters of the Indenture described in clauses (a) through (d) of the preceding sentence may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time only with the consent of the One Hundred Percent Holders. Notice of any such amendment shall be given by the Issuer to any Rating Agency then maintaining a Rating for the Bonds. 4. Mutilated, Lost, Destroyed or Stolen Bonds. (a) If any Bond shall become mutilated, the Issuer shall execute, and the Bond Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to the Bond Trustee of such mutilated Bond for cancellation, and the Issuer or the Bond Trustee may require reasonable indemnity therefor. If any Bond shall be reported lost, stolen or destroyed, evidence as to the ownership and the loss, theft or destruction thereof shall be submitted to the Bond Trustee. If such evidence shall be satisfactory to both the Bond Trustee and the Issuer and indemnity satisfactory to both shall be given, the Issuer shall execute, and thereupon the Bond Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and denomination. The cost of providing any substitute Bond under the provisions of Section 2.10 of the Indenture shall be borne by the Holder for whose benefit such substitute Bond is provided. If any such mutilated, lost, stolen or destroyed Bond shall have matured or be about to mature, the Issuer may, with the consent of the Bond Trustee, pay to the Holder thereof the principal amount of such Bond upon the maturity thereof and compliance with the aforesaid conditions by such Holder, without the issuance of a substitute Bond therefor, and likewise pay to the Holder the amount of the unpaid interest, if any, which would have been paid on a substitute Bond had one been issued. (b) Every substitute Bond issued pursuant to Section 2.10 of the Indenture shall constitute an additional contractual obligation of the Issuer, whether or not the Bond alleged to have been mutilated, destroyed, lost or stolen shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionally with any and all other Bonds duly issued hereunder. 5 6 (c) All Bonds shall be held and owned upon the express condition that the foregoing provisions are, to the extent permitted by Applicable Law, exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other rights and remedies with respect thereto. 5. Bond Trustee. For a description of the duties and the immunities and rights of the Bond Trustee under the Indenture, reference is made to the Indenture, and the obligations of the Bond Trustee to the Holder hereof are subject to such immunities and rights. 6. Paying Agents; Authenticating Agents; Registrars. The Issuer has initially appointed the Bond Trustee as Paying Agent, Authenticating Agent and Registrar. The Issuer may, subject to the terms of the Indenture, at any time appoint additional or other paying agents, authenticating agents and registrars and terminate the appointment thereof, provided, that while the Bonds are Outstanding, the Issuer will maintain offices or agencies for payment of principal of and interest on this Bond as herein provided in the Borough of Manhattan, The City of New York. Notice of any such termination or appointment and of any change in the office through which any paying agent, authenticating agent or registrar will act will be promptly given in the manner described in Section 8 hereof. 7. Enforcement. (a) Subject to the Intercreditor Agreement and the other provisions of Article 5 of the Indenture, a Holder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise for the appointment of a receiver or for the enforcement of any other remedy under or upon this Indenture, unless: (i) such Holder shall have previously given written notice to the Bond Trustee of a continuing Event of Default; (ii) Holders representing the percentage of aggregate principal amount of Outstanding Bonds needed to initiate the exercise of remedies shall have requested the Bond Trustee in writing to institute such suit, action or proceeding; (iii) the Bond Trustee shall have refused or neglected to institute any such suit, action or proceeding for sixty (60) days after receipt of such notice by the Bond Trustee; and (iv) no direction inconsistent with such written request has been given to the Bond Trustee during such sixty (60) day period by the Majority Holders. (b) Subject to the Intercreditor Agreement, it is understood and intended that one or more of the Holders shall not have any right in any manner whatsoever hereunder or under the Bonds to (i) surrender, impair, waive, affect, disturb or prejudice the Lien of the Security Documents on any property subject thereto or the rights of any other Holders, (ii) obtain or seek to obtain priority or preference over any other Holders or (iii) enforce any right under the Indenture, except in the manner provided herein or in the Indenture and for the equal, ratable and common benefit of all of the Holders. 8. Notices. Notices will be mailed to Holders at their registered addresses. Notice sent by first class mail, postage prepaid, shall be deemed to have been given on the date 6 7 of such mailing. In addition, the Issuer will cause all such other publications of such notices as may be required from time to time by Applicable Law. 9. Redemption at the Option of the Issuer. The Bonds are, under certain conditions, subject to redemption at the option of the Issuer as set forth in Section 3.1 of the Indenture. 10. Redemption at the Option of the Holders. The Bonds are, under certain conditions, subject to redemption at the option of the Holders as set forth in Section 3.1 of the Indenture. 11. Mandatory Redemption. The Bonds are subject to mandatory redemption under certain circumstances as set forth in Section 3.2 of the Indenture. 12. Authentication. This Bond shall not be valid for any purpose until an Authorized Representative of the Bond Trustee manually signs the certificate of authentication hereon substantially in the form set forth at the end of the form of the Bond attached to the Indenture as Exhibit A. 13. Governing Law. This Bond is a contract made under the laws of the State of New York of the United States and shall for all purposes be governed by and construed in accordance with the laws of such State without regard to the conflict of law rules thereof (other than Section 5-1401 of the New York General Obligations Law). 14. Warranty by the Issuer. Subject to Section 1.2, the Issuer hereby certifies and warrants that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Bond, and to constitute the same a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms, have been done and performed and have happened in due and strict compliance with all Applicable Laws. 15. Bond Trustee Dealings with the Issuer. Subject to certain limitations imposed by the Act, the Bond Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Bonds and may otherwise deal with and collect obligations owed to it by the Issuer or its Affiliates and may otherwise deal with the Issuer or its Affiliates with the same rights it would have it if were not Bond Trustee. 16. No Recourse Against Others. A director, officer, employee, partner, affiliate, agent, servant or shareholder, as such, of the Issuer or the Bond Trustee shall not have any liability for any obligations of the Issuer under the Bonds or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. The Bonds shall be payable from, and recourse solely to, the Guarantees and the Collateral. By accepting a Bond, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Bonds. 17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Bonds and has directed the Bond Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such 7 8 numbers either as printed on the Bonds or as contained in any notice of redemption and reliance may be placed only on the other identification number placed thereon. The Issuer will promptly notify the Bond Trustee of any change in the CUSIP numbers. 18. Indentures. The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: NRG SOUTH CENTRAL GENERATING LLC at 901 Marquette Avenue, Suite 2300, Minneapolis, Minnesota 55402-3265, Attention: General Counsel, Telecopier No.: (612) 373-5392. 19. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (Tenants in Common), TEN ENT (Tenants by the Entireties), JT TEN (Joint Tenants with Rights of Survivorship and not as Tenants in Common), CUST (Custodian), and U/G/M/A (Uniform Gift to Minors Act). 20. Descriptive Headings. The descriptive headings appearing in these Terms and Conditions are for convenience of reference only and shall not alter, limit or define the provisions thereof. 8 EX-4.5 15 y57012ex4-5.txt FORM OF CERTIFICATE 1 Exhibit 4.5 [FORM OF GLOBAL BOND FOR 9.479% SERIES B-1 SENIOR SECURED BOND DUE 2024] NRG SOUTH CENTRAL GENERATING LLC 9.479% Senior Secured Series B-1 Bonds Due 2024 UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER REPRESENTATIVE OF DTC AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL BOND SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL BOND SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE. CUSIP Number: [____________] ISIN Number: [____________] Principal Amount: $ Maturity Date: September 15, 2024 Issue Date: [__________], 2000 Interest Rate: 9.479% Registered Holder: Cede & Co.
NRG SOUTH CENTRAL GENERATING LLC, a Delaware limited liability company (the "the Issuer"), which term includes any successor or assign under the Indenture referred to below), for value received hereby promises to pay to Cede & Co., or its registered assigns, on each date (each a "Payment Date") the principal sum corresponding to such Payment Date set forth on Schedule I of the Indenture, or on such earlier date as the entire principal hereof may become due in accordance with the provisions of the Indenture, and to pay interest in arrears on each March 15 and September 15 (each an "Interest Payment Date"), commencing September 15, 2000, on said principal sum at the rate of 9.479% per annum. Interest shall accrue from and 2 including the most recent date to which interest has been paid or duly provided for, from September 15th, 2000 until payment of said principal sum has been made or duly provided for. The interest payable on any such Interest Payment Date will, subject to certain conditions set forth herein, be paid to the person in whose name this Bond is registered at the end of the fifteenth day next preceding each Interest Payment Date. Such payments shall be made exclusively in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. The statements in the legend set forth above, if any, are an integral part of the terms of this Bond and by acceptance hereof the holder of this Bond agrees to be subject to and bound by the terms and provisions set forth in such legend, if any. REFERENCE IS MADE TO THE FURTHER PROVISIONS SET FORTH UNDER THE TERMS AND CONDITIONS OF THE BONDS ENDORSED ON THE REVERSE HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE. Unless the certificate of authentication hereon has been executed by the Bond Trustee referred to on the reverse hereof by manual signature, this Bond shall not be entitled to any benefit under the Indenture or be valid for any purpose. IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed. Dated: ___________, 2000 NRG SOUTH CENTRAL GENERATING LLC By: ------------------------------------- Name: Title: This is one of the Bonds described in the within-mentioned Indenture. THE CHASE MANHATTAN BANK as Bond Trustee By: ------------------------------------- Authorized Signatory 2 3 TERMS AND CONDITIONS OF BONDS Principal Amount: $ Interest Rate: 9.479% Payment Dates: March 15 and September 15 (commencing September 15, 2000) Minimum Denominations: US$100,000 and integral multiples of $1,000 in excess thereof. Other Terms:
1. General. This Bond is one of a duly authorized issue of debt securities (the "Bonds") of NRG SOUTH CENTRAL GENERATING LLC (the "the Issuer") issued pursuant to an Indenture (the "Indenture") dated as of March 30, 2000, between the Issuer and THE CHASE MANHATTAN BANK, as Bond Trustee. All capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in Appendix A of the Indenture. The Holders of the Bonds will be entitled to the benefits of, be bound by and be deemed to have notice of, all of the provisions of the Indenture. A copy of the Indenture is on file and may be inspected at the Corporate Trust Office of the Bond Trustee in The City of New York, at the offices of the paying agents listed at the foot of this Bond and at the principal office of the Issuer set forth in Section 18 hereto. 2. Payments and Paying Agencies. (a) All payments on this Bond shall be made exclusively in immediately available funds and in such coin or currency of the United States of America which, at the time of payment, is legal tender for the payment of public and private debts. (b) The Person in whose name any Bond is registered at the close of business on any Regular Record Date immediately preceding any Payment Date shall be entitled to receive the principal, premium (if any) and/or interest payable on such Payment Date notwithstanding the cancellation of such Bond upon any transfer or exchange thereof subsequent to such Regular Record Date and prior to such Payment Date; provided, however, that if and to the extent there is a default in the payment of the principal, premium (if any) and/or interest due with respect to any Bond on such Payment Date, such defaulted principal, premium (if any) and/or interest shall be paid to the Holder in whose names Outstanding Bonds are registered at the close of business on a subsequent date (each such date, a "Special Record Date") determined by the Bond Trustee as provided in Section 2.4 of the Indenture. (c) If any date for the payment of principal of, premium (if any) or interest on the Bond is not a Business Day, such payment shall be due on the first Business Day thereafter. Any payment made on such next succeeding Business Day shall have the same force and effect as if made on the date on which such payment is due, and no interest shall accrue for the period after such date. 3 4 (d) Interest shall be calculated on the basis of a 360-day year of twelve 30-day months. 3. Amendments and Supplements to Indenture. (a) Without Consent of Holders. Subject to the Intercreditor Agreement, the Indenture may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time, without the consent of the Holders by a Supplemental Indenture authorized by a resolution of the Management Committee of the Issuer filed with, and in form satisfactory to, the Bond Trustee, solely for one or more of the following purposes: (i) to add additional covenants of the Issuer or any of the other obligors on the Bonds, to surrender any right or power herein conferred upon the Issuer or any of the other obligors on the Bonds or to confer upon the Holders any additional rights, remedies, benefits, powers or authorities that may lawfully be conferred; (ii) to increase the assets securing the Issuer's obligations under the Indenture; (iii) to provide for the issuance of Additional Bonds on the conditions set forth in Section 2.3 of the Indenture; (iv) for any purpose not inconsistent with the terms of the Indenture to cure any ambiguity or to correct or supplement any provision contained herein or in any Supplemental Indenture which may be defective or inconsistent with any other provision contained herein or in any Supplemental Indenture; (v) in connection with, and to reflect, any amendments to the provisions hereof required by the Rating Agencies in circumstances where confirmation of the Ratings are required under the Indenture in connection with the issuance of Additional Bonds or the taking of other actions by the Issuer; provided, however, that such amendments are not, in the judgment of the Bond Trustee, to the prejudice of the Bond Trustee or the Holders; (vi) to provide for the issuance of Exchange Bonds and Private Exchange Bonds, as contemplated by the Registration Rights Agreement or similar exchange bonds in respect of Additional Bonds; (vii) to evidence the succession of another Person to the Issuer or any other obligor on the Bonds as permitted by the terms of the Finance Documents, and the assumption by any such successor of the covenants of the Issuer or such obligor contained herein and in the Bonds; (viii) to evidence and provide for the acceptance of appointment of a successor Bond Trustee under the Indenture; 4 5 (ix) to mortgage, pledge, hypothecate or grant a security interest in favor of the Bond Trustee for the benefit of the Holders as additional security for the payment and performance of the Issuer's obligations under the Indenture; or (x) to comply with any requirements of the Commission or the Trust Indenture Act in order to effect and maintain the qualification of the Indenture under the Trust Indenture Act. (b) With Consent of Holders. Subject to the Intercreditor Agreement, the Indenture may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time, with the consent of the Majority Holders, for the purpose of adding any mutually agreeable provisions to or changing in any manner or eliminating any of the provisions of, the Indenture, except with respect to (a) the principal, premium (if any) or interest payable upon any Bonds, (b) the dates on which interest on or principal of any Bonds is paid, (c) the dates of maturity of any Bonds and (d) Article 8 of the Indenture. Subject to the Intercreditor Agreement, the matters of the Indenture described in clauses (a) through (d) of the preceding sentence may be amended or supplemented by the Issuer and the Bond Trustee at any time and from time to time only with the consent of the One Hundred Percent Holders. Notice of any such amendment shall be given by the Issuer to any Rating Agency then maintaining a Rating for the Bonds. 4. Mutilated, Lost, Destroyed or Stolen Bonds. (a) If any Bond shall become mutilated, the Issuer shall execute, and the Bond Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and denomination in exchange and substitution for the Bond so mutilated, but only upon surrender to the Bond Trustee of such mutilated Bond for cancellation, and the Issuer or the Bond Trustee may require reasonable indemnity therefor. If any Bond shall be reported lost, stolen or destroyed, evidence as to the ownership and the loss, theft or destruction thereof shall be submitted to the Bond Trustee. If such evidence shall be satisfactory to both the Bond Trustee and the Issuer and indemnity satisfactory to both shall be given, the Issuer shall execute, and thereupon the Bond Trustee shall authenticate and deliver, a new Bond of like tenor, maturity and denomination. The cost of providing any substitute Bond under the provisions of Section 2.10 of the Indenture shall be borne by the Holder for whose benefit such substitute Bond is provided. If any such mutilated, lost, stolen or destroyed Bond shall have matured or be about to mature, the Issuer may, with the consent of the Bond Trustee, pay to the Holder thereof the principal amount of such Bond upon the maturity thereof and compliance with the aforesaid conditions by such Holder, without the issuance of a substitute Bond therefor, and likewise pay to the Holder the amount of the unpaid interest, if any, which would have been paid on a substitute Bond had one been issued. (b) Every substitute Bond issued pursuant to Section 2.10 of the Indenture shall constitute an additional contractual obligation of the Issuer, whether or not the Bond alleged to have been mutilated, destroyed, lost or stolen shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionally with any and all other Bonds duly issued hereunder. 5 6 (c) All Bonds shall be held and owned upon the express condition that the foregoing provisions are, to the extent permitted by Applicable Law, exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other rights and remedies with respect thereto. 5. Bond Trustee. For a description of the duties and the immunities and rights of the Bond Trustee under the Indenture, reference is made to the Indenture, and the obligations of the Bond Trustee to the Holder hereof are subject to such immunities and rights. 6. Paying Agents; Authenticating Agents; Registrars. The Issuer has initially appointed the Bond Trustee as Paying Agent, Authenticating Agent and Registrar. The Issuer may, subject to the terms of the Indenture, at any time appoint additional or other paying agents, authenticating agents and registrars and terminate the appointment thereof, provided, that while the Bonds are Outstanding, the Issuer will maintain offices or agencies for payment of principal of and interest on this Bond as herein provided in the Borough of Manhattan, The City of New York. Notice of any such termination or appointment and of any change in the office through which any paying agent, authenticating agent or registrar will act will be promptly given in the manner described in Section 8 hereof. 7. Enforcement. (a) Subject to the Intercreditor Agreement and the other provisions of Article 5 of the Indenture, a Holder shall not have the right to institute any suit, action or proceeding at law or in equity or otherwise for the appointment of a receiver or for the enforcement of any other remedy under or upon this Indenture, unless: (i) such Holder shall have previously given written notice to the Bond Trustee of a continuing Event of Default; (ii) Holders representing the percentage of aggregate principal amount of Outstanding Bonds needed to initiate the exercise of remedies shall have requested the Bond Trustee in writing to institute such suit, action or proceeding; (iii) the Bond Trustee shall have refused or neglected to institute any such suit, action or proceeding for sixty (60) days after receipt of such notice by the Bond Trustee; and (iv) no direction inconsistent with such written request has been given to the Bond Trustee during such sixty (60) day period by the Majority Holders. (b) Subject to the Intercreditor Agreement, it is understood and intended that one or more of the Holders shall not have any right in any manner whatsoever hereunder or under the Bonds to (i) surrender, impair, waive, affect, disturb or prejudice the Lien of the Security Documents on any property subject thereto or the rights of any other Holders, (ii) obtain or seek to obtain priority or preference over any other Holders or (iii) enforce any right under the Indenture, except in the manner provided herein or in the Indenture and for the equal, ratable and common benefit of all of the Holders. 8. Notices. Notices will be mailed to Holders at their registered addresses. Notice sent by first class mail, postage prepaid, shall be deemed to have been given on the date 6 7 of such mailing. In addition, the Issuer will cause all such other publications of such notices as may be required from time to time by Applicable Law. 9. Redemption at the Option of the Issuer. The Bonds are, under certain conditions, subject to redemption at the option of the Issuer as set forth in Section 3.1 of the Indenture. 10. Redemption at the Option of the Holders. The Bonds are, under certain conditions, subject to redemption at the option of the Holders as set forth in Section 3.1 of the Indenture. 11. Mandatory Redemption. The Bonds are subject to mandatory redemption under certain circumstances as set forth in Section 3.2 of the Indenture. 12. Authentication. This Bond shall not be valid for any purpose until an Authorized Representative of the Bond Trustee manually signs the certificate of authentication hereon substantially in the form set forth at the end of the form of the Bond attached to the Indenture as Exhibit A. 13. Governing Law. This Bond is a contract made under the laws of the State of New York of the United States and shall for all purposes be governed by and construed in accordance with the laws of such State without regard to the conflict of law rules thereof (other than Section 5-1401 of the New York General Obligations Law). 14. Warranty by the Issuer. Subject to Section 1.2, the Issuer hereby certifies and warrants that all acts, conditions and things required to be done and performed and to have happened precedent to the creation and issuance of this Bond, and to constitute the same a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms, have been done and performed and have happened in due and strict compliance with all Applicable Laws. 15. Bond Trustee Dealings with the Issuer. Subject to certain limitations imposed by the Act, the Bond Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Bonds and may otherwise deal with and collect obligations owed to it by the Issuer or its Affiliates and may otherwise deal with the Issuer or its Affiliates with the same rights it would have it if were not Bond Trustee. 16. No Recourse Against Others. A director, officer, employee, partner, affiliate, agent, servant or shareholder, as such, of the Issuer or the Bond Trustee shall not have any liability for any obligations of the Issuer under the Bonds or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. The Bonds shall be payable from, and recourse solely to, the Guarantees and the Collateral. By accepting a Bond, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Bonds. 17. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Bonds and has directed the Bond Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such 7 8 numbers either as printed on the Bonds or as contained in any notice of redemption and reliance may be placed only on the other identification number placed thereon. The Issuer will promptly notify the Bond Trustee of any change in the CUSIP numbers. 18. Indentures. The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: NRG SOUTH CENTRAL GENERATING LLC at 901 Marquette Avenue, Suite 2300, Minneapolis, Minnesota 55402-3265, Attention: General Counsel, Telecopier No.: (612) 373-5392. 19. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (Tenants in Common), TEN ENT (Tenants by the Entireties), JT TEN (Joint Tenants with Rights of Survivorship and not as Tenants in Common), CUST (Custodian), and U/G/M/A (Uniform Gift to Minors Act). 20. Descriptive Headings. The descriptive headings appearing in these Terms and Conditions are for convenience of reference only and shall not alter, limit or define the provisions thereof. 8 EX-4.6 16 y57012ex4-6.txt EXCHANGE AND REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 4.6 NRG SOUTH CENTRAL GENERATING LLC and LOUISIANA GENERATING LLC $500,000,000 8.962% Series A Senior Secured Bonds due 2016 $300,000,000 9.479% Series B Senior Secured Bonds due 2024 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT March 30, 2000 CHASE SECURITIES INC. LEHMAN BROTHERS INC. On behalf of the Initial Purchasers Named in Schedule 1 hereto Ladies and Gentlemen: NRG South Central Generating LLC, a Delaware limited liability company (the "Issuer"), proposes to issue and sell to the Initial Purchasers named in Schedule 1 hereto (the "Initial Purchasers"), upon the terms and subject to the conditions set forth in a purchase agreement dated March 30, 2000 (the "Purchase Agreement"), between the Issuer, the Subsidiary Guarantor and the Initial Purchasers, $500,000,000 aggregate principal amount of its 8.962% Series A Senior Secured Bonds due 2016 and $300,000,000 aggregate principal amount of its 9.479% Series B Senior Secured Bonds due 2024 (the "Bonds"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement. As an inducement to the Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to the obligations of the Initial Purchasers thereunder, the Issuer and the Subsidiary Guarantor (together with the Issuer, the "Registrants") agrees with the Initial Purchasers, for the benefit of the holders (including the Initial Purchasers) of the Bonds, the Exchange Bonds (as defined herein) and the Private Exchange Bonds (as defined herein) (collectively, the "Holders"), as follows: 1. Registered Exchange Offer. The Registrants shall use their reasonable best efforts to (i) prepare and file with the Commission a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act with respect to a proposed offer to the Holders of the Bonds (the "Registered Exchange Offer") to issue 2 and deliver to such Holders, in exchange for the Bonds, a like aggregate principal amount of debt securities of the Issuer guaranteed by the Subsidiary Guarantor (the "Exchange Bonds") that are identical in all material respects to the Bonds, except for the transfer restrictions relating to the Bonds and the rights relating to this Agreement, (ii) use their reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Securities Act no later than 270 days following the date of original issuance of the Bonds (the "Issue Date") and (iii) unless the Exchange Offer would not be permitted by applicable law, or the applicable interpretations of the Commission's staff, keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). The Exchange Bonds will be issued under the Indenture or an indenture (the "Exchange Bonds Indenture") between the Registrants and the Bond Trustee or such other bank or trust company that is reasonably satisfactory to the Initial Purchasers, as trustee (the "Exchange Bonds Trustee"). Upon the effectiveness of the Exchange Offer Registration Statement, the Registrants shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Bonds for Exchange Bonds (assuming that such Holder (a) is not an affiliate (as defined in Section 10(e) below) of any of the Registrants or of an Exchanging Dealer (as defined herein) not complying with the requirements of the next sentence, (b) is not an Initial Purchaser holding Bonds that have, or that are reasonably likely to have, the status of an unsold allotment in an initial distribution, (c) acquires the Exchange Bonds in the ordinary course of such Holder's business and (d) has no arrangements or understandings with any person to participate in the distribution of the Exchange Bonds) and to trade such Exchange Bonds from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Registrants, the Initial Purchasers and each Exchanging Dealer acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, (i) each Holder that is a broker-dealer electing to exchange Bonds, acquired for its own account as a result of market-making activities or other trading activities, for Exchange Bonds (an "Exchanging Dealer"), is required to deliver a prospectus containing substantially the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Bonds received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) if any Initial Purchaser elects to sell the Exchange Bonds acquired in exchange for Bonds constituting any portion of an unsold allotment, it is required to deliver a prospectus containing the information required by Items 507 and/or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such a sale. 2 3 If, prior to the consummation of the Registered Exchange Offer, any Holder holds any Bonds acquired by it that have, or that are reasonably likely to be determined to have, the status of an unsold allotment in an initial distribution, or any Holder is not entitled to participate in the Registered Exchange Offer, the Issuer shall, upon the written request of any such Holder, simultaneously with the delivery of the Exchange Bonds in the Registered Exchange Offer, issue and deliver to any such Holder, in exchange for the Bonds held by such Holder (the "Private Exchange"), a like aggregate principal amount of debt securities of the Issuer guaranteed by the Subsidiary Guarantor (the "Private Exchange Bonds") that are identical in all material respects to the Exchange Bonds, except for the transfer restrictions relating to such Private Exchange Bonds. The Private Exchange Bonds will be issued under the same Indenture as the Exchange Bonds, and the Registrants shall use their reasonable best efforts to cause the Private Exchange Bonds to bear the same CUSIP number as the Exchange Bonds, upon resale of the Private Exchange Bonds pursuant to a registration statement declared by the Commission. In connection with the Registered Exchange Offer, the Registrants shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date on which notice of the Registered Exchange Offer is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York; (d) permit Holders to withdraw tendered Bonds at any time prior to the close of business, New York City time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply in all respects with all laws that are applicable to the Registered Exchange Offer. As soon as practicable after the close of the Registered Exchange Offer and any Private Exchange, as the case may be, the Registrants shall: (a) accept for exchange all Bonds properly tendered and not validly withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (b) deliver to the Bond Trustee for cancellation all Bonds so accepted for exchange; and (c) cause the Bond Trustee or the Exchange Bonds Trustee, as the case may be, promptly to authenticate and deliver to each Holder who has properly tendered, 3 4 Exchange Bonds or Private Exchange Bonds, as the case may be, equal in principal amount to the Bonds of such Holder so accepted for exchange. The Registrants shall use their reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein in order to permit such prospectus to be used by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Bonds; provided that (i) in the case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer, such period shall end on the earlier of 90 days from the date of the consummation of the Exchange Offer and the date on which all Exchanging Dealers have sold all Exchange Bonds held by them and (ii) the Registrants shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Bonds for a period of not less than 90 days after the consummation of the Registered Exchange Offer. The Indenture or the Exchange Bonds Indenture, as the case may be, shall provide that the Bonds, the Exchange Bonds and the Private Exchange Bonds shall vote and consent together on all matters as one class and that none of the Bonds, the Exchange Bonds or the Private Exchange Bonds will have the right to vote or consent as a separate class on any matter. Interest on each Exchange Bond and Private Exchange Bond issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Bonds surrendered in exchange therefor or, if no interest has been paid on the Bonds, from the Issue Date. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Issuer that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Bonds received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Bonds or the Exchange Bonds within the meaning of the Securities Act and (iii) such Holder is not an affiliate of the Registrants or, if it is such an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Notwithstanding any other provisions hereof, the Registrants will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not, as of the consummation of the Registered Exchange Offer, include an untrue statement of a material fact or omit to state a material fact necessary in order to make the 4 5 statements therein, in the light of the circumstances under which they were made, not misleading. 2. Shelf Registration. If (i) because of any change in law or applicable interpretations thereof by the Commission's staff the Registrants are not permitted to effect the Registered Exchange Offer as contemplated by Section 1 hereof, or (ii) any Bonds validly tendered pursuant to the Registered Exchange Offer are not exchanged for Exchange Bonds within 315 days after the Issue Date (unless the Exchange Offer is still in process), or (iii) any Initial Purchaser so requests with respect to Bonds or Private Exchange Bonds not eligible to be exchanged for Exchange Bonds in the Registered Exchange Offer and held by it following the consummation of the Registered Exchange Offer, or (iv) any applicable law or interpretations do not permit any Holder (other than an Initial Purchaser) to participate in the Registered Exchange Offer or (v) any Holder (other than an Initial Purchaser) that participates in the Registered Exchange Offer does not receive freely transferable Exchange Bonds in exchange for tendered Bonds, or (vi) the Issuer so elects, then the following provisions shall apply: (a) The Registrants shall use their reasonable best efforts to file as promptly as practicable with the Commission, and thereafter shall use their reasonable best efforts to cause to be declared effective, a shelf registration statement on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Bonds (as defined below) by the Holders thereof from time to time in accordance with the methods of distribution set forth in such registration statement (hereafter, a "Shelf Registration Statement" and, together with any Exchange Offer Registration Statement, a "Registration Statement"). (b) The Registrants shall use their reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus forming part thereof to be used by Holders of Transfer Restricted Bonds for a period ending on the earlier of (i) two years from the Issue Date or such shorter period that will terminate when all the Transfer Restricted Bonds covered by the Shelf Registration Statement have been sold pursuant thereto and (ii) the date on which the Bonds become eligible for resale without volume restrictions pursuant to Rule 144 under the Securities Act (in any such case, such period being called the "Shelf Registration Period"); provided that with respect to Exchange Bonds received by an Initial Purchaser in exchange for Bonds constituting any portion of an unsold allotment, the Issuer may, if permitted by current interpretations by the Commission's staff, file a post- 5 6 effective amendment to the Exchange Offer Registration Statement containing the information required by Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its obligations under this Section 2 with respect thereto, and any such Exchange Offer Registration Statement, as so amended shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. The Registrants shall be deemed not to have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if they voluntarily take any action that would result in Holders of Transfer Restricted Bonds covered thereby not being able to offer and sell such Transfer Restricted Bonds during that period, unless such action is (i) required by applicable law or (ii) such action is taken by the Issuer in good faith and for valid business reasons, including the acquisition or divestiture of assets. (c) Notwithstanding any other provisions hereof, the Registrants will ensure that (i) any Shelf Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations of the Commission thereunder, (ii) any Shelf Registration Statement and any amendment thereto (in either case, other than with respect to information included therein in reliance upon or in conformity with written information furnished to the Registrants by or on behalf of any Holder specifically for use therein (the "Holders' Information")) does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Shelf Registration Statement, and any supplement to such prospectus (in either case, other than with respect to Holders' Information), does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 3. Liquidated Damages. (a) The parties hereto agree that the Holders of Transfer Restricted Bonds will suffer damages if the Registrants fail to fulfill their obligations under Section 1 or Section 2, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) the Registered Exchange Offer is not consummated on or prior to 315 days (or if the 315th day is not a business day, the next business day following the 315th day) after the Issue Date or (ii) the Exchange Offer Registration Statement or the Shelf Registration 6 7 Statement, as the case may be, is not declared effective within 270 days (or, if the 270th day is not a business day, the next business day following the 270th day) after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of the Commission's staff, if later, within 45 days (or if the 45th day is not a business day, the next business day following the 45th day) after publication of the change in law or interpretation), (iii) the Shelf Registration Statement is filed and declared effective within 270 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of Commission's staff, if later, within 45 days after publication of the change in law or interpretation) but shall thereafter cease to be effective or usable (at any time that the Registrants are obligated to maintain the effectiveness thereof) without being succeeded within 45 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iii), a "Registration Default"), the Registrants will be obligated to pay liquidated damages to each Holder of Transfer Restricted Bonds, during the period of one or more such Registration Defaults, in the form of additional interest (in addition to the interest otherwise payable with respect to the Transfer Restricted Bonds) at a rate of one half of one percent (0.50%) per annum, which additional interest shall be payable by the Registrants to each Holder of Transfer Restricted Bonds at the time, in the manner and subject to the same terms and conditions set forth in the Indenture and the Bonds, until (i) the Exchange Offer Registration Statement is declared effective and/or the Registered Exchange Offer is consummated, (ii) the Shelf Registration Statement is declared effective or (iii) the Shelf Registration Statement again becomes effective, as the case may be. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. As used herein, the term "Transfer Restricted Bonds" means (i) each Bond until the date on which such Bond has been exchanged for a freely transferable Exchange Bond in the Registered Exchange Offer, (ii) each Bond or Private Exchange Bond until the date on which it has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) each Bond or Private Exchange Bond until the date on which it is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary in this Section 3(a), the Registrants shall not be required to pay liquidated damages to a Holder of Transfer Restricted Bonds if such Holder failed to comply with its obligations to make the representations set forth in the second to last paragraph of Section 1, failed to provide the information required to be provided by it, if any, pursuant to Section 4(n) or failed to properly tender Bonds for Exchange Bonds in the Exchange Offer. 7 8 (b) The Registrants shall notify the Bond Trustee and the Paying Agent under the Indenture immediately upon the happening of each and every Registration Default. The Registrants shall pay the liquidated damages due on the Transfer Restricted Bonds by depositing with the Paying Agent (which may not be the Issuer for these purposes), in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time, on the next interest payment date specified by the Indenture and the Bonds, sums sufficient to pay the liquidated damages then due. The liquidated damages due shall be payable on each interest payment date specified by the Indenture and the Bonds to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay liquidated damages shall be deemed to accrue from and including the date of the applicable Registration Default. (c) The parties hereto agree that the liquidated damages provided for in this Section 3 constitute a reasonable estimate of and are intended to constitute the sole damages that will be suffered by Holders of Transfer Restricted Bonds by reason of the failure of (i) the Shelf Registration Statement to become or remain effective or (ii) the Exchange Offer Registration Statement to be declared effective and/or the Registered Exchange Offer to be consummated, in each case to the extent required by this Agreement. 4. Registration Procedures. In connection with any Registration Statement, the following provisions shall apply: (a) The Registrants shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and shall use their reasonable best efforts to reflect in each such document, when so filed with the Commission, such comments as any Initial Purchaser may reasonably propose; (ii) include information substantially similar to that set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement, and include information substantially similar to that set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (iii) if requested by any Initial 8 9 Purchaser, include the information required by Items 507 or 508 of Regulation S-K, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement. (b) The Registrants shall advise each Initial Purchaser, each Exchanging Dealer which has identified itself to the Issuer and provided the Issuer a facsimile number or address for notices and the Holders (if applicable in the case of a Shelf Registration Statement) and, if requested by any such person, confirm such advice in writing (which, if after the effectiveness of the Registration Statement, advice pursuant to clauses (ii)(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when any Registration Statement and any amendment thereto has been filed with the Commission and when such Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to any Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the any of the Registrants of any notification with respect to the suspension of the qualification of the Bonds, the Exchange Bonds or the Private Exchange Bonds which are registered pursuant to such Registration Statement for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the making of any changes in any Registration Statement or the prospectus included therein in order that the statements therein, in the case of the prospectus, in light of the circumstances under which they were made, are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein, in the case of the prospectus, in light of the circumstances under which they were made, not misleading. 9 10 (c) Subject to the last sentence of Section 2(b), the Registrants will use its reasonable best efforts to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of any Registration Statement. (d) The Registrants will furnish to each Holder of Transfer Restricted Bonds included within the coverage of any Shelf Registration Statement, without charge, at least one conformed copy of such Shelf Registration Statement and any posteffective amendment thereto, including financial statements and schedules and, if any such Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Registrants will, during the Shelf Registration Period, promptly deliver to each Holder of Transfer Restricted Bonds included within the coverage of any Shelf Registration Statement, without charge, as many copies of the prospectus (including each preliminary prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Registrants consent to the use (in accordance with applicable law) of such prospectus or any amendment or supplement thereto by each of the selling Holders of Transfer Restricted Bonds in connection with the offer and sale of the Transfer Restricted Bonds covered by such prospectus or any amendment or supplement thereto. (f) The Registrants will furnish to each Initial Purchaser and each Exchanging Dealer, without charge, at least one conformed copy of the Exchange Offer Registration Statement and any posteffective amendment thereto, including financial statements and schedules and, if any Initial Purchaser or Exchanging Dealer so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (g) The Registrants will, during the Exchange Offer Registration Period or the Shelf Registration Period, as applicable, promptly deliver to each Initial Purchaser, each Exchanging Dealer and such other persons that are required by law to deliver a prospectus following the Registered Exchange Offer, or during the Shelf Registration Period, as applicable, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement or the Shelf Registration Statement and any amendment or supplement thereto as such Initial Purchaser, Exchanging Dealer or other persons may reasonably request; and the Registrants 10 11 consent to the use (in accordance with applicable law) of such prospectus or any amendment or supplement thereto by any such Initial Purchaser, Exchanging Dealer or other persons, as applicable, as aforesaid. (h) Prior to the effective date of any Registration Statement, the Registrants will use their reasonable best efforts to cooperate with the Holders of Bonds, Exchange Bonds or Private Exchange Bonds included therein and their respective counsel in connection with the registration or qualification of, such Bonds, Exchange Bonds or Private Exchange Bonds for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things necessary to enable the offer and sale in such jurisdictions of the Bonds, Exchange Bonds or Private Exchange Bonds covered by such Registration Statement; provided that the Registrants will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (i) Unless the applicable securities shall be in book-entry only form, the Registrants will cooperate with the Holders of Bonds, Exchange Bonds or Private Exchange Bonds to facilitate the timely preparation and delivery of certificates representing Bonds, Exchange Bonds or Private Exchange Bonds issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders thereof may request in writing prior to sales of Bonds, Exchange Bonds or Private Exchange Bonds pursuant to such Registration Statement. (j) Subject to the last sentence of Section 2(b), after effectiveness of a Registration Statement, if any event contemplated by Section 4(b)(ii) through (v) occurs during the period for which the Registrants are required to maintain the effectiveness of such Registration Statement, the Registrants will promptly prepare and file with the Commission a posteffective amendment to the Registration Statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to purchasers of the Bonds, Exchange Bonds or Private Exchange Bonds from a Holder, the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 11 12 (k) Not later than the effective date of the applicable Registration Statement, the Registrants will provide a CUSIP number for the Bonds, the Exchange Bonds and the Private Exchange Bonds, as the case may be, and provide the applicable trustee with printed certificates for the Bonds, the Exchange Bonds or the Private Exchange Bonds, as the case may be, in a form eligible for deposit with The Depository Trust Issuer. (l) The Issuer will comply with all applicable rules and regulations of the Commission and will make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earning statement satisfying the provisions of Section 11(a) of the Securities Act. (m) The Registrants will cause the Indenture or the Exchange Bonds Indenture, as applicable, to be qualified under the Trust Indenture Act as required by applicable law in a timely manner. (n) The Issuer may require each Holder of Transfer Restricted Bonds to be registered pursuant to any Shelf Registration Statement to furnish to the Issuer such information (including supplements thereto) concerning the Holder and the distribution of such Transfer Restricted Bonds as the Registrants may from time to time reasonably require for inclusion in such Shelf Registration Statement, and the Issuer may exclude from such registration the Transfer Restricted Bonds of any Holder that fails to furnish such information (including supplements thereto) within a reasonable time after receiving such request. (o) In the case of a Shelf Registration Statement, each Holder of Transfer Restricted Bonds to be registered pursuant thereto agrees that, upon receipt of any notice from the Registrants pursuant to Section 4(b)(ii) through (v), such Holder will discontinue disposition of such Transfer Restricted Bonds until such Holder's receipt of copies of the supplemental or amended prospectus contemplated by Section 4(j) or until advised in writing (the "Advice") by the Issuer that the use of the applicable prospectus may be resumed. If the Registrants shall give any notice under Section 4(b)(ii) through (v) during the period that the Registrants are required to maintain an effective Registration Statement (the "Effectiveness Period"), such Effectiveness Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Transfer Restricted Bonds covered by 12 13 such Registration Statement shall have received (x) the copies of the supplemental or amended prospectus contemplated by Section 4(j) (if an amended or supplemental prospectus is required) or (y) the Advice (if no amended or supplemental prospectus is required). (p) In the case of a Shelf Registration Statement, the Registrants shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as Holders of a majority in aggregate principal amount of the Bonds, Exchange Bonds and Private Exchange Bonds being sold or the managing underwriters (if any) shall reasonably request in order to facilitate any disposition of Bonds, Exchange Bonds or Private Exchange Bonds pursuant to such Shelf Registration Statement. (q) In the case of a Shelf Registration Statement, the Registrants shall (i) make reasonably available for inspection by a representative of, and Special Counsel (as defined below) acting for, Holders of a majority in aggregate principal amount of the Bonds, Exchange Bonds and Private Exchange Bonds being sold pursuant to such Shelf Registration Statement and any underwriter participating in any disposition of Bonds, Exchange Bonds or Private Exchange Bonds pursuant to such Shelf Registration Statement, all relevant financial and other records, pertinent corporate documents and properties of the Registrants and their subsidiaries and (ii) use their reasonable best efforts to have their officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative, Special Counsel or any such underwriter (an "Inspector") in connection with such Shelf Registration Statement; provided, however, that any information that is designated in writing by the Issuer, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such Inspector. (r) In the case of a Shelf Registration Statement, the Registrants shall, if requested by Holders of a majority in aggregate principal amount of the Bonds, Exchange Bonds and Private Exchange Bonds being sold pursuant to such Shelf Registration Statement, their Special Counsel or the managing underwriters (if any) in connection with such Shelf Registration Statement, use their reasonable best efforts to cause (i) their counsel to deliver an opinion relating to the Shelf Registration Statement and the Bonds, Exchange Bonds or Private Exchange Bonds being registered, as applicable, in customary form, (ii) their officers to execute and deliver all customary documents and certificates reasonably 13 14 requested by Holders of a majority in aggregate principal amount of the Bonds, Exchange Bonds and Private Exchange Bonds being sold pursuant to such Shelf Registration Statement, their Special Counsel or the managing underwriters (if any) and (iii) their independent public accountants to provide a comfort letter or letters in customary form, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. 5. Registration Expenses. The Registrants will bear all expenses incurred in connection with the performance of their obligations under Sections 1, 2, 3 and 4 and the Registrants will reimburse the Initial Purchasers and the Holders for the reasonable fees and disbursements of one firm of attorneys chosen by the Holders of a majority in aggregate principal amount of the Bonds, the Exchange Bonds and the Private Exchange Bonds to be sold pursuant to a Shelf Registration Statement (the "Special Counsel") acting for the Initial Purchasers or Holders in connection therewith. 6. Indemnification. (a) In the event of a Shelf Registration Statement or in connection with any prospectus delivery pursuant to an Exchange Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as applicable, the Registrants shall indemnify and hold harmless each Holder (including, without limitation, any such Initial Purchaser or Exchanging Dealer), its affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6 and Section 7 as a Holder) from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, without limitation, any loss, claim, damage, liability or action relating to purchases and sales of Bonds, Exchange Bonds or Private Exchange Bonds), to which that Holder may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Holder promptly upon demand for any legal or other expenses reasonably incurred by that Holder in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, 14 15 liability or action as such expenses are incurred; provided, however, that the Registrants shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with any Holders' Information; and provided, further, that with respect to any such untrue statement in or omission from any related prospectus, the indemnity agreement contained in this Section 6(a) shall not inure to the benefit of any Holder from whom the person asserting any such loss, claim, damage, liability or action received Bonds, Exchange Bonds or Private Exchange Bonds to the extent that such loss, claim, damage, liability or action of or with respect to such Holder results from the fact that both (A) a copy of the final prospectus or any amendment or supplement thereto was not sent or given to such person at or prior to the written confirmation of the sale of such Bonds, Exchange Bonds or Private Exchange Bonds to such person and (B) the untrue statement in or omission from the related prospectus was corrected in such final prospectus as so amended or supplemented unless, in either case, such failure to deliver such final prospectus as so amended of supplemented was a result of non-compliance by the Registrants with Section 4(e) or 4(g). (b) In the event of a Shelf Registration Statement or in connection with any prospectus delivered pursuant to an Exchange Offer Registration Statement by an Initial Purchaser of an Exchanging Dealer, each Holder or such Initial Purchaser or Exchanging Dealer shall indemnify and hold harmless the Registrants, their affiliates, their respective officers, directors, employees, representatives and agents, and each person, if any, who controls the Registrants within the meaning of the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 6(b) and Section 7 as the Issuer), from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Registrants may become subject, whether commenced or threatened, under the Securities Act, the Exchange Act, any other federal or state statutory law or regulation, at common law or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any such Registration Statement or any prospectus forming part thereof or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent 15 16 that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with, in the case of any Holder, any Holders' Information furnished to the Registrants by such Holder and, in the case of an Initial Purchaser or Exchanging Dealer, any information furnished to the Registrants by any Initial Purchaser or Exchanging Dealer for use in the Exchange Offer Registration Statement, and shall reimburse the Registrants for any legal or other expenses reasonably incurred by the Registrants in connection with investigating or defending or preparing to defend against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that no such Holder shall be liable for any indemnity claims hereunder in excess of the amount of net proceeds received by such Holder from the sale of Bonds, Exchange Bonds or Private Exchange Bonds pursuant to such Shelf Registration Statement. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 6 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than the reasonable costs of investigation; provided, however, that an indemnified party shall have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel for the indemnified party will be at the expense of such indemnified party 16 17 unless (1) the employment of counsel by the indemnified party has been authorized in writing by the indemnifying party, (2) the indemnified party has reasonably concluded (based upon advice of counsel to the indemnified party) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, (3) a conflict or potential conflict exists (based upon advice of counsel to the indemnified party) between the indemnified party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel reasonably satisfactory to the indemnified party to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements and other charges of more than one separate firm of attorneys (in addition to any local counsel) at any one time for all such indemnified party or parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent, but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. 7. Contribution. If the indemnification provided for in Section 6 is unavailable or insufficient to hold harmless an indemnified party under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage 17 18 or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Registrants from the offering and sale of the Bonds, on the one hand, and a Holder, Initial Purchaser or Exchange Dealer with respect to the sale by such Holder, Initial Purchaser or Exchange Dealer of Bonds, Exchange Bonds or Private Exchange Bonds, on the other, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Registrants on the one hand and such Holder, Initial Purchaser or Exchange Dealer on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Registrants on the one hand and a Holder on the other with respect to such offering and such sale shall be deemed to be in the same proportion as the total net proceeds from the offering of the Bonds (before deducting expenses) received by or on behalf of the Registrants, on the one hand, bear to the total proceeds received by such Holder, Initial Purchaser or Exchange Dealer with respect to its sale of Bonds, Exchange Bonds or Private Exchange Bonds on the other. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to the Registrants or information supplied by the Registrants on the one hand or to any Holders' Information supplied by such Holder or information furnished by such Initial Purchaser or Exchange Dealer, on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contributions pursuant to this Section 7 were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 7 shall be deemed to include, for purposes of this Section 7, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending or preparing to defend or appearing as a third party witness in connection with any such action or claim. Notwithstanding the provisions of this Section 7, an indemnifying party that is a Holder of Bonds, Exchange Bonds or Private Exchange Bonds shall not be required to contribute any amount in excess of the amount by which the total price at which the Bonds, Exchange Bonds or Private Exchange Bonds sold by such indemnifying party to any purchaser exceeds the amount of any damages which such indemnifying party has otherwise paid or become 18 19 liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. 8. Rules 144 and 144A. The Registrants shall use their reasonable best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Registrants are not required to file such reports, they will, upon the written request of any Holder of Transfer Restricted Bonds, make available to such Holder information that is necessary to permit sales of such Holder's securities pursuant to Rules 144 and 144A. The Registrants covenant that they will use their reasonable best efforts to take such further action as any Holder of Transfer Restricted Bonds may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Bonds without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon the written request of any Holder of Transfer Restricted Bonds, the Registrants shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to require the Registrants to register any of their securities pursuant to the Exchange Act. 9. Underwritten Registrations. If any of the Transfer Restricted Bonds covered by any Shelf Registration Statement are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Bonds included in such offering, subject to the consent of the Registrants, and such Holders shall be responsible for all underwriting commissions and discounts in connection therewith. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Bonds on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 10. Miscellaneous. (a) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Registrants have obtained the written consent of Holders of a 19 20 majority in aggregate principal amount of the Bonds, the Exchange Bonds and the Private Exchange Bonds, taken as a single class. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose Bonds, Exchange Bonds or Private Exchange Bonds are being sold pursuant to a Registration Statement or to Holders of Transfer Restricted Bonds and that does not directly or indirectly affect the rights of other Holders may be given by Holders of a majority in aggregate principal amount of the Bonds, the Exchange Bonds and the Private Exchange Bonds being sold by such Holders pursuant to such Registration Statement or Holders of Transfer Restricted Bonds, as the case may be. (b) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first class mail, telecopier or air courier guaranteeing next-day delivery: (1) if to a Holder, at the most current address given by such Holder to the Registrants in accordance with the provisions of this Section 10(b), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Chase Securities Inc. and Lehman Brothers Inc.; (2) if to an Initial Purchaser, initially at its address set forth in the Purchase Agreement; and (3) if to the Registrants, initially at the addresses of each Registrant set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; one business day after being delivered to a next day air courier; five business days after being deposited in the mail; and when receipt is acknowledged by the recipient's telecopier machine, if sent by telecopier. (c) Successors And Assigns. This Agreement shall be binding upon the Registrants and its successors and assigns. (d) Counterparts. This Agreement may be executed in any number of counterparts (which may be delivered in original form or by telecopier) and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same 20 21 agreement. (e) Definition of Terms. For purposes of this Agreement, (a) the term "business day" means any day on which the New York Stock Exchange, Inc. is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405 under the Securities Act and (c) except where otherwise expressly provided, the term "affiliate" has the meaning set forth in Rule 405 under the Securities Act. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to the conflict of law rules thereof. (h) Remedies. In the event of a breach by any of the Registrants or by any Holder of any of their obligations under this Agreement, each Holder or each of the Registrants, as the case may be, in addition to being entitled to exercise all rights granted by law, including recovery of damages (other than the recovery of damages for a breach by the Registrants of its obligations under Sections 1 or 2 hereof for which liquidated damages have been paid pursuant to Section 3 hereof), will be entitled to specific performance of its rights under this Agreement. Each Registrant and each Holder agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agree that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate. 21 22 (i) No Inconsistent Agreements. Each Registrant represents, warrants and agrees that (i) it has not entered into, shall not, on or after the date of this Agreement, enter into any agreement that conflicts with the provisions hereof, (ii) it has not previously entered into any agreement which remains in effect granting any registration rights with respect to any of its debt securities to any person and (iii) without limiting the generality of the foregoing, without the written consent of the Holders of a majority in aggregate principal amount of the then outstanding Transfer Restricted Bonds, it shall not grant to any person the right to request the Registrants to register any debt securities of the Issuer under the Securities Act unless the rights so granted are not in conflict or inconsistent with the provisions of this Agreement. (j) Severability. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. 22 23 Please confirm that the foregoing correctly sets forth the agreement among the Registrants and the Initial Purchasers. Very truly yours, NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Mataczynski -------------------------------- Name: Craig A. Mataczynski Title: President LOUISIANA GENERATING LLC By: /s/ Craig A. Mataczynski -------------------------------- Name: Craig A. Mataczynski Title: Vice President 23 24 Accepted on behalf of each of the Initial Purchasers: CHASE SECURITIES INC. By /s/ Christopher Lowe ---------------------------- Authorized Signatory Christopher Lowe, Vice President LEHMAN BROTHERS INC. By /s/ Illegible --------------------------- Authorized Signatory 24 25 SCHEDULE 1
Principal Amount Initial Purchasers of Series A Bonds ------------------ ----------------- Chase Securities Inc. $275,000,000 Lehman Brothers Inc. $175,000,000 Credit Suisse First Boston Corporation $ 25,000,000 Salomon Smith Barney Inc. $ 25,000,000 ------------ Total $500,000,000
Principal Amount Initial Purchasers of Series B Bonds ------------------ ----------------- Chase Securities Inc. $165,000,000 Lehman Brothers Inc. $105,000,000 Credit Suisse First Boston Corporation $ 15,000,000 Salomon Smith Barney Inc. $ 15,000,000 ------------ Total $300,000,000
25 26 ANNEX A Each brokerdealer that receives Exchange Bonds for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a brokerdealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Bonds received in exchange for Bonds where such Bonds were acquired by such brokerdealer as a result of marketmaking activities or other trading activities. The Registrants have agreed that, for a period of 90 days after the Expiration Date (as defined herein), it will make this Prospectus available to any brokerdealer for use in connection with any such resale. See "Plan of Distribution." 26 27 ANNEX B Each brokerdealer that receives Exchange Bonds for its own account in exchange for Bonds, where such Bonds were acquired by such brokerdealer as a result of marketmaking activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds. See "Plan of Distribution." 27 28 ANNEX C PLAN OF DISTRIBUTION Each brokerdealer that receives Exchange Bonds for its own account pursuant to the Registered Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Bonds. This Prospectus, as it may be amended or supplemented from time to time, may be used by a brokerdealer in connection with resales of Exchange Bonds received in exchange for Bonds where such Bonds were acquired as a result of marketmaking activities or other trading activities. The Registrants have agreed that, for a period of 90 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any brokerdealer for use in connection with any such resale. In addition, until_______________, 2000, all dealers effecting transactions in the Exchange Bonds may be required to deliver a prospectus. The Registrants will not receive any proceeds from any sale of Exchange Bonds by broker-dealers. Exchange Bonds received by brokerdealers for their own account pursuant to the Registered Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Bonds or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such brokerdealer or the purchasers of any such Exchange Bonds. Any broker-dealer that resells Exchange Bonds that were received by it for its own account pursuant to the Registered Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Bonds may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Bonds and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a brokerdealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 90 days after the Expiration Date the Issuer will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any brokerdealer that requests such documents in the Letter of Transmittal. The Issuer has agreed to pay all expenses incident to the Registered Exchange Offer (including the expenses of one counsel for the Holders of the Bonds) other than commissions or concessions of any brokerdealers and will indemnify the Holders of the Bonds (including any brokerdealers) against certain liabilities, including liabilities under the Securities Act. 28 29 ANNEX D - CHECK HERE IF YOU ARE A BROKERDEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: _________________________________ Address: ______________________________ ______________________________ If the undersigned is not a brokerdealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Bonds. If the undersigned is a brokerdealer that will receive Exchange Bonds for its own account in exchange for Bonds that were acquired as a result of marketmaking activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Bonds; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 29 EX-4.7 17 y57012ex4-7.txt COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT 1 Exhibit 4.7 COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT Dated as of March 30, 2000 among NRG SOUTH CENTRAL GENERATING LLC, as the Issuer, LOUISIANA GENERATING LLC, as the Subsidiary Guarantor, THE CHASE MANHATTAN BANK, as the Bond Trustee, THE CHASE MANHATTAN BANK, as the Depositary Bank, and THE CHASE MANHATTAN BANK, as the Collateral Agent 2 TABLE OF CONTENTS
Page ARTICLE 1 DEFINED TERMS: PRINCIPALS OF CONSTRUCTION 2 Section 1.1 Defined Terms 2 Section 1.2 Principles of Construction 5 ARTICLE 2 COLLATERAL AGENT; RELATIONS AMONG SECURED PARTIES 5 Section 2.1 Appointment and Duties of Collateral Agent 5 Section 2.2 Rights of Collateral Agent 6 Section 2.3 Lack of Reliance on the Collateral Agent 9 Section 2.4 Indemnification; Bankruptcy 10 Section 2.5 Resignation or Removal of the Collateral Agent 12 Section 2.6 Documents 12 Section 2.7 Authorization 13 Section 2.8 Additional Collateral Agents 14 Section 2.9 Power of Attorney from Secured Parties 16 Section 2.10 The Issuer as a Secured Party 17 Section 2.11 Additional Guarantors 17 Section 2.12 Assignment of Rights, No Assumption of Duties 17 Section 2.13 Miscellaneous 17 ARTICLE 3 DEPOSITARY BANK 18 Section 3.1 Appointment of Depositary Bank, Powers and Immunities 18 Section 3.2 Reliance by Depositary Bank 20 Section 3.3 Court Orders 21 Section 3.4 Resignation or Removal 21 Section 3.5 Expenses; Indemnification; Fees 22 Section 3.6 Direction to Depositary Bank 23 Section 3.7 Action by Depositary Bank 23 Section 3.8 Merger of Depositary Bank 23
i 3 ARTICLE 4 ADMINISTRATION OF THE COLLATERAL 23 Section 4.1 Administration of the Collateral 23 Section 4.2 Priority of Security Interests 24 Section 4.3 Modification of Certain Documents 24 ARTICLE 5 EVENTS OF DEFAULT; TRIGGER EVENTS 25 Section 5.1 Exercise of Rights 25 Section 5.2 Actions Upon A Trigger Event 26 Section 5.3 Exercise of Remedies and Application of Proceeds 26 Section 5.4 Receipt of Money or Proceeds 29 Section 5.5 Additional Secured Parties 30 Section 5.6 Event of Loss; Title Event 30 ARTICLE 6 MISCELLANEOUS 31 Section 6.1 Amendments 31 Section 6.2 Assignment 32 Section 6.3 Severability 32 Section 6.4 Notices 32 Section 6.5 Successors and Assigns 33 Section 6.6 Counterparts 33 Section 6.7 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial 33 Section 6.8 No Impairments of Other Rights 34 Section 6.9 Headings 34 Section 6.10 Termination 34 Section 6.11 Entire Agreement 35 Section 6.12 Execution in Lieu of Agent 35 Section 6.13 Conflicts with Other Security Documents 35 Section 6.14 Scope of Duties; Limits on Liability 35 Section 6.15 Notice of Adverse Claim 35
ii 4 COLLATERAL AGENCY AND INTERCREDITOR AGREEMENT (this "Agreement") dated as of March 30, 2000 among NRG SOUTH CENTRAL GENERATING LLC (the "Issuer"), a Delaware limited liability company, LOUISIANA GENERATING LLC (the "Subsidiary Guarantor"), a Delaware limited liability company, THE CHASE MANHATTAN BANK acting in its capacity as the bond trustee under the Indenture (together with its successors and assigns, the "Bond Trustee"), THE CHASE MANHATTAN BANK acting in its capacity as the depositary bank (together with its successors and assigns, the "Depositary Bank"), any trustees or agents under any other Finance Documents on behalf of the holders of the indebtedness or obligations evidenced by such Finance Documents and THE CHASE MANHATTAN BANK acting in its capacity as the collateral agent appointed hereunder for the Secured Parties (together with its successors and assigns, the "Collateral Agent"). W I T N E S S E T H: WHEREAS, the Subsidiary Guarantor is acquiring the Project from Cajun; WHEREAS, the Issuer is a limited liability company established for the sole purposes of (a) issuing the Bonds under the Indenture and incurring other Permitted Issuer Indebtedness, (b) owning the membership interests in the Subsidiary Guarantor and any Additional Subsidiaries or additional assets as permitted under the Indenture, (c) making a loan to the Subsidiary Guarantor pursuant to the Guarantor Loan Agreement and (d) entering into those transactions incident thereto; and WHEREAS, the Issuer has simultaneously with the execution and delivery of this Agreement issued and sold the Initial Bonds pursuant to the Indenture; WHEREAS, payments of the principal of, premium (if any), interest on and any other amounts due with respect to the Initial Bonds will be serviced by repayment of the Guarantor Loan and guaranteed (subject to certain limitations) by the Subsidiary Guarantor; and WHEREAS, the Issuer, the Subsidiary Guarantor, the Members, the Collateral Agent for the behalf of the Secured Parties, and the Depositary Bank are 5 entering into the other Security Documents, pursuant to which the Collateral Agent, acting on behalf of the Secured Parties, will obtain a continuing Lien on and perfected Security Interest in the Collateral; WHEREAS, the Issuer and the Subsidiary Guarantor may incur additional Permitted Indebtedness which may be secured by the Collateral; WHEREAS, the parties hereto desire to enter into this Agreement to set forth their mutual understanding with respect to (a) the exercise of certain rights, remedies and options by the respective parties hereto under the above described documents, (b) the priority of their respective Security Interests created by the Security Documents, (c) the appointment of the Collateral Agent and (d) the appointment of the Depositary Bank. NOW, THEREFORE, for and in consideration of the premises and mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby covenant and agree as follows: ARTICLE 1 DEFINED TERMS: PRINCIPALS OF CONSTRUCTION Section 1.1 Defined Terms. (a) For all purposes of this Agreement, capitalized terms used but not otherwise defined herein shall have the meaning set forth in Appendix A to the Trust Indenture, dated as of March 30, 2000, among the Issuer, the Subsidiary Guarantor and the Bond Trustee; provided, however that to the extent a definition is incorporated herein by reference, no amendment or modification to that definition will be effective under this Agreement without the prior written consent of the Working Capital Facility Agent if such amendment or modification would adversely effect the Working Capital Facility Banks. (b) The following terms shall have the following respective meanings: 2 6 "Additional Collateral Agent" shall have the meaning given to that term in Section 2.8(a). "Agreement" shall mean this Agreement in its entirety. "Arrearages" shall have the meaning specified in Section 5.4. "Collateral Agent Claims" shall mean all obligations of the Secured Parties, the Subsidiary Guarantor and the Issuer now or hereafter existing, to pay fees, costs and expenses to the Collateral Agent pursuant to Sections 2.2(e) and 2.4 and the other Finance Documents. "Combined Exposure" shall mean, as of any date of calculation, the sum (calculated without duplication) of the following to the extent the same is held by or represented by a Secured Party: (i) the aggregate principal amount of all Outstanding Bonds as of the calculation date, (ii) the aggregate principal amount of all loans (if any) outstanding as of such calculation date under the Working Capital Facility and (iii) the aggregate amount of all undrawn financing commitments as of such calculation date under the Working Capital Facility which, as of such calculation date, the lenders party to the Working Capital Agreement have no right to terminate. "Damages" shall have the meaning specified in Section 2.4(b). "Debt Termination Date" shall mean the date on which all Finance Liabilities, other than contingent liabilities and obligations which are unasserted at such date, have been paid and satisfied in full and all Finance Commitments have been terminated. "Designation Letter" shall mean any letter executed and delivered pursuant to Section 5.5 and substantially in the form of Exhibit A hereto. "Designation Letter (Additional Guarantor)" shall mean any letter executed and delivered pursuant to Section 2.11 and substantially in the form of Exhibit B hereto. "Event of Default" shall mean an "event of default" (or correlative term) under any Finance Document. 3 7 "Finance Commitment" shall mean any commitment pursuant to any of the Finance Documents (or any other similar agreement entered into by the Issuer, the Subsidiary Guarantor or any Additional Guarantor with respect to the incurrence of Permitted Indebtedness (other than the Bonds)) to provide credit to the Issuer, the Subsidiary Guarantor or Additional Guarantor, as the case may be. "Finance Liabilities" shall mean all Indebtedness, liabilities and obligations of the Issuer, the Subsidiary Guarantor and any Additional Guarantor (including, but not limited to, principal, interest, fees, reimbursement obligations, penalties, indemnities and legal and other expenses, whether due after acceleration or otherwise) to the Secured Parties (of whatsoever nature and howsoever evidenced) under or pursuant to the Indenture, the Bonds, the Guarantor Security Documents, any Additional Bonds, the Working Capital Facility and any other Finance Document (or any other similar agreement entered into by the Issuer, the Subsidiary Guarantor or Additional Guarantor with respect to the incurrence of Permitted Indebtedness (other than the Bonds)), to the extent arising on or prior to the Debt Termination Date, in each case, direct or indirect, primary or secondary, fixed or contingent, now or hereafter arising out of or relating to any such agreements; and also shall mean all interest owed to the Secured Parties and accrued following the commencement of a case (whether voluntary or involuntary) under the Federal Bankruptcy Code with respect to the Issuer, the Subsidiary Guarantor or Additional Guarantor. "Indemnified Depositary Bank Party" shall have the meaning specified in Section 3.5. "Indemnified Party" shall have the meaning specified in Section 2.4(b). "Indenture" shall mean the Trust Indenture, dated as of March 30, 2000, by and among the Issuer, the Subsidiary Guarantor and the Bond Trustee. "Post-Default Rate" means the rate of interest from time to time announced by The Chase Manhattan Bank, a New York banking corporation (or such other financial institution that is at such time serving as the Collateral Agent) at its principal office in New York, New York as its prime commercial lending rate (the "Prime Rate") plus 1%. Each change in any interest rate provided for herein or in the Security Documents based upon the Prime Rate resulting from a change in the Prime Rate shall take effect at the time of such change in the Prime Rate. 4 8 "Required Secured Parties" shall mean, at any time, at least 33 1/3% of the Combined Exposure in the case of a payment default and at least 66 2/3% of the Combined Exposure in the case of any other default or any other action required to be taken hereunder. "Security Interest" shall mean any perfected and enforceable Lien on the Collateral granted to the Collateral Agent pursuant to the requirements of any applicable Finance Document. "Trigger Event" shall mean 67% of the Combined Exposure shall have been declared to be, or shall automatically have become, due and payable (and shall not have been rescinded) under the Finance Documents, and the Collateral Agent shall have, upon the written direction from the Required Secured Parties, declared such event to be a Trigger Event. "Trigger Event Date" shall have the meaning set forth in Section 5.3(a). Section 1.2 Principles of Construction. For all purposes of this Agreement, the principles of construction set forth in Section 1.1 of the Indenture shall apply. ARTICLE 2 COLLATERAL AGENT; RELATIONS AMONG SECURED PARTIES Section 2.1 Appointment and Duties of Collateral Agent. (a) Each of the Secured Parties hereby designates and appoints The Chase Manhattan Bank to act as the Collateral Agent under this Agreement and the other Finance Documents to which the Collateral Agent is a party, and each of the Secured Parties hereby authorizes the Collateral Agent to take such actions on its behalf under the provisions of this Agreement and the other Finance Documents to which the Collateral Agent is a party and to exercise such powers and perform such duties as are expressly delegated to the Collateral Agent by the terms of this Agreement and the other Finance Documents to which the Collateral Agent is a party, together with such other powers as are reasonably incidental thereto. The execution of this Agreement by the Collateral Agent shall be deemed an acceptance by the Collateral Agent of the 5 9 appointment made under this Section 2.1 and an agreement to act as agent on behalf of the Secured Parties. Notwithstanding any provision to the contrary elsewhere in this Agreement and the other Finance Documents to which the Collateral Agent is a party, the Collateral Agent shall not have any duties or responsibilities, except those expressly set forth in this Agreement and the other Finance Documents to which the Collateral Agent is a party, or any fiduciary relationship with any Secured Party, and no implied covenants, functions or responsibilities shall be read into this Agreement or any other Finance Document to which the Collateral Agent is a party or otherwise exist against the Collateral Agent. The Collateral Agent shall not be liable for any action taken or omitted to be taken by it hereunder or under any other Finance Document to which the Collateral Agent is a party, or in connection herewith or therewith, or in connection with the Collateral, unless caused by its gross negligence or willful misconduct. The Collateral Agent shall not be obligated to expend or risk its own assets or property in connection with its administration of this Agreement or its appointment hereunder. (b) Notwithstanding anything to the contrary in this Agreement or any other Finance Document to which the Collateral Agent is a party, the Collateral Agent shall not exercise any rights or remedies under this Agreement (except as set forth in the proviso to Section 5.2(b)) or any other Finance Document to which the Collateral Agent is a party or give any consent under this Agreement or any other Finance Document to which the Collateral Agent is a party or enter into any agreement amending, modifying, supplementing or waiving any provision of this Agreement or any other Finance Document to which the Collateral Agent is a party unless it shall have been directed to do so in writing by the Required Secured Parties; provided, however, that the Collateral Agent shall consent to the release of Collateral contemplated by the Finance Documents, and shall enter into any amendments, waivers or supplements with respect to the Finance Document to which the Collateral Agent is a party to the extent not inconsistent with the provisions of the other Finance Documents and which would not result in a Material Adverse Effect (as evidenced by an Officer's Certificate signed by an Authorized Officer of the Issuer). Section 2.2 Rights of Collateral Agent. (a) The Collateral Agent may execute any of its duties under this Agreement or any other Finance Document to which the Collateral Agent is a party by or through agents, custodians, nominees or attorneys-in-fact. The Collateral Agent may consult with counsel and the advice or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or opinion of counsel. 6 10 (b) Neither the Collateral Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall (i) be liable for any action lawfully taken or omitted to be taken by it under or in connection with this Agreement or any other Finance Document to which the Collateral Agent is a party (except for its gross negligence or willful misconduct) or (ii) be responsible in any manner to any of the Secured Parties for any recitals, statements, representations or warranties made by the Issuer, the Subsidiary Guarantor or any Additional Guarantor contained in this Agreement or any other Finance Document to which the Collateral Agent is a party or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, this Agreement or any other Finance Document to which the Collateral Agent is a party or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Finance Document to which the Collateral Agent is a party or for any failure of the Issuer, the Subsidiary Guarantor or any Additional Guarantor to perform their respective obligations hereunder or thereunder. The Collateral Agent shall not be under any obligation to any Secured Party to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Finance Document to which the Collateral Agent is a party, or to inspect the properties, books or records of the Issuer, the Subsidiary Guarantor or any Additional Guarantor. (c) The Collateral Agent and its employees, agents, attorneys-in-fact, and affiliates shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice or statements of legal counsel (including, without limitation, counsel to the Issuer), independent accountants and other experts selected by the Collateral Agent. In connection with any request of the Required Secured Parties, the Collateral Agent shall be fully protected in relying on a certificate of any Secured Party, signed by an Authorized Officer of such Secured Party, setting forth the amount owed by the Issuer, the Subsidiary Guarantor or any Additional Guarantor, to such Person as of the date of such certificate, which certificate shall state that the Person signing such certificate is an Authorized Officer of such Person and shall state specifically the Finance Document and provision thereof pursuant to which the Collateral Agent is being directed to act. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying on such certificate. The Collateral Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Finance Document to 7 11 which the Collateral Agent is a party (i) if such action would, in the reasonable opinion of the Collateral Agent, be contrary to law or the terms of this Agreement or the other Finance Documents, (ii) if such action is not specifically provided for in this Agreement or such other Finance Document, it shall not have received any such advice or concurrence of the Required Secured Parties as it deems appropriate or, (iii) if, in connection with the taking of any such action that would constitute an exercise of remedies under this Agreement or such other Finance Document, it shall not first be indemnified to its satisfaction by the Secured Parties (other than the Bond Trustee (in its individual capacity), the Collateral Agent (in its individual capacity), the Depositary Bank (in its individual capacity) or any other agent or trustee under any of the Finance Documents (in its individual capacity)) against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Finance Document to which the Collateral Agent is a party in accordance with a written request of the Required Secured Parties (to the extent that the Required Secured Parties are expressly authorized to direct the Collateral Agent to take or refrain from taking such action), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Secured Parties. (d) The Collateral Agent shall not be deemed to have actual, constructive, direct or indirect knowledge or notice of the occurrence of any Event of Default or Trigger Event unless and until an Authorized Officer of the Collateral Agent has received a written notice or a certificate from any Secured Party, the Issuer, the Subsidiary Guarantor or any Additional Guarantor stating that an Event of Default or Trigger Event has occurred and describing such event. The Collateral Agent shall have no obligation whatsoever either prior to or after receiving such notice or certificate to inquire whether an Event of Default or Trigger Event has in fact occurred and shall be entitled to rely conclusively, and shall be fully protected in so relying, on any such notice or certificate so furnished to it. In the event that the Collateral Agent receives such a notice of or certificate regarding the occurrence of any Trigger Event or Event of Default, the Collateral Agent shall give notice thereof to the Secured Parties. The Collateral Agent shall take such action with respect to such Trigger Event as so requested pursuant to Sections 5.1, 5.2 and 5.3 hereof. The agreements in this Section shall survive the payment or satisfaction in full of the Finance Liabilities and the resignation or removal of the Collateral Agent or the termination of this Agreement. 8 12 (e) The Issuer shall pay to the Collateral Agent upon demand the amount of any and all reasonable out-of-pocket expenses, including the reasonable fees and expenses of its counsel (and any local counsel) and of any experts and agents (including the Depositary Bank) which the Collateral Agent may incur in connection with (i) the acceptance or administration of this Agreement and the other Finance Documents to which the Collateral Agent is a party, (ii) the custody or preservation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement (whether through negotiations, legal proceedings or otherwise) of any of the rights of the Collateral Agent or the other Secured Parties hereunder or under the other Finance Documents to which the Collateral Agent is a party or (iv) the failure by the Issuer, the Subsidiary Guarantor or any Additional Guarantor to perform or observe any of the provisions hereof or of any of the other Finance Documents to which the Collateral Agent is a party. (f) Notwithstanding any other provision of this Agreement to the contrary, the Collateral Agent shall be under no obligation to take any action pursuant to any request or direction of any party hereto if it shall receive conflicting instructions from another party hereto; provided that the Collateral Agent shall inform such parties of the conflict. (g) The Collateral Agent shall not be under any obligation to take any action which is discretionary with the Collateral Agent pursuant to this Agreement or in any other Finance Document. Section 2.3 Lack of Reliance on the Collateral Agent. Each of the other Secured Parties expressly acknowledges that neither the Collateral Agent nor any of its officers, directors, employees, agents or attorneys-in-fact has made any representations or warranties to it and that no act by the Collateral Agent hereinafter taken, including, without limitation, any review of the Project or of the affairs of the Issuer, the Subsidiary Guarantor or any Additional Guarantor, shall be deemed to constitute any representation or warranty by the Collateral Agent to any other Secured Party. Each Secured Party represents to the Collateral Agent that it has, independently and without reliance upon the Collateral Agent or any other Secured Party, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Project, the Issuer, the Subsidiary Guarantor and any Additional Guarantor. Each Secured Party also represents that it will, independently and without reliance upon the Collateral Agent or any other Secured Party, and based on such documents and information as it shall 9 13 deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Project, the Issuer, the Subsidiary Guarantor and any Additional Guarantor. Except for notices, reports and other documents expressly required to be furnished to the other Secured Parties by the Collateral Agent hereunder, the Collateral Agent shall not have any duty or responsibility to provide any other Secured Party with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Project, the Issuer, the Subsidiary Guarantor or any Additional Guarantor which may come into the possession of the Collateral Agent or any of its officers, directors, employees, agents or attorneys-in-fact. Section 2.4 Indemnification; Bankruptcy. (a) The other Secured Parties severally agree to indemnify the Collateral Agent and its agents, officers, directors, representatives and attorneys-in-fact, including, but not limited to, the Depositary Bank, each in its capacity as such (to the extent not reimbursed by the Issuer, the Subsidiary Guarantor or any Additional Guarantor and without limiting the obligation of the Issuer, the Subsidiary Guarantor or any Additional Guarantor to do so), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time be imposed on, incurred by or asserted against the Collateral Agent in its capacity as such in any way relating to or arising out of this Agreement or the other Finance Documents to which the Collateral Agent is a party, or the performance of its duties as Collateral Agent hereunder or thereunder or any action taken or omitted by the Collateral Agent in its capacity as such under or in connection with any of the foregoing (including, but not limited to, any claim that the Collateral Agent is the owner or operator of any of the Project and liable as such pursuant to any Environmental Laws); provided that the other Secured Parties shall not be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent that any of the foregoing result from the Collateral Agent's gross negligence or willful misconduct. (b) Without limiting the obligations of the Issuer, the Subsidiary Guarantor and any Additional Guarantor under any other Finance Document, the Issuer, the Subsidiary Guarantor and each Additional Guarantor jointly and severally indemnify the Collateral Agent and each other Secured Party and, in their capacity as such, their officers, directors, shareholders, controlling persons, employees, agents, 10 14 officers, directors, representatives and servants (each an "Indemnified Party") from and against any and all claims, damages, losses, liabilities, obligations, penalties, actions, causes of action, judgments, suits, costs, expenses or disbursements (including, without limitation, reasonable attorneys' and consultants' fees and expenses) (collectively "Damages") of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any Indemnified Party (or which may be claimed against any Indemnified Party by any Person) by reason of, in connection with or in any way relating to or arising out of any Transaction Document, the Collateral or any other documents or transactions in connection with or relating thereto (including, without limitation, Damages in connection with the presence, release or threatened release of Environmentally Regulated Materials at, on, under, to or from the Project or any disposal sites to which wastes from the Project have been taken), unless due to the gross negligence or willful misconduct of such Indemnified Party. The Issuer and the Subsidiary Guarantor further shall, upon demand by any Indemnified Party, jointly and severally pay to such Indemnified Party all reasonable costs and expenses incurred by such Indemnified Party in enforcing any rights under any of the Transaction Documents, including reasonable fees and expenses of counsel (including local counsel). (c) The Secured Parties hereby agree that, except upon the written consent of the Required Secured Parties, (i) no Secured Party shall authorize the Issuer, the Subsidiary Guarantor or any Additional Guarantor (A) to commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Issuer, the Subsidiary Guarantor or the Additional Guarantor, as the case may be, under any bankruptcy, insolvency or other similar law now or hereafter in effect in any jurisdiction or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Issuer, the Subsidiary Guarantor or the Additional Guarantor or (B) to consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against the Issuer, the Subsidiary Guarantor or any Additional Guarantor to make a general assignment for the benefit of any Secured Party or any other creditor of the Issuer, the Subsidiary Guarantor or the Additional Guarantor, and (ii) none of the Secured Parties shall commence or join with any other Person in commencing any proceeding against the Issuer, the Subsidiary Guarantor or any Additional Guarantor under any bankruptcy, reorganization, liquidation or insolvency law or statute now or hereafter in effect in any jurisdiction. Section 2.5 Resignation or Removal of the Collateral Agent. The Collateral Agent may resign as Collateral Agent upon sixty (60) days' notice to the 11 15 Secured Parties and may be removed at any time with or without cause upon sixty (60) days' written notice by the Required Secured Parties, with any such resignation or removal to become effective only upon the appointment of a successor Collateral Agent under this Section 2.5; provided, however, that if no successor Collateral Agent shall have been so appointed within sixty (60) days, the resigning Collateral Agent may petition any court of competent jurisdiction for the appointment of a new Collateral Agent; provided further, however, that if at any time prior to the occurrence of a Trigger Event, the Collateral Agent is the same Person as the Bond Trustee, the Issuer, at the reasonable request of Persons who become Secured Parties after the Closing Date, shall have the right to remove the Collateral Agent upon 60 days' notice to the Secured Parties with or without cause, effective upon the appointment of a successor Collateral Agent under this Section 2.5. If the Collateral Agent shall resign or be removed as Collateral Agent by the Required Secured Parties or the Issuer, as applicable, then the Required Secured Parties shall (and if no such successor shall have been appointed within sixty (60) days of the Collateral Agent's resignation or removal, the Collateral Agent may) appoint a successor agent for the Secured Parties, which successor agent shall be reasonably acceptable to the Issuer, whereupon such successor agent shall succeed to the rights, powers and duties of the Collateral Agent, and the term "Collateral Agent" shall mean such successor agent effective upon its appointment, and the former Collateral Agent's rights, powers and duties as Collateral Agent shall be terminated, without any other or further act or deed on the part of such former Collateral Agent (except that the resigning Collateral Agent shall deliver all Collateral then in its possession to the successor Collateral Agent) or any of the other Secured Parties. After any retiring Collateral Agent's resignation or removal hereunder as Collateral Agent, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent. Section 2.6 Documents. The Collateral Agent will forward promptly after the Collateral Agent's receipt thereof (and will use its best efforts to forward within five (5) Business Days of such receipt) to the Bond Trustee and the Working Capital Facility Agent (a) a copy of each document furnished to the Collateral Agent for such Secured Party under the Finance Documents and (b) any written notice delivered to the Collateral Agent pursuant to any Third Party Consent. The Collateral Agent will forward to each Secured Party, promptly upon such Secured Party's written request therefor, a copy of any other document furnished to the Collateral Agent under any Finance Document to which the Collateral Agent is a party. 12 16 Section 2.7 Authorization. (a) The Collateral Agent is hereby authorized by each Secured Party, for itself and as a Secured Party (i) to execute, deliver and perform each of the Finance Documents (other than the Working Capital Facility) to which the Collateral Agent or the Secured Parties are or are intended to be a party and (ii) subject to the terms of the Finance Documents, to draw on, or otherwise act under any letter of credit or guarantee delivered to the Collateral Agent for the benefit of the Secured Parties and each of the other Secured Parties agrees to be bound by all the agreements of the Collateral Agent contained in, and all of the terms and conditions of, the Finance Documents for which the Collateral Agent is acting as its agent hereunder. (b) Without the prior written consent of, or direction from, each of the Secured Parties, the Collateral Agent shall not (i) consent to any modification, supplement or waiver (other than to cure any ambiguity, defect or inconsistency upon advice of counsel) under any of the Finance Documents to which the Collateral Agent is a party, (ii) except as permitted pursuant to Section 2.1(b), release any Collateral or otherwise terminate any Lien under any Finance Document (except that the Collateral Agent may release funds from the Depositary Accounts in accordance with the terms and provisions of Article 6 of the Indenture), (iii) consent to any modification of this Section 2.7 or of the definition of Secured Obligation or Secured Party, (iv) release any letter of credit, guarantee or other instrument securing the obligations of any Person under any Transaction Document, (v) consent to any Lien under any Security Document securing obligations other than Secured Obligations or (iv) consent to any item requiring the consent of the One Hundred Percent Holders as set forth in Section 8.2 of the Indenture or all of the Working Capital Facility Banks, as set forth in Section 10.2(b) of the Working Capital Facility. (c) For the avoidance of doubt, nothing in this Section 2.7 or elsewhere in this Agreement or in any other Finance Document or other Transaction Document shall limit the obligations of the Issuer, the Subsidiary Guarantor or any Additional Guarantor under any of the Transaction Documents, including, without limitation, any obligation of the Issuer, the Subsidiary Guarantor or the Additional Guarantor to obtain any consent or approval of any of the Secured Parties, obtained or required to be obtained by the Issuer, the Subsidiary Guarantor or the Additional Guarantor prior to any amendment of, modification or supplement to or waiver under any Finance Document or other Transaction Document, and the Collateral Agent shall not consent to any amendment of, modification of or supplement to or waiver under any Finance Document or other Transaction Document unless and until the Issuer, the Subsidiary Guarantor or the Additional Guarantor shall have first obtained 13 17 all such required consents and approvals and provided the Collateral Agent with written certification of the same. Section 2.8 Additional Collateral Agents. (a) Whenever the Collateral Agent shall deem it necessary or prudent in order either to conform to any law of any jurisdiction in which all or any part of the Collateral shall be situated or to make any claim or bring any suit with respect to the Collateral, or the Collateral Agent shall have been advised by counsel that it is so necessary or prudent in the interests of the Secured Parties, the Collateral Agent shall take such action (including, to the extent required, the execution and delivery of an agreement supplemental hereto and such other instruments and agreements) as may be necessary or proper to constitute another bank or trust company, or one or more Persons approved by the Collateral Agent and, unless an Event of Default has occurred and is continuing, reasonably acceptable to the Issuer, either to act as an additional collateral agent of all or any part of the Collateral, jointly with the Collateral Agent, or to act as a separate collateral agent or trustee of all or any part of the Collateral (any such additional or separate agent or trustee being herein called an "Additional Collateral Agent"), in any such case with such powers as may be granted pursuant to such action, and to vest in such bank, trust company or Person as an Additional Collateral Agent any property, title, right or power of the Collateral Agent deemed necessary or advisable by the Collateral Agent, subject to the remaining provisions of this Section 2.8. The Collateral Agent may execute, deliver and perform any deed, conveyance, assignment or other instrument in writing as may be required by any Additional Collateral Agent for more fully and certainly vesting in and confirming to it, him or her any property, title, right or power which by the terms of such agreement supplemental hereto is expressed to be conveyed or conferred to or upon such Additional Collateral Agent. (b) Each Additional Collateral Agent shall, to the extent permitted by law, be appointed and act, and the Collateral Agent shall act, subject to the following provisions and conditions: (i) all powers, duties, obligations and rights conferred or imposed upon the Collateral Agent in respect of the receipt, custody, investment and payment of moneys shall be exercised solely by the Collateral Agent; (ii) all other rights, powers, duties and obligations conferred or imposed upon the Collateral Agent may be conferred or imposed 14 18 upon and exercised or performed by the Additional Collateral Agent jointly with the Collateral Agent, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Collateral Agent shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to any part of the Collateral in any such jurisdiction) shall be exercised and performed by such Additional Collateral Agent; (iii) no power hereby given to, or with respect to which it is hereby provided may be exercised by, any such Additional Collateral Agent shall be exercised hereunder by such Additional Collateral Agent except jointly with, or with the consent of, the Collateral Agent; (iv) such Additional Collateral Agent shall act only upon and to the extent of written instructions from the Collateral Agent and no other party, and the Additional Collateral Agent shall not be required to take and shall not be responsible for taking any action as Additional Collateral Agent under any Security Document or this Agreement unless it has received such written instructions from the Collateral Agent; and (v) the Collateral Agent shall not be personally liable by reason of any act or omission of any Additional Collateral Agent hereunder, nor shall such Additional Collateral Agent be personally liable by reason of any act or omission of the Collateral Agent or any other Additional Collateral Agent hereunder. If at any time the Collateral Agent shall deem it no longer necessary or prudent in order to conform to any such law or take any such action or shall be advised by counsel that it is no longer so necessary or prudent in the interest of the Secured Parties to appoint an Additional Collateral Agent, the Collateral Agent shall execute and deliver an agreement supplemental hereto and all other instruments and agreements necessary or proper to remove any Additional Collateral Agent. (c) Any Additional Collateral Agent may at any time by an instrument in writing constitute the Collateral Agent its agent or attorney-in-fact, with full power and authority, to the extent which may be authorized by law, to do all acts and things and exercise all discretion which it is authorized or permitted to do or exercise, for and in its behalf and in its name. In case any such Additional Collateral Agent shall die, become incapable of acting, resign or be removed, all the assets, 15 19 property, rights, powers, trusts, duties and obligations of such Additional Collateral Agent, so far as permitted by law, shall vest in and be exercised by the Collateral Agent, without the appointment of a new successor to such Additional Collateral Agent unless and until a successor is appointed in the manner hereinbefore provided. (d) Any request, approval or consent in writing by the Collateral Agent to any Additional Collateral Agent shall be sufficient to warrant such Additional Collateral Agent to take such action as may be so requested, approved or consented. (e) Each Additional Collateral Agent appointed pursuant to this Section 2.8 shall be subject to, and shall have the benefits of, the provisions of this Agreement insofar as they apply to the Collateral Agent. Section 2.9 Power of Attorney from Secured Parties. Each Secured Party hereby gives a power of attorney, coupled with an interest, to the Collateral Agent, and appoints, makes, constitutes and designates the Collateral Agent its true and lawful attorney-in-fact, subject to Section 2.7, to consent on its behalf (in its capacity as a Secured Party) under the Transaction Documents to the extent that the consent of the Collateral Agent or such Secured Party is required thereunder, and to take such actions on its behalf (in its capacity as a Secured Party) under the provisions of such Transaction Documents as are reasonably incidental thereto, to execute and deliver in the name of and on behalf of such Secured Party, or in its own name, as the case may be, all documents required to be executed by such Secured Party (in its capacity as such) in connection therewith and to do, take and perform all and every act and thing whatsoever requisite, proper or necessary to be done, in the exercise of any of the rights and powers herein granted, as fully to all intents and purposes as such Secured Party (in its capacity as such) might or could do, with full power of substitution or revocation, hereby ratifying and confirming all that said attorney-in-fact, or its substitute or substitutes, shall lawfully do or cause to be done by virtue of this power of attorney and the rights and powers herein granted; provided that the Collateral Agent shall not so consent or take such other actions other than in accordance with this Agreement and the Security Documents. This Section 2.9 is to be construed and interpreted as a general power of attorney coupled with an interest. The enumeration of specific items, rights, acts or powers herein is not intended to, nor does it limit or restrict, and is not to be construed or interpreted as limiting or restricting, the general powers herein granted to said attorney-in-fact. The rights, powers, and authority of said attorney-in-fact herein granted shall commence and be in full force and effect as of the Closing Date, and such rights, 16 20 powers and authority shall remain in full force and effect thereafter until the Debt Termination Date. Section 2.10 The Issuer as a Secured Party. The Issuer hereby collaterally assigns, transfers and conveys all of its rights hereunder, either now existing or hereafter arising, to the Bond Trustee for the benefit of the Holders, as security for its obligations under the Finance Documents. The Bond Trustee shall, subject to the terms of the Indenture, be entitled to vote on all matters under this Agreement in accordance with the direction of the Holders of the aggregate principal amount of the Outstanding Bonds required to take action under the Indenture. Section 2.11 Additional Guarantors. If the Issuer acquires or creates an Additional Subsidiary that is an Additional Guarantor pursuant to the Finance Documents, the Issuer will cause such Subsidiary to execute the Designation Letter (Additional Guarantor) attached as Exhibit B hereto. Section 2.12 Assignment of Rights, No Assumption of Duties. Anything herein contained to the contrary notwithstanding, (i) each of the Issuer, the Subsidiary Guarantor and any Additional Guarantor shall remain liable under each of the Transaction Documents to which it is a party to the extent set forth therein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Collateral Agent of any of its rights, remedies or powers hereunder shall neither release the Issuer, the Subsidiary Guarantor nor any Additional Guarantor from any of its duties or obligations under each of the Transaction Documents to which it is a party and (c) the Collateral Agent shall have no obligation or liability under any of the Transaction Documents to which each of the Issuer, the Subsidiary Guarantor and any Additional Guarantor is a party by reason of or arising out of this Agreement, nor shall the Collateral Agent be obligated to perform any of the obligations or duties of the Issuer, the Subsidiary Guarantor or any Additional Guarantor thereunder, except as expressly provided herein. Section 2.13 Miscellaneous. (a) None of the provisions of this Agreement shall require the Collateral Agent to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to it against such risk or liability is not assured to it. 17 21 (b) Whenever in the administration of the provisions of this Agreement, the Collateral Agent shall deem it necessary or desirable that a matter be provided or established prior to taking or suffering any action to be taken hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of gross negligence or bad faith on the part of the Collateral Agent, be deemed to be conclusively proved and established by a certificate signed by any of the Secured Parties and delivered to the Collateral Agent and such certificate, in the absence of gross negligence or bad faith on the part of the Collateral Agent, shall be full warrant to the Collateral Agent for any action taken, suffered or omitted by it under the provisions of this Agreement upon the faith thereof. (c) The Collateral Agent shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, entitlement order, approval or other paper or document. (d) The Collateral Agent may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, attorneys, custodians or nominees appointed with due care, and shall not be responsible for any willful misconduct or negligence on the part of any new agent, attorney, custodian or nominee so appointed. (e) Any corporation into which the Collateral Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Collateral Agent shall be a party, or any corporation succeeding to the business of the Collateral Agent shall be the successor of the Collateral Agent hereunder without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto except where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding. ARTICLE 3 DEPOSITARY BANK Section 3.1 Appointment of Depositary Bank, Powers and Immunities. 18 22 (a) The Depositary Bank may execute any of its duties under this Agreement and the Indenture by or through agents or attorneys-in-fact. The Depositary Bank may consult with counsel and the advice or any opinion of counsel shall be full and complete authorization and protection in respect of any action taken or omitted by it hereunder in good faith and in accordance with such advice or opinion of counsel. (b) The Collateral Agent on behalf of the Secured Parties under this Agreement hereby appoints the Depositary Bank to act as depositary bank and "securities intermediary" hereunder with such powers as are expressly delegated to the Depositary Bank by the terms of this Agreement and the Indenture. The Depositary Bank shall not have any duties or responsibilities except those expressly set forth in this Agreement and the Indenture. Without limiting the generality of the foregoing, the Depositary Bank shall take all actions as the Collateral Agent shall direct it to perform in accordance with the express provisions of this Agreement and the Indenture or as the Collateral Agent may otherwise direct it to perform in accordance with the provisions of this Agreement and the Indenture. Notwithstanding anything to the contrary contained herein, the Depositary Bank shall not be required to take any action which is contrary to this Agreement, the Indenture or Applicable Law. Neither the Depositary Bank nor any of its Affiliates shall be responsible to any Secured Party for any recitals, statements, representations or warranties made by the Issuer, the Subsidiary Guarantor or any Additional Guarantor contained in this Agreement or any other Finance Document or in any certificate or other document referred to or provided for in, or received by any Secured Party under, the Indenture, this Agreement or any other Finance Document for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, the Indenture or any other document referred to or provided for herein or therein or for any failure by the Issuer, the Subsidiary Guarantor or any Additional Guarantor to perform their respective obligations hereunder or thereunder. The Depositary Bank shall not be required to ascertain or inquire as to the performance by the Issuer, the Subsidiary Guarantor or any Additional Guarantor of any of their respective obligations under the Indenture, this Agreement, any other Finance Document or any other document or agreement contemplated hereby or thereby. The Depositary Bank shall not be (a) required to initiate or conduct any litigation or collection proceeding hereunder or under any other Security Document or (b) responsible for any action taken or omitted to be taken by it hereunder (except for its own gross negligence or willful misconduct) or in connection with any other Security Document. Except as otherwise provided under this Agreement, the Working Capital Facility or the Indenture, the Depositary Bank shall take action under this Agreement and the 19 23 Indenture only as it shall be directed in writing by the Collateral Agent. Whenever in the administration of this Agreement or the Indenture, the Depositary Bank shall deem it necessary or desirable that a factual matter be proved or established in connection with the Depositary Bank taking, suffering or omitting to take any action hereunder or thereunder, such matter (unless other evidence in respect thereof is herein specifically prescribed) may be deemed to be conclusively proved or established by a certificate of any Authorized Officer of the Issuer or the Collateral Agent, if appropriate. The Depositary Bank shall have the right at any time to seek instructions concerning the administration of this Agreement and the Indenture from the Collateral Agent or any court of competent jurisdiction. The Depositary Bank shall have no obligation to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or under the Indenture. Section 3.2 Reliance by Depositary Bank. The Depositary Bank shall be entitled to rely upon and shall not be bound to make any investigation into the facts or matters stated in any Officer's Certificate of the Issuer, the Subsidiary Guarantor, any Additional Guarantor or the Collateral Agent or any other notice or other document (including any cable, telegram, telecopy or telex) believed by it to be genuine and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice or statement of legal counsel, independent accountants and other experts selected by the Depositary Bank and shall have no liability for its actions taken thereupon, unless due to the Depositary Bank's willful misconduct or gross negligence. Without limiting the foregoing, the Depositary Bank shall be required to make payments to the Secured Parties only as set forth herein. The Depositary Bank shall be fully justified in failing or refusing to take any action under this Agreement or the Indenture (i) if such action would, in the reasonable opinion of the Depositary Bank, be contrary to Applicable Law or the terms of this Agreement or the Indenture, (ii) if such action is not specifically provided for in this Agreement or the Indenture, it shall not have received any such advice or concurrence of the Collateral Agent as it deems appropriate or (iii) if, in connection with the taking of any such action that would constitute an exercise of remedies under this Agreement or the Indenture (whether such action is or is intended to be an action of the Depositary Bank or the Collateral Agent), it shall not first be indemnified to its satisfaction by the Secured Parties (other than the Bond Trustee (in its individual capacity) or the Collateral Agent (in its individual capacity) or any other agent or trustee under any of the Finance Documents (in their respective individual capacities)) against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Depositary Bank shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or the Indenture in 20 24 accordance with a request of the Collateral Agent, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Secured Parties. Section 3.3 Court Orders. The Depositary Bank is hereby authorized, in its exclusive discretion, to obey and comply with all writs, orders, judgments or decrees issued by any court or administrative agency affecting any money, documents or things held by the Depositary Bank. The Depositary Bank shall not be liable to any of the parties hereto or any other Secured Party, their successors, heirs or personal representatives by reason of the Depositary Bank's compliance with such writs, orders, judgments or decrees, notwithstanding that such writ, order, judgment or decree is later reversed, modified, set aside or vacated. Section 3.4 Resignation or Removal. (a) Except during the continuation of a Default or Event of Default (as such term is defined in such document) under any Finance Document, the Issuer shall have the right to remove the Depositary Bank upon thirty (30) days' prior written notice to the Secured Parties with or without cause, effective upon the appointment of a successor Depositary Bank under this Section 3.4, which is reasonably acceptable to the Bond Trustee, the Working Capital Facility Agent and the Collateral Agent. (b) Subject to the appointment and acceptance of a successor Depositary Bank as provided below, the Depositary Bank may resign at any time by giving thirty (30) days' prior written notice thereof to the Collateral Agent and the Issuer, provided that in the event the Depositary Bank is also the Collateral Agent, it must also at the same time resign as Collateral Agent. The Depositary Bank may be removed at any time with cause by the Collateral Agent. In the event that the Depositary Bank shall decline to take any action without first receiving adequate indemnity from the Issuer, the Subsidiary Guarantor, an Additional Guarantor, the other Secured Parties or the Collateral Agent, as the case may be, and, having received an indemnity, shall continue to decline to take such action, the Collateral Agent shall be deemed to have sufficient cause to remove the Depositary Bank. In the event that the Depositary Bank is also the Bond Trustee, the Collateral Agent shall have the right to remove the Depositary Bank with or without cause. Upon any such resignation or removal, the Collateral Agent shall have the right to appoint a successor Depositary Bank, which Depositary Bank (except during the continuation of a Default or Event of Default (as such term is defined in such document) under any Finance Document) shall be reasonably acceptable to the Issuer. If no successor 21 25 Depositary Bank shall have been appointed by the Collateral Agent and shall have accepted such appointment within thirty (30) days' after the retiring Depositary Bank's giving of notice of resignation or removal of the retiring Depositary Bank, then (i) the retiring Depositary Bank may petition a court of competent jurisdiction for the appointment of a successor Depositary Bank or (ii) the retiring Depositary Bank may appoint a successor Depositary Bank, which shall be a bank or trust company reasonably acceptable to the Collateral Agent and the Issuer. Upon the acceptance of any appointment as Depositary Bank hereunder by the successor Depositary Bank, (a) such successor Depositary Bank shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Depositary Bank, and the retiring Depositary Bank shall be discharged from its duties and obligations hereunder and (b) the retiring Depositary Bank shall promptly transfer all Depositary Accounts within its possession or control to the possession or control of the successor Depositary Bank and shall execute and deliver such notices, instructions and assignments as may be necessary or desirable to transfer the rights of the Depositary Bank with respect to the Depositary Accounts to the successor Depositary Bank. After the retiring Depositary Bank's resignation or removal hereunder as Depositary Bank, the provisions of this Article 3 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Depositary Bank. Section 3.5 Expenses; Indemnification; Fees. (a) The Issuer and the Subsidiary Guarantor jointly and severally agree to pay or reimburse all reasonable out-of-pocket expenses of the Depositary Bank (including reasonable fees and expenses for legal services) in respect of, or incident to, the execution, administration or enforcement of any of the provisions of this Agreement or the Indenture or in connection with any amendment, waiver or consent relating to this Agreement, the Working Capital Facility or the Indenture. The obligations contained in this Section 3.5 shall survive the termination of this Agreement, the Working Capital Facility and the Indenture or the resignation or removal of the Depositary Bank. (b) The Issuer and the Subsidiary Guarantor jointly and severally agree to indemnify the Depositary Bank in its capacity as such, and, in their capacity as such, its officers, directors, shareholders, controlling persons, employees, agents and servants (each an "Indemnified Depositary Bank Party") from and against any and all claims, losses, liabilities and expenses (including the reasonable fees and expenses of counsel) arising out of or resulting from this Agreement, the Working 22 26 Capital Facility or the Indenture (including, without limitation, performance under or enforcement of this Agreement, the Working Capital Facility or the Indenture, but excluding any such claims, losses or liabilities resulting from the Indemnified Depositary Bank Party's gross negligence or willful misconduct). This indemnity shall survive the termination of this Agreement, the Working Capital Facility and the Indenture and the resignation or removal of the Depositary Bank. This indemnity is extended in addition to, and not in derogation or limitation of, the provisions of Section 2.4. (c) On the Closing Date, and on each anniversary of the Closing Date to and including the Debt Termination Date, the Issuer shall pay the Depositary Bank an annual fee in an amount mutually agreed on by the Issuer and the Depositary Bank. Section 3.6 Direction to Depositary Bank. Unless otherwise provided herein, any instruction or direction given to the Depositary Bank with respect to the transfer, withdrawal, deposit or payment of any funds under this Agreement, the Working Capital Facility or the Indenture shall be in writing and shall state with specificity the dollar amount, source and disposition of any such funds. Section 3.7 Action by Depositary Bank. Notwithstanding any provisions to the contrary in this Agreement, the Working Capital Facility or the Indenture, if any transfer, withdrawal, deposit or payment of any funds by the Depositary Bank, or any other action to be taken by the Depositary Bank, under this Agreement, the Working Capital Facility or the Indenture is to be made or taken on a day which is not a Business Day, such transfer, withdrawal, deposit, payment or other action shall be made or taken on the next succeeding Business Day. Section 3.8 Merger of Depositary Bank. Any corporation into which the Depositary Bank may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Depositary Bank shall be a party, or any corporation succeeding to the business of the Depositary Bank shall be the successor of the Depositary Bank hereunder without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto except where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding. 23 27 ARTICLE 4 ADMINISTRATION OF THE COLLATERAL Section 4.1 Administration of the Collateral. (a) The Collateral Agent shall hold the Collateral and any Lien thereon for the benefit of the Secured Parties pursuant to the terms of this Agreement, the Security Documents and any other Finance Document to which the Collateral Agent is a party. The Collateral Agent shall administer the Collateral in the manner contemplated by the Security Documents and the other Finance Documents and shall apply the balances from time to time held in the Depositary Accounts in the manner provided in this Agreement, the Indenture, the Working Capital Facility and the other Finance Documents. The Collateral Agent shall exercise such rights and remedies with respect to the Collateral as are granted to it under the Security Documents, the other Finance Documents and Applicable Law. Except as otherwise expressly provided herein, no Secured Party and no class or classes thereof shall have any right to direct the Collateral Agent to take any action in respect of the Collateral and no Secured Party shall have any right to sell, exchange or otherwise deal with any property at any time pledged, assigned or mortgaged to secure the Secured Obligations or take action with respect to the Collateral independently of the Collateral Agent. (b) The Collateral Agent shall have no responsibility with respect to the recording, re-recording, filing, or refiling under the laws of any jurisdiction under this Agreement, the other Finance Documents, or any other document or statement that may be required or permitted to be recorded, re-recorded, filed or re-filed under any such laws to perfect or protect the security interests created by or pursuant to the Security Documents, or the payment of any fees or taxes in connection therewith. Section 4.2 Priority of Security Interests. (a) Each Secured Party agrees that the Security Interest of each Secured Party in any Collateral ranks and shall rank equally in priority with the Security Interest of the other Secured Parties in the same Collateral. (b) Notwithstanding anything to the contrary in clause (a), the priorities specified in this Agreement and in the Indenture with respect to (i) the Collateral, (ii) all proceeds of the Collateral (including without limitation all Loss Proceeds to the extent received by the Collateral Agent after giving effect to the limitations and deductions permitted under the Indenture with respect to such 24 28 proceeds) and (iii) all amounts and funds retained in accordance with the Indenture, in each case are applicable irrespective of any statement to the contrary in any Finance Document or any other agreement, the time or order or method of attachment or perfection of Liens, the time or order of filing of financing statements, or the giving or failure to give notice of the acquisition or expected acquisition of purchase money or other security interests, and to the extent not provided for in this Agreement, the rights and priorities of the Secured Parties shall be determined in accordance with Applicable Law. Section 4.3 Modification of Certain Documents. Neither the Issuer, the Subsidiary Guarantor nor the Bond Trustee shall agree or consent to any material termination, modification, supplement or waiver of any material provision of Sections 6.2, 6.3, 6.4, 6.5, 6.7 or 6.11 of the Indenture (or any material definition applicable thereto) without the prior written consent of the Working Capital Facility Agent. ARTICLE 5 EVENTS OF DEFAULT; TRIGGER EVENTS Section 5.1 Exercise of Rights. So long as any Finance Liabilities remain outstanding, each of the Secured Parties hereby acknowledges and agrees as follows: (a) The Collateral Agent shall administer the Collateral in the manner contemplated by the Security Documents and this Agreement and only upon the occurrence and continuance of a Trigger Event (subject to the requirement that the Collateral Agent shall have received written notice pursuant to Article 5.2(a)), the Collateral Agent shall exercise, upon the written instruction of, and on behalf of, the Required Secured Parties in accordance with the terms and provisions of this Article 5, such rights and remedies with respect to the Collateral as are granted to it under this Agreement, the Security Documents and Applicable Law. (b) No Secured Party and no class or classes of Secured Parties shall have any right, other than in accordance with the terms and provisions of this Article 5, to (i) sell, exchange, release, not perfect and otherwise deal with any property at any time pledged, assigned or mortgaged to secure the Finance Liabilities, (ii) exercise or refrain from exercising any rights to direct the Collateral Agent to take any action in respect of the Collateral, or (iii) take any other action with 25 29 respect to the Collateral (A) independently of the Collateral Agent or (B) other than to direct the Collateral Agent to take action in accordance with the terms and provisions of this Article 5. Subject to Section 2.7, any of the Secured Parties may, at any time and from time to time (i) amend in any manner any outstanding Finance Documents to which they are a party in accordance with the terms thereof, (ii) release anyone liable in any manner under or in respect of such Secured Party's Finance Liabilities in accordance with the terms of the Finance Documents to which they are a party and (iii) apply any sums from time to time received for payment or satisfaction of such Secured Party's Finance Liabilities except as otherwise provided in Section 5.4. (c) Each Secured Party hereby agrees that upon the request of the Collateral Agent it will give the Collateral Agent notice of the aggregate amount of outstanding Indebtedness owed by the Issuer, the Subsidiary Guarantor and any Additional Guarantor to such Secured Party under the applicable Finance Documents and any other information that the Collateral Agent may reasonably request. Section 5.2 Actions Upon A Trigger Event. So long as any Finance Liability remains outstanding, the following provisions shall apply: (a) Each Secured Party hereby agrees to give each other Secured Party and the Collateral Agent written notice of the occurrence of an Event of Default under such Secured Party's Finance Documents and of the occurrence of an acceleration under such Secured Party's Finance Documents wherein such Secured Party's Finance Liabilities have been declared to be or have automatically become due and payable earlier than the scheduled maturity thereof and such notice shall set forth the aggregate amount of Finance Liabilities that have been so accelerated under such Finance Documents, in each case as soon as practicable after the occurrence thereof; provided, however, that the failure to provide such notice shall not limit or impair the rights of the Secured Parties hereunder or under any of the other Finance Documents. (b) The Issuer and the Subsidiary Guarantor hereby agree that if a Trigger Event shall have occurred and is continuing, the Collateral Agent is hereby irrevocably authorized and empowered to act as the attorney-in-fact for the Issuer, the Subsidiary Guarantor and the Additional Guarantor with respect to the giving of any instructions or notices under the Finance Documents; provided, however that if a bankruptcy event set forth in the Indenture, the Working Capital Facility or any other Finance Document in respect of the Issuer, the Subsidiary Guarantor, or any Addi- 26 30 tional Guarantor has caused the Trigger Event, the Collateral Agent shall automatically and irrevocably be authorized and empowered to act as the attorney-in-fact for the Issuer, the Subsidiary Guarantor and the Additional Guarantor with respect to the giving of such instructions or notices. The Collateral Agent hereby agrees that, upon the written request of the Required Secured Parties, it shall give such notices and instructions under the Finance Documents to the Depositary Bank. The Depositary Bank hereby agrees that it shall accept such notices and instructions from the Collateral Agent. Section 5.3 Exercise of Remedies and Application of Proceeds. Notwithstanding the provisions of Article 6 of the Indenture, so long as any Finance Liability remains outstanding to more than one Secured Party, the following provisions shall apply: (a) If a Trigger Event shall have occurred and be continuing (subject to the requirement that the Collateral Agent shall have received written notice pursuant to Section 5.2(a)), upon the written request of the Required Secured Parties, the Collateral Agent, on behalf of the Secured Parties, shall give the Depositary Bank a written notice that a Trigger Event has occurred (the date of such notice, the "Trigger Event Date") and direct the Depositary Bank to render an accounting of the current balance of each Depositary Account and of any other Monies of the Issuer, the Subsidiary Guarantor and any Additional Guarantor administered by such Depositary Bank. No Secured Party shall be deemed to have knowledge or notice of the occurrence of any Event of Default until such Secured Party has received a written notice of such Event of Default from the Issuer, the Subsidiary Guarantor, an Additional Guarantor or any other Person for whom such Secured Party is acting as agent or trustee. (b) If a Trigger Event shall have occurred and be continuing (subject to the requirement that the Collateral Agent shall have received written notice pursuant to Section 5.2(a)), and only in such event, upon the written request of the Required Secured Parties, the Collateral Agent shall be authorized to take any and all actions and to exercise any and all rights, remedies and options which it may have under the Security Documents or which the Required Secured Parties direct it to take under this Agreement, including realization and foreclosure on the Collateral; provided, however, that if a bankruptcy event set forth in the Indenture, the Working Capital Facility or any other Finance Document in respect of the Issuer, the Subsidiary Guarantor or any Additional Guarantor has caused the Trigger Event, the 27 31 Collateral Agent shall automatically be authorized to take such action without the written request of the Required Secured Parties. (c) The proceeds of any sale, disposition or other realization or foreclosure by the Collateral Agent upon the Collateral or any portion thereof pursuant to the Security Documents shall be governed by this Section 5.3(c). Any non-cash proceeds resulting from such liquidation of the Collateral shall be held by the Collateral Agent for the benefit of the Secured Parties until later sold or otherwise converted into cash, at which time the Collateral Agent shall apply such cash in accordance with the next sentence of this Section 5.3(c). The Collateral Agent shall transfer any cash proceeds net of expenses resulting from liquidation of the Collateral to the Revenue Account from which such proceeds shall be distributed by the Depositary Bank in accordance with the terms and provisions of the Indenture in the following order of priority: first, to the payment of (a) all reasonable costs and expenses relating to the sale of the Collateral and the collection of all amounts owing hereunder, including reasonable attorneys' fees and disbursements and the just compensation of the Collateral Agent for services rendered in connection therewith or in connection with any proceeding to sell if a sale is not completed, in each case whether arising hereunder or under the other Security Documents or other Finance Documents, (b) all charges, expenses and advances incurred or made by the Collateral Agent in order to protect the Liens of the Security Documents, the Security Interests in the Collateral or the security afforded thereby, and (c) all liabilities incurred by the Collateral Agent which are covered by the indemnity provisions of this Agreement or the other Security Documents or other Finance Documents together with interest at the rate per annum equal to the Post Default Rate; second, to the payment to the Bond Trustee and the Working Capital Facility Agent for all fees and expenses due and owing under the applicable Finance Documents; third, to the payment to the remaining Secured Parties not set forth in priority second, for all fees and expenses due and owing under the applicable Finance Documents; fourth, to the payment to the Secured Parties (for the benefit of themselves and the lenders under the related Finance Documents, as applica- 28 32 ble) of the sum of accrued and unpaid interest on the Bonds, the Working Capital Facility and any other Secured Obligations and on any commitment fees, pro rata in accordance with the respective amounts of unpaid interest and commitment fees owed to such Person to be applied by each such Person in accordance with the related Finance Documents pursuant to which such unpaid interest is payable; fifth, to the payment to the Secured Parties (for the benefit of themselves and the lenders under the related Finance Documents, as applicable) of principal owed to the Secured Parties (for the benefit of themselves and the lenders under the related Finance Documents, as applicable), respectively, hereunder or under any other Finance Document, pro rata, in accordance with the respective amounts of principal owed to such Person to be applied by each such Person in accordance with the related Finance Documents pursuant to which such principal is payable; sixth, to the payment to the Secured Parties (for the benefit of themselves and the lenders under the related Finance Documents, as applicable) of make-whole premiums, if any, and breakage costs, if any, owed to the Secured Parties (for the benefit of themselves and the lenders under the related Finance Documents, as applicable) respectively, hereunder or under any other Finance Document, pro rata, in accordance with the respective amounts of make-whole premiums and breakage costs owed to such Person to be applied by each such Person in accordance with the related Finance Documents pursuant to which such make-whole premiums and breakage costs are payable; seventh, to the payment to the Secured Parties (for the benefit of themselves and the lenders under the related Finance Documents, as applicable), of the other Secured Obligations owed to the Secured Parties (for the benefit of themselves and the lenders under the related Finance Documents, as applicable), respectively, hereunder or under any Finance Document, pro rata in accordance with the respective outstanding unpaid fees, charges and other unpaid Secured Obligations, owed to such Person to be applied by each such Person in accordance with the related Finance Document pursuant to which such Secured Obligations were incurred; and finally, to the payment to the Issuer, or its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining. 29 33 (d) The proceeds of any sale, disposition or other realization with respect to Collateral held for the benefit of some but not all of the Secured Parties, if applicable, shall be applied to the payment of obligations owed to the parties for whose benefit the specific Collateral was held. Section 5.4 Receipt of Money or Proceeds. The Secured Parties and the Depositary Bank hereby agree that if, at any time during the term of this Agreement, any Secured Party receives any payment or distribution of assets of the Issuer, the Subsidiary Guarantor or an Additional Guarantor of any kind or character, whether monies or cash proceeds, resulting from liquidation of the Collateral, other than in accordance with the terms of this Agreement, the Working Capital Facility and the Indenture, the Secured Party shall hold such payment or distribution in trust for the benefit of the Secured Parties and shall immediately remit such payment or distribution to the Depositary Bank and the Depositary Bank shall deposit such monies or proceeds in the Revenue Fund for application or distribution, as the case may be, in accordance with the terms of the Indenture, the Working Capital Facility and this Agreement. If any Secured Party shall certify in writing to the Collateral Agent that any Permitted Indebtedness in respect of which such Secured Party is the trustee or agent has not been paid when due and after the giving of any applicable notice or the passage of any applicable grace period (such amount referred to herein as "Arrearages"), then in any such event, and upon the written request of such Secured Party, the Collateral Agent shall make demand for payment of such Arrearages where such demand may be made by the terms thereof. Section 5.5 Additional Secured Parties. The Issuer and the Subsidiary Guarantor shall cause each Person replacing any of the Secured Parties and each Person (or trustee or agent thereof) providing Permitted Indebtedness to the Issuer, the Subsidiary Guarantor or any Additional Guarantor that is to be secured by all or any portion of the Collateral to execute a Designation Letter, and upon such execution, such Person shall become a party to this Agreement, and any Person which executes and delivers a counterpart to this Agreement or is designated as a Secured Party pursuant to the terms of a Designation Letter, shall become a party hereto and shall be bound by and subject to the terms and conditions hereof and the covenants, stipulations and agreements contained herein. Section 5.6 Event of Loss; Title Event. (a) If an Event of Loss or Title Event shall occur with respect to the Project, the Issuer and/or the Subsidiary Guarantor, as the case may be, shall (i) diligently pursue all of its rights to compensation against the appropriate Person, as the case may be, in respect of such 30 34 Event of Loss or Title Event, (ii) compromise, settle or consent to the settlement of any claim against the appropriate Person, as the case may be, and (iii) deposit any Loss Proceeds from such Event of Loss or proceeds from such Title Event, as the case may be, after deducting all reasonable expenses incurred by it in litigating, arbitrating, compromising, settling or consenting to the settlement of any claims against the appropriate Person into the Revenue Account pursuant to Section 6.5 of the Indenture. (b) If an Event of Loss shall occur, as soon as reasonably practicable, but no later than fifteen (15) days after the date of receipt by the Issuer and/or the Subsidiary Guarantor (or the Collateral Agent on their behalf) of Loss Proceeds, the Issuer and/or the Subsidiary Guarantor (or the Collateral Agent on their behalf), as the case may be, shall make a reasonable good faith determination as to whether the property affected by such Event of Loss can be rebuilt, repaired or restored. (c) If (x) an Event of Loss occurs and the Issuer and/or the Subsidiary Guarantor has either (i) determined that the property affected by such Event of Loss cannot be repaired, rebuilt or replaced or (ii) decided not to repair, rebuild or replace the property affected by such Event of Loss and (y) Loss Proceeds exceed $10,000,000, all Loss Proceeds in excess of $10,000,000 shall be distributed pro rata among the Secured Parties; provided that the pro rata share of Loss Proceeds owing to holders of Outstanding Bonds will be applied to a pro rata redemption of the Bonds in accordance with Section 3.2 of the Indenture. (d) In the event that the Issuer and/or the Subsidiary Guarantor has determined that the property affected by the Event of Loss be repaired, rebuilt or replaced and the amount of the Loss Proceeds remaining after the payment of the actual total cost of such repair, rebuilding or replacement exceeds $5,000,000, the amount by which all the Loss Proceeds exceeds the actual total cost of such repair, rebuilding or replacement of the property affected by the Event of Loss which is in excess of $5,000,000, shall be distributed pro rata among the Secured Parties; provided that the pro rata share of Loss Proceeds owing to holders of Outstanding Bonds will be applied to a pro rata redemption of the Bonds in accordance with Section 3.2 of the Indenture. 31 35 ARTICLE 6 MISCELLANEOUS Section 6.1 Amendments. No amendment or waiver of any provision of this Agreement shall be effective unless the same shall be in writing and signed by each of the Secured Parties, the Issuer, the Subsidiary Guarantor and all other parties hereto, which consents from all such parties shall not be unreasonably withheld, and any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. No failure to exercise, and no delay in exercising, any right, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude or require any other or future exercise thereof or the exercise of any other right, power or privilege. All rights, powers and remedies granted to any party hereto and all other agreements, instruments and documents executed in connection with this Agreement shall be cumulative, may be exercised singly or concurrently and shall not be exclusive of any rights or remedies provided by law. The Collateral Agent may, but shall not be obligated to, execute and deliver any supplement, modification or amendment of this Agreement which modifies its rights, powers, duties, immunities or indemnities hereunder. In executing any supplement, modification or amendment to this Agreement, the Collateral Agent shall be entitled to receive and shall be fully protected in relying upon, an opinion of counsel stating that the execution of such supplement, modification or amendment is authorized or permitted by this Agreement. Section 6.2 Assignment. Any Secured Party may at any time assign, transfer, grant or sell participations in its rights and interests under the Security Documents, subject, however, to the restrictions imposed on the assignment, transfer, grant or sale of participation in the Secured Obligations owing to such Secured Party pursuant to the agreement giving rise to such Secured Obligations or any other agreement relating thereto. In the event of any such assignment or transfer, the term "Secured Party" as used in this Agreement shall be deemed to mean any such assignee or transferee, as the case may be. Notwithstanding anything above to the contrary, no assignment nor transfer may be made by the Issuer, the Subsidiary Guarantor nor any Additional Guarantor without the prior written consent of the Collateral Agent, acting pursuant to the provisions of this Agreement. 32 36 Section 6.3 Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected and/or impaired thereby. Section 6.4 Notices. Except as otherwise expressly provided herein, (a) all notices and other communications provided for hereunder shall be provided in writing (including telegraphic, telex, facsimile or cable communication) and shall be sent by telecopy, telex, telegraph or cable with the original of such communication dispatched by (if inland) overnight or (if overseas) international courier and, if such courier service is not available, by registered airmail (or, if inland, registered first-class mail) with postage prepaid to the Issuer, the Subsidiary Guarantor, any Additional Guarantor, the Secured Parties, the Depositary Bank and the Collateral Agent at their respective addresses specified on Schedule III to the Indenture or Section 10.01 of the Working Capital Facility or in any Designation Letter, or at such other address as shall be designated by such Person in a written notice to the other parties hereto and (b) all such notices and communications shall, when mailed, telegraphed, telexed, telecopied, cabled or sent by overnight courier, be effective seven (7) days after being deposited in the mail in the manner as aforesaid, when delivered to the telegraph company or cable company (if inland), one (1) day or (if overseas) three (3) days after delivery to a courier in the manner as aforesaid, as the case may be, or when sent by telex (with the correct answer back) or telecopier (after confirmation of receipt). Section 6.5 Successors and Assigns. All of the covenants, promises and agreements in this Agreement by or on behalf of the respective parties hereto shall bind and inure to the benefit of their respective successors and assigns, regardless of whether so expressed. Section 6.6 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. Section 6.7 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) THIS AGREEMENT IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO 33 37 THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). (b) Any legal action or proceeding against the Issuer, the Subsidiary Guarantor or an Additional Guarantor with respect to this Agreement or any other Finance Document may be brought in the courts of the State of New York in the County of New York or of the United States for the Southern District of New York and, by execution and delivery of this Agreement, the Issuer and the Subsidiary Guarantor each hereby irrevocably submits and accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Issuer and the Subsidiary Guarantor agree that a judgment in connection with this Agreement, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon the Issuer, the Subsidiary Guarantor and an Additional Guarantor, as the case may be. The Issuer and the Subsidiary Guarantor each hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 111 Eighth Avenue, New York, N.Y. 10011, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notice and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such agent, the Issuer and the Subsidiary Guarantor each agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Collateral Agent. The Issuer and the Subsidiary Guarantor each further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Issuer, the Subsidiary Guarantor or any Additional Guarantor, as the case may be, at their respective address referred to in Section 6.4, such service to become effective thirty (30) days after such mailing. Nothing herein shall affect the right of any Secured Party or any other Person to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Issuer, the Subsidiary Guarantor or an Additional Guarantor in any other jurisdiction. (c) The Issuer and the Subsidiary Guarantor each hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such 34 38 action or proceeding brought in any such court has been brought in an inconvenient forum. (d) WITH REGARD TO THIS AGREEMENT, EACH PARTY HERETO HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY. Section 6.8 No Impairments of Other Rights. Nothing in this Agreement is intended or shall be construed to impair, diminish or otherwise adversely affect any other rights the Secured Parties may have or may obtain against the Issuer, the Subsidiary Guarantor or any Additional Guarantor. Section 6.9 Headings. Headings herein are for convenience only and shall not be relied upon in interpreting or enforcing this Agreement. Section 6.10 Termination. This Agreement shall remain in full force and effect until the Debt Termination Date. Following the Debt Termination Date or the resignation or removal of the Collateral Agent, Sections 2.4(a) and (b) and Sections 3.5(a) and (b) shall remain in full force and effect. Section 6.11 Entire Agreement. This Agreement, including the documents referred to herein, embodies the entire agreement and understanding of the parties hereto and supersedes all prior agreements and understandings of the parties hereto relating to the subject matter herein contained. Section 6.12 Execution in Lieu of Agent. To the extent that any lenders under the Working Capital Facility or holders of Permitted Indebtedness incurred subsequent to the date hereof are not represented by an agent that is a party to this Agreement, such lender under the Working Capital Facility or holder of such Permitted Indebtedness shall be permitted to execute this Agreement and the Designation Letter on its own behalf in lieu of any agent on its behalf. Section 6.13 Conflicts with Other Security Documents. Notwithstanding any provision hereof, in the event of any conflict between the terms of this Agreement and the other Security Documents (other than the Indenture), the provisions of this Agreement shall control. Section 6.14 Scope of Duties; Limits on Liability. Without limiting any other provision hereof, the duties and obligations of the Collateral Agent shall be determined solely by the express provisions of this Agreement; the Collateral Agent 35 39 shall not be liable except for the performance of such duties and obligations as are specifically set forth herein. Anything in this Agreement to the contrary notwithstanding, in no event shall the Collateral Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Collateral Agent has been advised of the likelihood of such loss or damage and regardless of the form of action. Section 6.15 Notice of Adverse Claim. Except for the claims and interest of the Secured Parties in the Depositary Accounts, the Collateral Agent does not know of any claim to, or interest in, the Depositary Accounts or in any "financial asset" (as defined in Section 8-102(a) of the UCC) credited thereto. If any person asserts any lien, encumbrance or adverse claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against the Depositary Accounts or in any financial asset carried therein, the Collateral Agent will promptly notify the Secured Parties, the Issuer, the Subsidiary Guarantor and any Additional Guarantor thereof. 36 40 IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed by their duly authorized officers, all as of the date first written above. NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Matczynski --------------------------------- Name: Craig A. Matczynski Title: President LOUISIANA GENERATING LLC By: /s/ Craig A. Matczynski --------------------------------- Name: Craig A. Matczynski Title: Vice President THE CHASE MANHATTAN BANK, as Bond Trustee By: /s/ Annette M. Marsula --------------------------------- Name: Annette M. Marsula Title: Vice President THE CHASE MANHATTAN BANK, as Collateral Agent By: /s/ Annette M. Marsula --------------------------------- Name: Annette M. Marsula Title: Vice President 37 41 THE CHASE MANHATTAN BANK, as the Depositary Bank By: /s/ Annette M. Marsula --------------------------------- Name: Annette M. Marsula Title: Vice President 38 42 Exhibit A to the Intercreditor Agreement [FORM OF DESIGNATION LETTER] [Date] [Collateral Agent] Re: NRG South Central Generating LLC Ladies and Gentlemen: Reference is made to (i) the Collateral Agency and Intercreditor Agreement (the "Intercreditor Agreement") dated as of March 30, 2000 among NRG South Central Generating LLC (the "Issuer"), Louisiana Generating LLC (the "Subsidiary Guarantor"), the Bond Trustee, the Depositary Bank, the Collateral Agent and any trustees or agents under any other Finance Documents and (ii) [Describe New Credit Documents]. Capitalized terms used herein and not defined herein shall have the meanings set forth in Appendix A to the Indenture (the "Indenture") dated as of March 30, 2000 between the Issuer, the Subsidiary Guarantor and the Bond Trustee. The undersigned is the [Bank/Lender][agent for the [Banks] [Lenders]] under the [New Credit Document]. The undersigned is delivering this Designation Letter pursuant to Section 5.5 of the Intercreditor Agreement in order to permit the undersigned [and the [Banks][Lenders] under the New Credit Document] to become Secured Parties under the Intercreditor Agreement and the other Finance Documents and to benefit from the Collateral under the Finance Documents in accordance with the terms of the Intercreditor Agreement and the other Finance Documents. The undersigned [on behalf of itself and the [Banks][Lenders]] accedes to and agrees to be bound by all of the terms and provisions of the 43 Intercreditor Agreement and the other Finance Documents. In furtherance thereof, the undersigned [on behalf of itself and the [Banks][Lenders] agrees to execute a counterpart of the Intercreditor Agreement. Our address for notices is: [Insert Information] Our wire transfer instructions are: [Insert Information] We agree that any extensions of credit under the [New Credit Documents] shall be deposited with the Depositary Bank, to the extent required by Section 6.5 of the Indenture. This Designation Letter may be executed in any number of counterparts, each executed counterpart constituting an original but all counterparts together constituting only one instrument. THIS DESIGNATION LETTER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). [CREDITOR] By: --------------------------- Name: Title: Consented to by: - -------------------, as Collateral Agent Exhibit A-2 44 By: --------------------- Name: Title: Exhibit A-3 45 Exhibit B to the Intercreditor Agreement [FORM OF DESIGNATION LETTER (ADDITIONAL GUARANTOR)] [Date] [Collateral Agent] [Issuer] Re: NRG South Central Generating LLC Ladies and Gentlemen: Reference is made to (i) the Collateral Agency and Intercreditor Agreement (the "Intercreditor Agreement") dated as of March 30, 2000 among NRG South Central Generating LLC (the "Issuer"), Louisiana Generating LLC (the "Subsidiary Guarantor"), the Bond Trustee, the Depositary Bank, the Collateral Agent and any trustees or agents under any other Finance Documents and (ii) [Describe New Credit Documents]. Capitalized terms used herein and not defined herein shall have the meanings set forth in Appendix A to the Indenture (the "Indenture") dated as of March 30, 2000 between the Issuer, the Subsidiary Guarantor and the Bond Trustee. The undersigned is an Additional Guarantor pursuant to the Indenture. The undersigned is delivering this Designation Letter pursuant to Section 2.11 of the Intercreditor Agreement in order to permit the undersigned to become an Additional Guarantor under the Intercreditor Agreement. By executing this letter, the undersigned shall be deemed to be an Additional Guarantor (as defined in the Indenture) and accedes to and agrees to be bound by all of the terms and provisions of the Intercreditor Agreement relating to the Subsidiary Guarantor. All obligations of the Subsidiary Guarantor under the Intercreditor Agreement shall be deemed to be the obligations of the undersigned. In 46 furtherance thereof, the undersigned agrees to execute a counterpart of the Intercreditor Agreement. Our address for notices is: [Insert Information] This Designation Letter (Additional Guarantor) may be executed in any number of counterparts, each executed counterpart constituting an original but all counterparts together constituting only one instrument. THIS DESIGNATION LETTER (ADDITIONAL GUARANTOR) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). [ADDITIONAL GUARANTOR] By: -------------------------- Name: Title: Consented to by: - ----------------------------- as Collateral Agent By: -------------------------- Name: Title: - -----------------------------, as Issuer By: -------------------------- Name: Title: Exhibit B-2 EX-4.8 18 y57012ex4-8.txt ASSIGNMENT AND SECURITY AGREEMENT 1 EXHIBIT 4.8 ASSIGNMENT AND SECURITY AGREEMENT Dated as of March 30, 2000 by NRG SOUTH CENTRAL GENERATING LLC to THE CHASE MANHATTAN BANK, as Collateral Agent 2 TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS; RULES OF INTERPRETATION ............. 2 SECTION 1.1. Definitions ............................................... 2 SECTION 1.2. Rules of Interpretation ................................... 6 ARTICLE II ASSIGNMENT AND GRANT OF SECURITY INTERESTS ............... 6 SECTION 2.1. Assignment and Grant of Security Interest ................. 6 SECTION 2.2. Security Interest Absolute ................................ 8 SECTION 2.3. Power of Attorney ......................................... 9 SECTION 2.4. Inspection and Verification ............................... 11 SECTION 2.5. Perfection of Security Interest in Guarantor Note ......... 11 ARTICLE III GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS .......... 12 SECTION 3.1. Title and Authority ....................................... 12 SECTION 3.2. Validity, Perfection and Priority of Lien ................. 12 SECTION 3.3. No Liens; Other Financing Statements ...................... 13 SECTION 3.4. Chief Executive Office; Name; Records ..................... 13 SECTION 3.5. Additional Statements and Schedules ....................... 14 SECTION 3.6. Further Actions ........................................... 14 ARTICLE IV SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT ..... 15 SECTION 4.1. Maintenance of Insurance; Protection of Security Interest . 15 SECTION 4.2. Location of Inventory and Equipment ....................... 15 SECTION 4.3. Inventory Records ......................................... 15
3 ARTICLE V SPECIAL PROVISIONS CONCERNING RECEIVABLES, CONTRACTS AND INSTRUMENTS ................... 15 SECTION 5.1. Additional Representations and Warranties ....................... 15 SECTION 5.2. Maintenance of Records; Legending of Records .................... 16 SECTION 5.3. Modification of Terms; No Payment to Grantor .................... 16 SECTION 5.4. Collection ...................................................... 16 SECTION 5.5. Instruments ..................................................... 17 ARTICLE VI SPECIAL PROVISIONS CONCERNING CONTRACTS ......................... 17 SECTION 6.1. Security Interest in Contract Rights ............................ 17 SECTION 6.2. Further Protection .............................................. 18 SECTION 6.3. Liabilities Under Receivables and Contracts ..................... 18 SECTION 6.4. Remedies ........................................................ 18 ARTICLE VII DUTY OF CARE OF COLLATERAL AGENT ................................ 19 SECTION 7.1. Collateral Agent's Duties; Reasonable Care ...................... 19 ARTICLE VIII REMEDIES UPON OCCURRENCE OF A TRIGGER EVENT ..................... 19 SECTION 8.1. Remedies; Obtaining the Issuer Security Agreement Collateral upon Trigger Event ................................................... 19 SECTION 8.2. Remedies; Disposition of the Issuer Security Agreement Collateral 20 SECTION 8.3. Waiver .......................................................... 21 SECTION 8.4. Application of Proceeds; Grantor Liable for Deficiency .......... 23 SECTION 8.5. No Waiver; Remedies Cumulative .................................. 23 SECTION 8.6. Discontinuance of Proceedings ................................... 23 ARTICLE IX MISCELLANEOUS ................................................... 24 SECTION 9.1. Notices ......................................................... 24
ii 4 SECTION 9.2. Amendment ....................................................... 24 SECTION 9.3. Successors and Assigns .......................................... 24 SECTION 9.4. Survival ........................................................ 24 SECTION 9.5. Headings Descriptive ............................................ 24 SECTION 9.6. Severability .................................................... 24 SECTION 9.7. Grantor's Duties ................................................ 25 SECTION 9.8. Termination; Release ............................................ 25 SECTION 9.9. Reinstatement ................................................... 25 SECTION 9.10. Counterparts ................................................... 25 SECTION 9.11 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial . 26 SECTION 9.12. Authority of Collateral Agent .................................. 27 SECTION 9.13. Conflict with Intercreditor Agreement .......................... 27 SECTION 9.14. Indemnities and Expenses ....................................... 27 SECTION 9.15. Entire Agreement ............................................... 27 SECTION 9.16. Independent Security ........................................... 28 SECTION 9.17. Third Party Beneficiaries ...................................... 28 SECTION 9.18. Limitation of Liability ........................................ 28 SECTION 9.19. Merger of Collateral Agent ..................................... 28 Schedule IV to Assignment and Security Agreement ............................. Sch.IV-1
Schedule I - Filing Offices Schedule II - Instruments Schedule III - Copyrights Schedule IV - Patents Schedule V - Trademarks Schedule 4.2 - Location of Investory and Equipment Exhibit A - Bond Power iii 5 ASSIGNMENT AND SECURITY AGREEMENT ASSIGNMENT AND SECURITY AGREEMENT, dated as of March 30, 2000 (this "Agreement"), made by NRG South Central Generating LLC (the "Grantor"), in favor of The Chase Manhattan Bank, as collateral agent (together with its successors in such capacity, the "Collateral Agent") for the benefit of the Secured Parties. W I T N E S S E T H: WHEREAS, pursuant to the Acquisition Agreement, the Subsidiary Guarantor, a wholly owned subsidiary of the Grantor, is acquiring the Project from Cajun; and WHEREAS, the Grantor has simultaneously with the execution and delivery of this Agreement issued and sold the Initial Bonds pursuant to the Indenture; and WHEREAS, payments of the principal of, premium (if any), interest on and any other amounts due with respect to the Initial Bonds will be serviced by repayment of the Guarantor Loan and guaranteed (subject to certain limitations) by the Subsidiary Guarantor; and WHEREAS, the Working Capital Facility Banks, the Working Capital Facility Agent and the Grantor are parties to the Working Capital Facility providing, subject to the terms and conditions thereof, for the making of loans to the Grantor for working capital purposes; and WHEREAS, to secure its obligations under the Finance Documents, the Grantor is entering into this Agreement with the Collateral Agent, pursuant to which the Collateral Agent, acting on behalf of the Secured Parties, will obtain a continuing Lien on and perfected security interest in, the Issuer Security Agreement Collateral. NOW THEREFORE, in consideration of the Secured Parties entering into the Finance Documents and to induce the Secured Parties to release the proceeds of the issuance and sale of the Initial Bonds, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Grantor hereby agrees with the Collateral Agent as follows: 6 ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.1. Definitions. (a) For all purposes of this Agreement, capitalized terms used but not otherwise defined herein shall have the meanings set forth in Appendix A to the Trust Indenture, dated as of March 30, 2000, among the Grantor, the Subsidiary Guarantor and The Chase Manhattan Bank, as Bond Trustee (the "Indenture"). (b) The following terms shall have the following respective meanings unless the context otherwise requires. The definitions shall be equally applicable to the singular and plural forms of the terms defined. Commercial terms used herein but not defined herein or in Appendix A to the Indenture shall have the meanings specified for such terms in the UCC as in effect in the State of New York. "Agreement" shall have the meaning specified in the preamble hereto. "Chattel Paper" shall mean "chattel paper" as such term is defined in the UCC as in effect in any relevant jurisdiction. "Contract Rights" shall have the meaning specified in Section 6.1. "Contracts" shall mean all contracts to which the Grantor now is, or hereafter will be, bound, or a party, beneficiary or assignee, including, without limitation, all of the Project Documents, including all exhibits, schedules and appendices thereto, and all other instruments, agreements and documents executed and delivered with respect to such contracts, all Third Party Consents, and all revenues, rentals, Proceeds and other sums of money due and to become due from any of the foregoing, as the same may be modified, supplemented or amended from time to time in accordance with their respective terms. "Copyrights" shall mean all of the following now owned or hereafter acquired by the Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States, whether as author, assignee, transferee or otherwise; and (b) all registrations and applications for registration of any such copyright rights in the United States, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including, without limitation, those listed on Schedule III. 2 7 "Documents" shall mean "documents" as such term is defined in the UCC as in effect in any relevant jurisdiction. "Equipment" shall mean all "equipment" (as such term is defined in the UCC as in effect in any relevant jurisdiction), now or hereafter owned or leased by the Grantor and, in any event, shall include, but shall not be limited to, all equipment used in connection with the Project, all machinery, manufacturing equipment, data processing equipment, computers, tools, office equipment, appliances, furniture, furnishings, fixtures, spare parts, vehicles, motor vehicles, and any manuals, instructions, blueprints, computer software and similar items which relate to the above, and any and all additions to, substitutions for and replacements of any of the foregoing, wherever located, together with all improvements thereon and all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Financing Statements" shall mean all financing statements, recordings, filings or other instruments of registration necessary and appropriate to perfect a security interest or lien by filing in any appropriate filing or recording office in accordance with the UCC as enacted in any and all relevant jurisdictions or any other relevant applicable law. "Fixtures" shall mean "fixtures" as such term is defined in the UCC as in effect in any relevant jurisdiction and in any event shall include all goods now or hereafter attached to, placed on, or incorporated in the real property constituting the Project. "General Intangibles" shall mean all "general intangibles" (as such term is defined in the UCC as in effect in any relevant jurisdiction) now or hereafter owned by the Grantor and shall include, but not be limited to, all Trademarks, trademark applications, trademark registrations, tradenames, fictitious business names, business names, company names, business identifiers, prints, labels, trade styles and service marks (whether or not registered), including logos and/or designs, Copyrights, Patents, patent applications, goodwill of the Grantor's business symbolized by any of the foregoing, trade secrets, license rights, license agreements, permits, franchises and any rights to tax refunds to which the Grantor is now or hereafter may be entitled. "Goods" shall mean "goods" as such term is defined in the UCC as in effect in any relevant jurisdiction. "Grantor" shall have the meaning specified in the preamble hereto. "Instruments" shall mean "instruments" as such term is defined in the UCC as in effect in any relevant jurisdiction. 3 8 "Insurance Policies" shall mean all insurance policies to which the Grantor now is, or hereafter will be, a party, including, without limitation, all insurance policies required pursuant to this Agreement and the other Finance Documents. "Insurance Proceeds" shall mean all amounts and proceeds of any kind (including interest, if any, thereon) paid or payable pursuant to any Insurance Policy. "Intellectual Property" shall mean, collectively, Copyrights, Patents and Trademarks. "Inventory" shall mean all of the inventory of the Grantor of every type or description, including all "inventory" as such term is defined in the UCC as in effect in any relevant jurisdiction, now owned or hereafter acquired and wherever located, including without limitation, whether raw, in process or finished, all materials usable in processing the same and all documents of title covering any inventory, including, but not limited to, work in process, materials used or consumed in the Grantor's business, now owned or hereafter acquired or manufactured by the Grantor and held for sale in the ordinary course of its business, all present and future substitutions therefor, parts and accessories thereof and all additions thereto, and all proceeds thereof and products of such inventory in any form whatsoever. "Inventory Records" shall mean all books, records and other property and General Intangibles at any time relating to the Inventory. "Investment Property" shall mean "investment property" as such term is defined in the UCC as in effect in any relevant jurisdiction. "Issuer Security Agreement Collateral" shall have the meaning specified in Section 2.1(a). "Patents" shall mean all of the following now owned or hereafter acquired by the Grantor: (a) all letters patent of the United States, all registrations and recordings thereof, and all applications for letters patent of the United States, including registrations, recordings and pending applications in the United States Patent and Trademark Office, including, without limitation, those listed on Schedule IV; and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein. "Proceeds" shall mean "proceeds" as such term is defined in the UCC as in effect in any relevant jurisdiction or under other relevant law and, in any event, shall include, 4 9 but shall not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or the Grantor from time to time, and claims for insurance, indemnity, warranty or guaranty effected or held for the benefit of the Grantor with respect to any of the Issuer Security Agreement Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to the Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Issuer Security Agreement Collateral by any Governmental Authority (or any person acting under color of Governmental Authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Issuer Security Agreement Collateral. "Receivables" shall mean any "account" as such term is defined in the UCC as in effect in any relevant jurisdiction and in any event shall include, but not be limited to, all of the Grantor's rights to payment for goods (including, without limitation, electricity) sold or leased, or services performed, by the Grantor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, contract rights (including any and all rights to liquidated damage payments), security agreement, chattel paper, or other evidence of indebtedness or security, together with (i) all security pledged, assigned, hypothecated or granted to or held by the Grantor to secure the foregoing, (ii) all guarantees, warranties, endorsements, indemnifications or collateral on, or of, any of the foregoing, (iii) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (iv) all books, correspondence, credit files, records, ledger cards, invoices and other papers relating thereto, including, without limitation, all similar information stored on a magnetic medium or other similar storage device and other papers and documents in the possession or under the control of the Grantor or any computer bureau from time to time acting for the Grantor, (v) all evidences of the filing of Financing Statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (vi) all credit information, reports and memoranda relating thereto, and (vii) all other writings related in any way to the foregoing. "Security Entitlement" shall have the meaning assigned to that term under the UCC as in effect in any relevant jurisdiction. "Security Interest" shall have the meaning specified in Section 2.1. "Trademarks" shall mean all of the following now owned or hereafter acquired by the Grantor: (i) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter 5 10 adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, any State of the United States or any political subdivision thereof, and all extensions or renewals thereof, including, without limitation, those listed on Schedule V; (ii) all goodwill associated therewith or symbolized thereby; and (iii) all other assets, rights and interests that uniquely reflect or embody such goodwill. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if by reason of mandatory provisions of law, the perfection or priority of the security interest granted hereunder in any Issuer Security Agreement Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction solely for the purposes of the provisions hereof relating to such perfection or priority. SECTION 1.2. Rules of Interpretation. Except as otherwise expressly provided herein, the rules of interpretation set forth in Section 1.1 to the Indenture shall apply to this Agreement. ARTICLE II ASSIGNMENT AND GRANT OF SECURITY INTERESTS SECTION 2.1. Assignment and Grant of Security Interest. (a) As security for the prompt and complete payment and performance when due of all of the Secured Obligations, the Grantor hereby grants to the Collateral Agent, for itself and for the ratable benefit of all the Secured Parties, a continuing security interest of first priority (the "Security Interest") in all of the Grantor's right, title and interest in, to and under the following, in each case, whether now owned or existing or hereafter acquired, arising or created, and wherever located: (i) all Receivables; (ii) all Documents; (iii) all Equipment; (iv) all General Intangibles; (v) all Inventory; (vi) all cash collateral accounts established with respect to the Grantor, and all checking, savings, deposit, securities or other accounts of the Grantor, including, without limitation, the Depositary Accounts and any successor accounts thereto, and all property on deposit therein or credited thereto, including, without limitation, all Investment Property, Security Entitlements, Financial Assets, securities, instruments or cash on deposit therein or credited thereto and all Security Entitlements with respect thereto; (vii) all Contracts and Contract Rights, to the extent assignable pursuant to their terms, including, without limitation, all Contract Rights under the Project Documents to which the Grantor is a party; (viii) all cash, accounts, deposits, securities and insurance policies now or at any time hereafter in the 6 11 possession or under control of the Grantor or its bailees, including, but not limited to, the Escrow Fund established pursuant to the Escrow Agreement, and any interest therein; (ix) all Insurance Policies and all Loss Proceeds; (x) all Governmental Approvals, provided that any Governmental Approval which by its terms or by operation of law would become void, voidable, terminable or revocable (or would constitute a breach or default thereunder or under applicable law) if mortgaged, pledged or assigned hereunder or if a security interest therein were granted hereunder are expressly excepted and excluded from the Lien and the terms of this Agreement to the extent, and only to the extent, necessary so as to avoid such voidness, voidability, terminability or revocability or breach or default; (xi) all Fixtures, including, without limitation, those now or hereafter attached to, placed on, or incorporated in the Site; (xii) all natural gas, fuel oil, electricity and related products; (xiii) without limiting the generality of the foregoing, all other personal property, Goods, Instruments, Chattel Paper, credits, claims, demands, assets, books and records, customer lists, ledger cards, credit files, print-outs and other materials and records pertaining to any of the foregoing, of the Grantor, whether now existing or hereafter acquired from time to time and whether or not of a type which may be subject to a security interest under the UCC as in effect in the State of New York; (xiv) the Guarantor Note and all of the Grantor's rights thereto and all proceeds associated therewith; and (xv) any and all additions and accessions to any of the foregoing, all improvements thereto, all substitutions and replacements therefor and all products and Proceeds thereof (all of the above collectively, the "Issuer Security Agreement Collateral"); provided, however, that the Security Interest in the Debt Service Reserve Account granted herein to the Collateral Agent shall be for the sole benefit of the Holders of the Bonds and the Bond Trustee. (b) The security interest granted to the Collateral Agent pursuant to this Agreement extends to all Issuer Security Agreement Collateral of the kind which is the subject of this Agreement which the Grantor may acquire at any time during the continuation of this Agreement, whether such Issuer Security Agreement Collateral is in transit or in the Grantor's, the Collateral Agent's, any other Secured Party's or any other Person's constructive, actual or exclusive occupancy or possession until the release thereof pursuant to Section 9.8. (c) The assignments and security interests under this Agreement granted to the Collateral Agent shall not relieve the Grantor from the performance of any term, covenant, condition or agreement on the Grantor's part to be performed or observed under or in respect of any of the Issuer Security Agreement Collateral pledged by it hereunder or from any liability to any Person under or in respect of any of such Issuer Security Agreement Collateral or impose any obligation on the Collateral Agent to perform or observe any such term, covenant, condition or agreement on the Grantor's part to be so performed or observed or impose any liability on the Collateral Agent for any act or omission on the part of the Grantor or for any 7 12 breach of any representation or warranty on the part of the Grantor contained in this Agreement or any other Project Document, or in respect of the Issuer Security Agreement Collateral pledged by it hereunder or made in connection herewith or therewith. The obligations of the Grantor contained in this paragraph shall survive the termination of this Agreement and the discharge of the Grantor's other obligations hereunder. (d) This Agreement shall create a continuing security interest in the Issuer Security Agreement Collateral until the release thereof pursuant to Section 9.8. SECTION 2.2. Security Interest Absolute. The parties hereto shall not challenge or question in any proceeding the validity or enforceability of this Agreement as a whole or any term or provision contained herein or the validity of any Lien or Financing Statement in favor of the Collateral Agent. All rights of the Collateral Agent and the other Secured Parties and all security interests hereunder shall, to the fullest extent permitted by law, be absolute and unconditional irrespective of: (a) any invalidity, irregularity or unenforceability of any Finance Document or any other agreement or instrument relating thereto, or any amendment, change or modification of any of the Finance Documents; (b) any impairment, modification, change, exchange, release or subordination of or limitation on, any liability to, or stay of actions or lien enforcement proceedings against, the Grantor, its property or its estate in bankruptcy resulting from any bankruptcy, arrangement, readjustment, composition, liquidation, rehabilitation or similar proceeding against or otherwise involving or affecting the Grantor; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Finance Document; (d) any change in the time, order or method of attachment or perfection of Liens or the filing or recording of Financing Statements or other Security Documents and irrespective of anything contained in any filing or agreement to which the Collateral Agent or any other Secured Party may now or hereafter be a party; (e) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of, or consent to departure from, any guaranty for all or any of the Secured Obligations; or 8 13 (f) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Grantor or a third party pledgor, except as otherwise provided herein. SECTION 2.3. Power of Attorney. (a) The Grantor hereby irrevocably constitutes and appoints the Collateral Agent, on behalf of itself and the other Secured Parties, or any Person, officer or agent thereof whom the Collateral Agent may designate, as the Grantor's true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Grantor and in the name of the Grantor or in its own name, at the Grantor's cost and expense, to exercise at any time in the Collateral Agent's discretion all or any of the following powers, which, being coupled with an interest, shall be irrevocable until the Debt Termination Date (as defined in the Intercreditor Agreement): (i) to receive, take, endorse, sign, assign and deliver, all in the Collateral Agent's name or the Grantor's name, any and all checks, notes, drafts, and other documents or instruments relating to the Issuer Security Agreement Collateral; (ii) to receive, open and dispose of all mail addressed to the Grantor and to notify postal authorities to change the address for delivery thereof to such address as the Collateral Agent designates; (iii) to request from account debtors of the Grantor, in the Grantor's name or in the name of the Collateral Agent or the Collateral Agent's designee, information concerning the Receivables and the amounts owing thereon; (iv) to transmit to account debtors indebted on Receivables notice of the Collateral Agent's interest therein; (v) to notify account debtors indebted on Receivables to make payment directly to the Collateral Agent; (vi) to take or bring, in the Grantor's name or in the Collateral Agent's name on behalf of the Secured Parties, all steps, actions, suits or proceedings deemed by the Collateral Agent to be necessary or desirable to enforce or effect collection of the Receivables; (vii) to the fullest extent permitted by law, to prepare, sign and file any Financing Statements or file this Agreement in the name of the Grantor as debtor; 9 14 (viii) if the Grantor shall have failed to do so in a timely manner, to take or cause to be taken all actions necessary to perform or comply, or cause performance or compliance with, the covenants of the Grantor contained in any Transaction Document; (ix) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Issuer Security Agreement Collateral; (x) to defend any suit, action or proceeding brought against the Grantor with respect to any Issuer Security Agreement Collateral; (xi) to settle, compromise or adjust any suit, action or proceeding described in the preceding clause (x) and, in connection therewith, to give such discharges or releases as the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, may deem appropriate; (xii) generally, to sell or transfer and make any agreement with respect to or otherwise deal with any of the Issuer Security Agreement Collateral as fully and completely as though the Secured Parties were the absolute owner thereof for all purposes, and to do, at the Secured Parties' option and the Grantor's expense, at any time, or from time to time, all acts and things which the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, deem necessary to protect, preserve or realize upon the Issuer Security Agreement Collateral and the Liens of the Secured Parties thereon; (xiii) to execute, in connection with any foreclosure, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Issuer Security Agreement Collateral; (xiv) to exercise the Grantor's rights under any Contract in accordance with Section 6.1; and (xv) to exercise any and all other rights, remedies, powers and privileges of the Grantor with respect to the Issuer Security Agreement Collateral; 10 15 provided, however, that the Collateral Agent shall not exercise its powers under clauses (i), (ii), (iii), (iv), (v), (vi), (ix), (x), (xi), (xii), (xiii), (xiv) or (xv) unless a Trigger Event of which the Collateral Agent has actual knowledge has occurred and is continuing. (b) The Grantor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. The Grantor hereby acknowledges and agrees that in acting pursuant to this power-of-attorney the Collateral Agent shall be acting in its own interest and in the interest of the other Secured Parties and the Grantor acknowledges and agrees that the Collateral Agent and the other Secured Parties shall have no fiduciary duties to the Grantor and the Grantor hereby waives any claims to the rights of a beneficiary of a fiduciary relationship hereunder. SECTION 2.4. Inspection and Verification. The Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right, no more often than once each year, unless an Event of Default has occurred and is continuing, and, if an Event of Default has occurred and is continuing, at any reasonable time or times, in each case upon ten (10) days' notice and at the Grantor's own cost and expense, to inspect the Issuer Security Agreement Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Issuer Security Agreement Collateral is located, to discuss the Grantor's affairs with the appropriate officers of the Grantor and its independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Issuer Security Agreement Collateral, including, in the case of Receivables or Issuer Security Agreement Collateral in the possession of any third party, by contacting account debtors or the third party possessing such Issuer Security Agreement Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any other Secured Party. SECTION 2.5. Perfection of Security Interest in Guarantor Note. Prior to or concurrently with the execution and delivery of this Agreement, the Grantor shall deliver to the Collateral Agent the Guarantor Note accompanied by an undated bond power substantially in the form of Exhibit A hereto duly executed in blank. 11 16 ARTICLE III GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS The Grantor hereby represents, warrants and covenants to the Collateral Agent and the other Secured Parties, which representations, warranties and covenants shall survive execution and delivery of this Agreement and the making and repayment of the Secured Obligations, subject to the provisions of Section 9.9, as follows: SECTION 3.1. Title and Authority. The Grantor has good and valid rights in and title to the Issuer Security Agreement Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Issuer Security Agreement Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any Person other than any consent or approval that has been obtained and is in full force and effect. SECTION 3.2. Validity, Perfection and Priority of Lien. (a) This Agreement creates in favor of the Collateral Agent, for itself and for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Issuer Security Agreement Collateral and the proceeds thereof owned by the Grantor, and when Financing Statements in appropriate form are filed in the offices specified on Schedule I hereto, the Lien created under this Agreement will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Grantor in such Issuer Security Agreement Collateral and the proceeds thereof, in each case prior and superior in right to any other Person, subject only to Permitted Liens. (b) (i) Fully executed Financing Statements or other appropriate filings, recordings or registrations containing a description of the Issuer Security Agreement Collateral have been delivered to the Collateral Agent for filing in each governmental, municipal or other office specified in Schedule I, which are all the filings, recordings and registrations that are necessary to publish notice of and protect the validity of and to establish a valid and perfected security interest in favor of the Collateral Agent (for the benefit of itself and for the ratable benefit of the Secured Parties) in respect of all Issuer Security Agreement Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under Applicable Law with respect to the filing of continuation statements and except that recordation of the Security Interest in the United States 12 17 Patent and Trademark Office may be necessary with respect to Issuer Security Agreement Collateral consisting of Patents and Trademarks and recordation of the Security Interest, in addition to registration of any unregistered copyrights, in the United States Copyright Office may be necessary with respect to Issuer Security Agreement Collateral consisting of Copyrights. The Grantor will pay any applicable filing fees and related expenses. The Grantor hereby irrevocably authorizes the Collateral Agent to file any such Financing Statements without its signature as the debtor. (ii) The Instruments listed on Schedule II hereto, which, as of the date hereof, constitute all instruments of the Grantor, and all other Chattel Paper have been stamped to indicate the Security Interest of the Collateral Agent for itself and the ratable benefit of the Secured Parties hereunder. SECTION 3.3. No Liens; Other Financing Statements. (a) Except for the Lien granted to the Collateral Agent for itself and the ratable benefit of the Secured Parties hereunder and Permitted Liens, and, further, except for the interest in and control over the Depositary Accounts of and by the Depositary Bank as provided in the Indenture, the Grantor is, and as to all Issuer Security Agreement Collateral whether now existing or hereafter acquired after the date hereof, the Grantor will and will continue to be the owner of valid and marketable title in and to each item of the Issuer Security Agreement Collateral free and clear of any and all Liens other than Permitted Liens and the Grantor shall defend the Issuer Security Agreement Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent or any other Secured Party. (b) Other than Financing Statements filed in connection herewith, there is no Financing Statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Issuer Security Agreement Collateral except (i) Financing Statements filed in connection with Permitted Liens, and (ii) Financing Statements for which proper termination statements have been delivered to the Collateral Agent for filing. The Grantor will not execute or authorize any Financing Statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Issuer Security Agreement Collateral to be filed in any public office, except Financing Statements filed or to be filed in respect of and covering the security interests granted hereby to the Collateral Agent by the Grantor and Financing Statements filed in respect of and covering Permitted Liens. SECTION 3.4. Chief Executive Office; Name; Records. (a) The chief executive office and principal place of business of the Grantor is located at 1221 Nicollet Mall, Suite 700, Minneapolis, Minnesota 55403. Except as permitted by the Indenture, the Grantor 13 18 will not (i) move its chief executive office, or (ii) change its name from, nor carry on business under any name other than "NRG South Central Generating LLC," unless it has complied with the requirements of Section 3.4(b). The originals of all documents evidencing all Contracts and Receivables of the Grantor, and the only original books of account and records concerning the Issuer Security Agreement Collateral are, and will continue to be, kept at, and controlled and directed (including, without limitation, for general accounting purposes) from, such chief executive office, or at such new location for such chief executive office as the Grantor may establish in accordance with Section 3.4(b). (b) The Grantor shall not establish a new location for its chief executive office or change its name or the name under which it presently conducts its business unless (i) it has given to the Collateral Agent not less than thirty (30) days' prior written notice of its intention so to do, clearly describing such new location or specifying such new name, as the case may be, and providing such other information in connection therewith as the Collateral Agent may reasonably request, and (ii) with respect to such new location or such new name, as the case may be, the Grantor shall have taken all action, satisfactory to the Collateral Agent, to maintain the security interest of the Collateral Agent in the Issuer Security Agreement Collateral intended to be granted hereby at all times fully perfected and in full force and effect. SECTION 3.5. Additional Statements and Schedules. The Grantor shall execute and deliver to the Collateral Agent, from time to time, for its convenience in maintaining a record of the Issuer Security Agreement Collateral, such written statements and schedules as the Collateral Agent may reasonably require, designating, identifying or describing the Issuer Security Agreement Collateral. SECTION 3.6. Further Actions. The Grantor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Issuer Security Agreement Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, Financing Statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Issuer Security Agreement Collateral and other property or rights covered by the Security Interest hereby granted by the Grantor to perfect, preserve or protect its security interest in the Issuer Security Agreement Collateral within thirty (30) days after any request by the Collateral Agent or such earlier date as may be required by applicable law or necessary to preserve or protect the security interests in the Issuer Security Agreement Collateral granted by the Grantor pursuant to this Agreement, including the payment of any fees and taxes required in connection with the execution and delivery of 14 19 this Agreement, the granting of the Lien created hereby and the filing of any Financing Statements or other documents in connection herewith. ARTICLE IV SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT SECTION 4.1. Maintenance of Insurance; Protection of Security Interest. The Grantor shall carry with respect to the Issuer Security Agreement Collateral and its use such insurance, if any, as shall be required under the Indenture. SECTION 4.2. Location of Inventory and Equipment. All Inventory and Equipment owned on the date hereof by the Grantor is located at one of the locations shown on Schedule 4.2 (other than Equipment undergoing repairs). The Grantor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) one of the locations on Schedule 4.2. SECTION 4.3 Inventory Records. The Grantor shall maintain, at its own cost and expense, satisfactory and complete Inventory Records. ARTICLE V SPECIAL PROVISIONS CONCERNING RECEIVABLES, CONTRACTS AND INSTRUMENTS SECTION 5.1. Additional Representations and Warranties. As of the time when each of its Receivables arises, the Grantor shall be deemed to have represented and warranted to the best of its knowledge that such Receivable and all records, papers and documents relating thereto (if any) are genuine and in all respects what they purport to be, and that all papers and documents (if any) relating thereto (i) will (subject to dispute, return, replacement, settlement or compromise) represent the genuine, legal, valid and binding obligation of the account debtor evidencing indebtedness unpaid and owed by such account debtor arising out of the performance of labor or services or the sale and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for purposes other than general accounting purposes), (iii) will (subject to dispute, return, replacement, settlement or compromise) evidence true and valid obligations, enforceable in accordance with their respective terms, not subject to the fulfillment of any contract or condition whatsoever unless set forth in the writing and not subject to any defenses, set-offs or counterclaims or stamp or other taxes, and not subject to any provisions prohibiting the 15 20 Security Interest granted hereunder, and (iv) will be in compliance and will conform with all Applicable Law. SECTION 5.2. Maintenance of Records; Legending of Records. The Grantor will keep and maintain at its own cost and expense satisfactory and complete records of its Receivables for at least five (5) years from the date on which the Receivable comes into existence, including, without limitation, records of all payments received and all credits granted thereon, and the Grantor will make the same available to the Collateral Agent and the other Secured Parties for inspection in accordance with Section 2.4. The Grantor shall, at its own cost and expense, deliver all tangible evidence of its Receivables (including, without limitation, all documents evidencing the Receivables) and books and records that the Collateral Agent may request to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by the Grantor) at any reasonable time during normal business hours upon the Collateral Agent's demand. The Grantor shall, at the Collateral Agent's request and at the Grantor's own cost and expense, legend in form and substance satisfactory to the Collateral Agent, the Issuer Security Agreement Collateral, as well as books, records and documents of the Grantor evidencing or pertaining to the Issuer Security Agreement Collateral, with an appropriate reference to the fact that the items constituting the Issuer Security Agreement Collateral have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. SECTION 5.3. Modification of Terms; No Payment to Grantor. The Grantor shall not, other than in the ordinary course of business, rescind or cancel any indebtedness evidenced by any Receivable or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or interest therein, without the prior written consent of the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein. The Grantor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and will do nothing to impair the rights of the Collateral Agent in the Receivables. SECTION 5.4. Collection. The Grantor shall take all commercially reasonable actions to cause to be collected from the account debtors of each of the Receivables, as and when due (including Receivables that are delinquent, such Receivables to be collected in accordance with generally accepted commercial collection procedures), any and all amounts owing under or on account of such Receivables, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivables. 16 21 SECTION 5.5. Instruments. If any of the Receivables becomes evidenced by an Instrument having a face value in excess of $5,000 and a maturity of thirty (30) days or longer, the Grantor shall promptly notify the Collateral Agent thereof in writing, and within ten (10) days of a request by the Collateral Agent therefor, shall deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. Notwithstanding the foregoing, at such time that an Event of Default shall have occurred and be continuing, or at such time as the Grantor shall own or acquire Instruments which in the aggregate exceed $20,000, the Grantor shall deliver all Instruments to the Collateral Agent within ten (10) days, appropriately endorsed to the order of the Collateral Agent as further security hereunder. ARTICLE VI SPECIAL PROVISIONS CONCERNING CONTRACTS SECTION 6.1. Security Interest in Contract Rights. The Grantor's grant, pursuant to Section 2.1, to the Collateral Agent, of a security interest in all of its right, title and interest in and to each and all of the Contracts and the contract rights thereunder, includes, but is not limited to: (i) all (A) rights to payment under any Contract and (B) payments due and to become due under any Contract, in each case whether as contractual obligations, damages or otherwise; (ii) all of its claims, rights, powers, privileges and remedies under any Contract; and (iii) all of its rights under any Contract to make determinations, to exercise any election (including, without limitation, election of remedies) or option or to give or receive any notice, consent, waiver or approval together with full power and authority with respect to any Contract to demand, receive, enforce, collect or receipt for any of the foregoing rights or any property the subject of any of the Contracts, to enforce or execute any checks or other instruments or orders, to file any claims and to take any action which, in the opinion of the Collateral Agent, may be necessary or advisable in connection with any of the foregoing (the Contracts, together with all of the foregoing in this Section 6.1, the "Contract Rights"); provided, however, that, unless a Trigger Event shall have occurred and be continuing, notwithstanding anything else herein to the contrary, the Grantor may, subject to the terms and 17 22 provisions of the Finance Documents, exclusively exercise all of its rights, powers, privileges and remedies under the Contracts. SECTION 6.2. Further Protection. The Grantor warrants and forever shall defend the title to the Contract Rights against the claims and demands of any Person other than the Collateral Agent and the Secured Parties, and hereby grants the Collateral Agent full power and authority, upon the occurrence and during the continuance of a Trigger Event, to take all actions as the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, reasonably deems necessary or advisable to effectuate the provisions set forth in this sentence. SECTION 6.3. Liabilities Under Receivables and Contracts. Anything herein to the contrary notwithstanding (including, without limitation, the grant of any rights to the Collateral Agent), the Grantor shall remain liable under each of the Receivables and Contracts to observe and perform all the conditions and obligations to be observed and performed by it thereunder and under or with respect to the Issuer Security Agreement Collateral, all in accordance with the terms of any agreement giving rise to each such Receivable, Contract or procurement of Issuer Security Agreement Collateral. Neither the Collateral Agent nor any other Secured Party shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) or Contract or with respect to the Issuer Security Agreement Collateral by reason of or arising out of this Agreement or the receipt by the Collateral Agent of any payment relating to such Receivable, Contract or Issuer Security Agreement Collateral pursuant hereto, nor shall the Collateral Agent or any other Secured Party be obligated in any manner to perform any of the obligations of the Grantor under or pursuant to any Receivable (or any agreement giving rise thereto) or under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Receivable (or any agreement giving rise thereto) or under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. SECTION 6.4. Remedies. Upon the occurrence of any Trigger Event, the Collateral Agent shall have the rights set forth in Article VIII, and, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, may (i) enforce all remedies, rights, powers and privileges of the Grantor under any or all of the Contracts, (ii) sell any or all of the Contract Rights at public or private sale upon at least ten (10) days' prior written notice and/or (iii) substitute itself or any nominee or trustee in lieu of the Grantor as party to any of the Contracts and to notify the obligor of any Contract Right (the Grantor hereby agreeing to deliver any such notice at the request of the Collateral Agent) that all 18 23 payments and performance under the relevant Contract shall be made or rendered to the Collateral Agent or such other Person as the Collateral Agent may designate. ARTICLE VII DUTY OF CARE OF COLLATERAL AGENT SECTION 7.1. Collateral Agent's Duties; Reasonable Care. The Collateral Agent shall have the duty to exercise reasonable care in the custody and preservation of any Issuer Security Agreement Collateral in its possession, which duty shall be fully satisfied if the Collateral Agent maintains safe custody of such Issuer Security Agreement Collateral in accordance with customary banking standards. SECTION 7.2. Further Protection. In acting hereunder, the Collateral Agent shall be entitled to the same rights, indemnities and immunities as afforded to it under the Intercreditor Agreement. ARTICLE VIII REMEDIES UPON OCCURRENCE OF A TRIGGER EVENT SECTION 8.1. Remedies; Obtaining the Issuer Security Agreement Collateral upon Trigger Event. (a) Upon the occurrence and during the continuance of a Trigger Event, the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, shall be entitled to exercise on behalf of itself and the other Secured Parties, all the rights and remedies of a secured party under the UCC as in effect in any relevant jurisdiction and all rights now or hereafter existing under all other Applicable Law to enforce this Agreement and the security interests contained herein, and, in addition, subject to any Applicable Laws then in effect, the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, may, but is under no obligation to, in addition to its other rights and remedies hereunder, including without limitation under Section 8.2 and Section 8.6, and also the rights of the Collateral Agent and the other Secured Parties under any of the Transaction Documents, do any of the following to the fullest extent permitted by applicable law: (i) personally, or by agents, trustees or attorneys, immediately take possession of the Issuer Security Agreement Collateral or any part thereof, from the Grantor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Grantor's premises or such other Person's premises 19 24 where any of the Issuer Security Agreement Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of the Grantor; (ii) instruct the obligor or obligors of any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Issuer Security Agreement Collateral to make any payment required by the terms of such instrument or agreement directly to the Collateral Agent; and (iii) take possession of the Issuer Security Agreement Collateral or any part thereof, by directing the Grantor in writing to turn over the same to the Collateral Agent at the Project Site or, to the extent such Issuer Security Agreement Collateral may be moved, to deliver the same to the Collateral Agent at any other place or places designated by the Collateral Agent, in which event the Grantor shall, at its own expense, (A) forthwith turn over the same to the Collateral Agent at one of the locations on Schedule 4.2 or cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, as the case may be, (B) store and keep any Issuer Security Agreement Collateral so turned over or delivered to the Collateral Agent at one of the locations on Schedule 4.2 or at such place or places pending further action by the Collateral Agent as provided in Section 8.2, and (C) while the Issuer Security Agreement Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain the Issuer Security Agreement Collateral in good condition. (b) The Grantor's obligation to turn over or deliver the Issuer Security Agreement Collateral as set forth above is of the essence of this Agreement and, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to obtain a decree requiring specific performance by the Grantor of said obligation. (c) When Issuer Security Agreement Collateral is in the Collateral Agent's possession, (i) the Grantor shall pay (or reimburse the Collateral Agent on demand for) all reasonable expenses (including the cost of any insurance and payment of taxes or other charges) incurred in the custody, preservation, use or operation of the Issuer Security Agreement Collateral, and the obligation to reimburse all such expenses shall be secured hereby, and (ii) the risk of accidental loss or damage shall be on the Grantor to the extent of any deficiency in any effective insurance coverage. SECTION 8.2. Remedies; Disposition of the Issuer Security Agreement Collateral. Any Issuer Security Agreement Collateral repossessed by the Collateral Agent 20 25 under or pursuant to Section 8.1 and any other Issuer Security Agreement Collateral, whether or not so repossessed by the Collateral Agent, may, to the extent permitted by any contract terms governing such Issuer Security Agreement Collateral and to the fullest extent permitted by applicable law, be sold, leased or otherwise disposed of under one or more contracts or as an entirety, whether by public or private sale and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms (whether cash or credit, and in the case of credit, without assumption of future credit risk) as the Collateral Agent may, in compliance with Applicable Law, determine to be commercially reasonable. If any Issuer Security Agreement Collateral is sold by the Collateral Agent upon credit or for future delivery, the Collateral Agent shall not be liable for the failure of the purchaser to pay for the same and in such event the Collateral Agent may resell the Issuer Security Agreement Collateral. In no event shall the Grantor be credited with any part of the proceeds of sale of any Issuer Security Agreement Collateral until payment thereof in cash or cash equivalents has actually been received by the Collateral Agent. Any of the Issuer Security Agreement Collateral may be sold, leased or otherwise disposed of, or options or contracts may be entered to do so, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. Any such disposition shall be made upon not less than ten (10) days' written notice to the Grantor specifying the time such disposition is to be made and, if such disposition shall be a public sale, specifying the place of such sale. Any such sale may be adjourned by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the extent permitted by Applicable Law, the Collateral Agent or any other Secured Party may itself bid for and become the buyer of the Issuer Security Agreement Collateral or any item thereof offered for sale at a public auction without accountability to the Grantor. SECTION 8.3. Waiver. (a) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, THE GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL IN ACCORDANCE WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, AND THE GRANTOR HEREBY FURTHER WAIVES: 21 26 (i) all damages occasioned by such taking of possession except any damages which are finally judicially determined to have been the direct result of the Collateral Agent's gross negligence or wilful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's and the other Secured Parties' rights hereunder; (iii) demand of performance or other demand, notice of intent to demand or accelerate, notice of acceleration, presentment, protest, advertisement or notice of any kind to or upon the Grantor or any other Person; and (iv) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Issuer Security Agreement Collateral or any portion thereof, and the Grantor, for itself and all who may claim under it, insofar as it or they may now or hereafter lawfully do so, hereby waives the benefit of such laws. (b) Without limiting the generality of the foregoing, the Grantor hereby: (i) authorizes the Collateral Agent, in its sole discretion and without notice to or demand upon the Grantor and without otherwise affecting the obligations of the Grantor hereunder from time to time, to take and hold other collateral granted to it by any other Person (in addition to the Issuer Security Agreement Collateral) for payment of any Secured Obligations, or any part thereof, and to exchange, enforce or release such other collateral or any part thereof, and to accept and hold any endorsement or guarantee of payment of the Secured Obligations or any part thereof, and to release or substitute any endorser or guarantor or any other Person granting security for or in any way obligated upon any Secured Obligations, or any part thereof; and (ii) waives and releases any and all right to require the Collateral Agent or the other Secured Parties to collect any of the Secured Obligations from any specific item or items of Issuer Security Agreement Collateral or from any other party liable as guarantor or in any other manner in respect of any of the Secured Obligations or from any collateral (other than the Issuer Security Agreement Collateral) for any of the Secured Obligations. (c) Any sale of, or the grant of options to purchase, or any other realization upon, any Issuer Security Agreement Collateral shall, provided that it is done in accordance with applicable law and this Agreement, operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Grantor therein and thereto, and shall be a perpetual bar both at law and in equity against the Grantor and against any and all Persons claiming or 22 27 attempting to claim the Issuer Security Agreement Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the Grantor. SECTION 8.4. Application of Proceeds; Grantor Liable for Deficiency. The Collateral Agent shall apply the net proceeds of any collection, sale or other realization of all or any part of the Issuer Security Agreement Collateral pursuant to this Agreement, and any other cash at the time of such collection, sale or other realization held by the Collateral Agent under this Agreement, in accordance with Article V of the Intercreditor Agreement. The Grantor shall remain liable to the extent of any deficiency between the amount of proceeds of the Issuer Security Agreement Collateral and the aggregated amount of the Secured Obligations in accordance with the Finance Documents. SECTION 8.5. No Waiver; Remedies Cumulative. No failure or delay on the part of any Secured Party in exercising any right, remedy, power or privilege hereunder and no course of dealing between the Grantor and any Secured Party shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. A waiver by any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which any Secured Party would otherwise have on any future occasion. The rights and remedies herein expressly provided are cumulative and may be exercised singly or concurrently and as often and in such order as any Secured Party deems expedient and are not exclusive of any rights or remedies which the Secured Parties would otherwise have whether by agreement or now or hereafter existing under Applicable Law. No notice to or demand on the Grantor in any case shall entitle the Grantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Secured Parties to any other or future action in any circumstances without notice or demand. SECTION 8.6. Discontinuance of Proceedings. In case any Secured Party shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to such Secured Party, then, in every such case, subject to the terms of any final non-appealable judgment rendered in any such proceeding, the Grantor, the Secured Parties and each holder of any of the Secured Obligations shall be restored to their former positions and rights hereunder with respect to the Issuer Security Agreement Collateral, subject to the Security Interest created under this Agreement, and all rights, remedies and powers of the Secured Parties shall continue as if no such proceeding had been instituted. 23 28 ARTICLE IX MISCELLANEOUS SECTION 9.1. Notices. Unless otherwise specifically herein provided, all notices required or permitted under the terms and provisions hereof shall be in writing and any such notice shall become effective if given in accordance with the provisions of Section 12.5 of the Indenture. SECTION 9.2. Amendment. No waiver, amendment, modification or termination of any provision of this Agreement, or consent to any departure by the Grantor therefrom, shall in any event be effective without the prior written consent of the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, and none of the Issuer Security Agreement Collateral shall be released without the written consent of the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 9.3. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Grantor and the Secured Parties, all future holders of the Secured Obligations and their respective successors, transferees and assigns (to the extent such successors, transferees and assigns are permitted under the Finance Documents and the documents regarding additional Permitted Indebtedness), except that the Grantor may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent and in accordance with this Agreement. SECTION 9.4. Survival. All agreements, statements, representations and warranties made by the Grantor herein or in any certificate or other instrument delivered by the Grantor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the execution and delivery of this Agreement and the other Finance Documents regardless of any investigation made by any Secured Party or made on their behalf. SECTION 9.5. Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. SECTION 9.6. Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality 24 29 and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 9.7. Grantor's Duties. Anything herein contained to the contrary notwithstanding, the Grantor shall remain liable to perform all of its obligations under or with respect to the Issuer Security Agreement Collateral, and the Secured Parties shall not have any obligations or liabilities under or with respect to any Issuer Security Agreement Collateral by reason of or arising out of this Agreement, nor shall the Secured Parties be required or obligated in any manner to perform or fulfill any of the obligations of the Grantor under or with respect to any Issuer Security Agreement Collateral. SECTION 9.8. Termination; Release. (a) Upon the occurrence of the Debt Termination Date, this Agreement shall terminate (except as provided in Section 9.4), and the Collateral Agent, at the written request and expense of the Grantor, will promptly execute and deliver to the Grantor the proper instruments (including UCC termination statements on form UCC-3) acknowledging the termination of this Agreement, and will duly assign, transfer and deliver to the Grantor (without recourse and without any representation or warranty of any kind) such of the Issuer Security Agreement Collateral as may be in the possession of the Collateral Agent and has not theretofore been disposed of or otherwise applied or released. (b) Upon the sale or disposition of any portion of the Issuer Security Agreement Collateral permitted pursuant to the terms of the Finance Documents, including, but not limited to, any Permitted Asset Sale, the purchaser of such portion of the Issuer Security Agreement Collateral shall, upon such purchase, acquire good title to the Issuer Security Agreement Collateral so purchased, free of the security interest created by this Agreement. The Collateral Agent, upon the request, and at the expense, of the Grantor, shall execute and deliver all such documentation necessary to evidence such release of the security interest created in such Issuer Security Agreement Collateral pursuant to this Agreement. SECTION 9.9. Reinstatement. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by any Secured Party in respect of the Secured Obligations is rescinded or must otherwise be restored or returned by such Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Grantor or upon the appointment of any intervenor or conservator of, or trustee or similar official for, the Grantor or any substantial part of its assets, or upon the entry of an order by a bankruptcy court avoiding payment of such amount, or otherwise, all as though such payments had not been made. 25 30 SECTION 9.10. Counterparts. This Agreement may be executed in any number of counterparts, each 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. SECTION 9.11 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) THIS AGREEMENT IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Regardless of any provision in any other Finance Document, for purposes of the UCC, New York shall be deemed to be the Depositary Bank's location and the Depositary Accounts (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York, without regard to the conflict of law rules thereof (other than Section 5-1401 of the New York General Obligations Law). (b) Any legal action or proceeding against the Grantor with respect to this Agreement may be brought in the courts of the State of New York in the County of New York or of the United States for the Southern District of New York and, by execution and delivery of this Agreement, the Grantor hereby irrevocably submits and accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Grantor agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon the Grantor, and may be enforced in any other jurisdiction, by a suit upon such judgment, a certified copy of which shall be conclusive evidence of the judgment. The Grantor hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 111 Eighth Avenue, New York, N.Y. 10011, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notice and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such agent, the Grantor agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Collateral Agent. The Grantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Grantor, at its address referred to in Section 12.5(a) of the Indenture, such service to become effective thirty (30) days after such mailing. Nothing herein shall affect the right of the Collateral Agent or any other Person to serve process in any other manner 26 31 permitted by law or to commence legal proceedings or otherwise proceed against the Grantor in any other jurisdiction. (c) The Grantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (d) WITH REGARD TO THIS AGREEMENT, EACH PARTY HERETO HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY. SECTION 9.12. Authority of Collateral Agent. The Grantor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Agent and the other Secured Parties, be governed by this Agreement, the other Finance Documents and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantor, the Collateral Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and the Grantor shall not be under any obligation, or entitlement, to make any inquiry respecting such authority. SECTION 9.13. Conflict with Intercreditor Agreement. In case of a conflict between any provision of this Agreement and any provision of the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. No such conflict shall be deemed to exist merely because this Agreement imposes greater obligations on the Grantor than the Intercreditor Agreement. SECTION 9.14. Indemnities and Expenses. The obligation of the Grantor to pay the costs and expenses of, and to indemnify, defend and hold harmless, the Collateral Agent, its agents, officers, directors and representatives and the other Secured Parties under and in connection with this Agreement shall be as provided in Section 2.4 of the Intercreditor Agreement as in effect as of the date hereof. No amendment to such Section 2.4 or termination of the Intercreditor Agreement shall affect the provisions of this Section 9.16 unless such amendment or termination shall have been consented to by the parties to this Agreement in accordance with the provisions hereof and of the other Finance Documents. 27 32 SECTION 9.15. Entire Agreement. This Agreement, together with any other agreement executed in connection herewith, is intended by the parties as a final expression of their agreement as to the matters covered hereby and is intended as a complete and exclusive statement of the terms and conditions thereof. SECTION 9.16. Independent Security. The security provided for in this Agreement shall be in addition to and shall be independent of every other security which the Collateral Agent or the other Secured Parties may at any time hold for any of the Secured Obligations hereby secured, whether or not under the Security Documents. The execution of any other Security Document shall not modify or supersede the security interest or any rights or obligations contained in this Agreement and shall not in any way affect, impair or invalidate the effectiveness and validity of this Agreement or any term or condition hereof. The Grantor hereby waives its right to plead or claim in any court that the execution of any other Security Document is a cause for extinguishing, invalidating, impairing or modifying the effectiveness and validity of this Agreement or any term or condition contained herein. The Collateral Agent shall be at liberty to accept further security from the Grantor or from any third party and/or release such security without notifying the Grantor and without affecting in any way the obligations of the Grantor under the Security Documents or the other Finance Documents. The Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, shall determine if any security conferred upon the Collateral Agent and the other Secured Parties under the Security Documents shall be enforced by the Collateral Agent, as well as the sequence of securities to be so enforced. SECTION 9.17. Third Party Beneficiaries. The agreements of the parties hereto are intended to benefit the Secured Parties and their respective successors and assigns. SECTION 9.18. Limitation of Liability. The provisions of Section 12.11 of the Indenture shall apply to this Agreement. SECTION 9.19. Merger of Collateral Agent. Any corporation into which the Collateral Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Collateral Agent shall be a party, or any corporation succeeding to the business of the Collateral Agent shall be the successor of the Collateral Agent hereunder without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto except where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 28 33 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written. NRG SOUTH CENTRAL GENERATING LLC, as Grantor By: /s/ C. A. Mataczynski -------------------------------- Name: Craig A. Mataczynski Title: President THE CHASE MANHATTAN BANK, as Collateral Agent By: /s/ Annette M. Marsula -------------------------------- Name: Annette M. Marsula Title: Vice President 29 34 Schedule I to Assignment and Security Agreement Filing Offices Office of the Secretary of State of the State of Minnesota Sch. I - 1 35 Schedule II to Assignment and Security Agreement Instruments None. Sch. II - 1 36 Schedule III to Assignment and Security Agreement Copyrights None. Sch. III - 1 37 Schedule IV to Assignment and Security Agreement Patents None. Sch. IV - 1 38 Schedule V to Assignment and Security Agreement Trademarks None. Sch. V - 1 39 Schedule 4.2 to Assignment and Security Agreement Location of Inventory and Equipment None. Sch. 4.2 - 1 40 Exhibit A BOND POWER FOR VALUE RECEIVED, NRG SOUTH CENTRAL GENERATING LLC hereby assigns and transfers unto _________ one promissory note of LOUISIANA GENERATING LLC, a Delaware limited liability company, in the principal amount of [ ______________________ ($[ ______ ])], dated [ _______ ], and does hereby irrevocably consent and appoint ________ attorney to transfer the said promissory note with full power of substitution in the premises. DATED:___________ NRG SOUTH CENTRAL GENERATING LLC By: ___________________________ Name: Title: Exhibit A-1 EX-4.9 19 y57012ex4-9.txt GUARANTOR NOTE 1 Exhibit 4.9 GUARANTOR NOTE US$800,000,000 March 30, 2000 For value received, the undersigned, LOUISIANA GENERATING LLC, a Delaware limited liability company (the "Subsidiary Guarantor"), by this promissory note promises to pay to the order of NRG SOUTH CENTRAL GENERATING LLC, a Delaware limited liability company ("the Issuer"), at the office of The Chase Manhattan Bank, a bank organized and existing under the laws of the State of New York, located at 450 West 33rd Street, 15th Floor, New York, NY 10001, in lawful currency of the United States of America and in immediately available funds, the principal amount of eight hundred million dollars (US$800,000,000), or if less, the aggregate unpaid and outstanding principal amount of this Guarantor Note advanced by the Issuer to the Subsidiary Guarantor pursuant to that certain Guarantor Loan Agreement, dated as of March 30, 2000 (the "Guarantor Loan Agreement"), by and among the Subsidiary Guarantor and the Issuer, and as the same may be amended from time to time, and all other amounts owed by the Subsidiary Guarantor to the Issuer hereunder. This is one of the Guarantor Notes entered into pursuant to the Guarantor Loan Agreement and is entitled to the benefits thereof and is subject to all terms, provisions and conditions thereof. Capitalized terms used and not defined herein shall have the meanings set forth in Appendix A of that certain Trust Indenture, dated as of March 30, 2000 (the "Indenture"), by and between the Issuer and The Chase Manhattan Bank, a bank organized and existing under the laws of the State of New York, as Bond Trustee. Reference is hereby made to the Indenture and the Security Documents for the provisions, among others, with respect to the custody and application of the Collateral, the nature and extent of the security provided thereunder, the rights, duties and obligations of the Subsidiary Guarantor and the rights of the holder of this Guarantor Note. The principal amount hereof is payable in accordance with the Guarantor Loan Agreement, and such principal amount may be prepaid solely in accordance with the Guarantor Loan Agreement. 2 The Subsidiary Guarantor further agrees to pay, in lawful currency of the United States of America and in immediately available funds, interest from the date hereof on the unpaid and outstanding principal amount hereof until such unpaid and outstanding principal amount shall become due and payable (whether at stated maturity, by acceleration or otherwise) at the rates of interest and at the times set forth in the Guarantor Loan Agreement, and the Subsidiary Guarantor agrees to pay all other amounts due, including, without limitation, fees and costs, as stated in the Guarantor Loan Agreement. Upon the occurrence of any one or more Guarantor Events of Default (as defined in Section 4.1 of the Guarantor Loan Agreement) all amounts then remaining unpaid under this Guarantor Note may become or be declared to be immediately due and payable as provided in the Guarantor Loan Agreement, without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or notices or demands of any kind, all of which are expressly waived by the Subsidiary Guarantor. The obligations hereunder are subject to the limitations set forth in Section 5.10 of the Guarantor Loan Agreement, the provisions of which are hereby incorporated by reference. THIS GUARANTOR NOTE IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES OF AMERICA AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 2 3 IN WITNESS WHEREOF, the Subsidiary Guarantor has caused this Guarantor Note to be duly executed. LOUISIANA GENERATING LLC By: /s/ Craig A. Mataczynski ------------------------------------ Name: Craig A. Mataczynski Title: Vice President 3 EX-4.10 20 y57012ex4-10.txt GUARANTOR LOAN AGREEMENT 1 Exhibit 4.10 ================================================================================ GUARANTOR LOAN AGREEMENT Between LOUISIANA GENERATING LLC, as borrower and NRG SOUTH CENTRAL GENERATING LLC as lender Dated as of March 30, 2000 ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS; CONSTRUCTION ------------------------- Section 1.1 Definitions ...................................................... 2 Section 1.2 Principles of Construction ....................................... 2 ARTICLE II DESCRIPTION OF THE GUARANTOR LOAN --------------------------------- Section 2.1 Acknowledgments of Subsidiary Guarantor; Guarantor Loan ................................................... 2 Section 2.2 Term of this Agreement ........................................... 3 Section 2.3 Interest ......................................................... 3 Section 2.4 Principal ........................................................ 3 Section 2.5 Obligations of the Subsidiary Guarantor Hereunder Unconditional .................................................... 4 Section 2.6 General Terms of Payment ......................................... 4 Section 2.7 Security ......................................................... 4 Section 2.8 Pledge of Guarantor Note ......................................... 4 ARTICLE III COVENANTS AND AGREEMENTS OF THE SUBSIDIARY GUARANTOR ---------------------------------------------------- Section 3.1 Reporting Requirements ........................................... 5 Section 3.2 Existence; Governmental Approvals; Compliance with Applicable Laws ............................................. 5 Section 3.3 Title to Assets. ................................................. 6 Section 3.4 Payment of Taxes and Claims ...................................... 6 Section 3.5 Books and Records ................................................ 6 Section 3.6 Right of Inspection .............................................. 7 Section 3.7 Use of Proceeds; Depositary Accounts ............................. 7 Section 3.8 Performance of Transaction Documents ............................. 7 Section 3.9 Auditors ......................................................... 7
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Page ---- Section 3.10 Operation of the Project ........................................ 7 Section 3.11 Insurance ....................................................... 8 Section 3.12 Third Party Consents ............................................ 8 Section 3.13 Permitted Indebtedness .......................................... 8 Section 3.14 Permitted Liens ................................................. 9 Section 3.15 Guarantees ...................................................... 9 Section 3.16 Business Activities ............................................. 9 Section 3.17 Assignment of Obligations; Additional Agreements ................ 9 Section 3.18 Fundamental Changes; Sale of Assets ............................ 10 Section 3.19 Investments; Transactions with Affiliates ...................... 10 Section 3.20 Finance Documents; Project Documents ........................... 12 Section 3.21 Restricted Payments ............................................ 13 Section 3.22 Investment Company Act ......................................... 13 Section 3.23 Taxation ....................................................... 13 Section 3.24 Further Assurances ............................................. 13 ARTICLE IV EVENTS OF DEFAULT; REMEDIES --------------------------- Section 4.1 Events of Default ............................................... 14 Section 4.2 Remedies Upon a Guarantor Event of Default ...................... 17 Section 4.3 Continuing Lien ................................................. 18 Section 4.4 Defense of Actions .............................................. 19 ARTICLE V GENERAL TERMS AND CONDITIONS ---------------------------- Section 5.1 Notices ......................................................... 19 Section 5.2 Amendments and Waivers .......................................... 19 Section 5.3 No Waiver; Remedies Cumulative .................................. 20 Section 5.4 Severability .................................................... 20 Section 5.5 Third Party Beneficiaries ....................................... 20 Section 5.6 Subsidiary Guarantor in Control ................................. 21 Section 5.7 Number and Gender ............................................... 21 Section 5.8 Section Headings ................................................ 21 Section 5.9 Governing Law; Submission to Jurisdiction;/Waiver of Jury Trial ...................................................... 21
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Page ---- Section 5.10 Limitation of Liability ........................................ 22 Section 5.11 Counterparts ................................................... 23 Section 5.12 Successors and Assigns ......................................... 23 Section 5.13 Maximum Interest Rate .......................................... 23 Section 5.14 Entire Agreement ............................................... 23 Schedule I Amortization Schedule and Interest Rate Schedule 3.13 Permitted Guarantor Indebtedness Schedule 3.15 Permitted Liens Schedule 3.16 Guarantees Schedule 3.17 Permitted Investments Exhibit A: Form of Guarantor Note
iii 5 GUARANTOR LOAN AGREEMENT This GUARANTOR LOAN AGREEMENT, dated as of March 30, 2000 (this "Agreement") is by and among LOUISIANA GENERATING LLC, a Delaware limited liability company (the "Subsidiary Guarantor"), as borrower, and NRG SOUTH CENTRAL GENERATING LLC, a Delaware limited liability company ("the Issuer"), as lender. RECITALS WHEREAS, the Issuer is a limited liability company established for the purpose of issuing the Bonds in its individual capacity pursuant to the Indenture and to make loans pursuant to this Agreement; WHEREAS, the Issuer has simultaneously with the execution and delivery of this Agreement issued and sold the Initial Bonds pursuant to the Indenture; WHEREAS, pursuant to this Agreement, the Issuer intends to use a portion of the proceeds from the issuance and sale of the Initial Bonds to make the Guarantor Loan to the Subsidiary Guarantor in the aggregate principal amount of $800,000,000 the proceeds of which will be used, among other things, to finance costs and expenses associated with the Acquisition; and WHEREAS, payments of the principal of, premium (if any), interest on and any other amounts due with respect to the Initial Bonds will be serviced by repayment of the Guarantor Loan and guaranteed by the Subsidiary Guarantor. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants hereinafter contained, the parties hereto formally covenant, agree and bind themselves as follows: 6 ARTICLE I DEFINITIONS; CONSTRUCTION Section 1.1 Definitions. Except as otherwise expressly provided herein or unless the context otherwise clearly requires, capitalized terms used in this Agreement shall have the meanings ascribed thereto in Appendix A of the Trust Indenture, dated as of March 30, 2000, among the Issuer, the Subsidiary Guarantor and The Chase Manhattan Bank, as Bond Trustee and Appendix A is incorporated by reference herein as if set forth in full herein. Section 1.2 Principles of Construction. Except as otherwise expressly provided herein or unless the context otherwise clearly requires, the principles of construction set forth in Section 1.1 (Definitions; Construction) of the Indenture shall apply to this Agreement. ARTICLE II DESCRIPTION OF THE GUARANTOR LOAN Section 2.1 Acknowledgments of Subsidiary Guarantor; Guarantor Loan. The Subsidiary Guarantor and the Issuer hereby acknowledge and agree that: (a) pursuant to this Agreement, the Issuer does hereby lend to the Subsidiary Guarantor and the Subsidiary Guarantor does hereby borrow from the Issuer funds in the aggregate principal amount of Eight Hundred Million Dollars ($800,000,000) (the "Guarantor Loan") to be evidenced by a promissory note or notes substantially in the form of Exhibit A issued by the Subsidiary Guarantor in favor of the Issuer (each such note, including any note issued pursuant to clause (b) of this Section 2.1, a "Guarantor Note"); and (b) if proceeds from the issuance and sale of any Additional Bonds the proceeds of which must be loaned to the Subsidiary Guarantor by the Issuer pursuant to the terms of the Indenture or applicable Supplemental Indenture, the outstanding principal balance of the Guarantor Loan shall be increased by the amount of net proceeds loaned to the Subsidiary Guarantor in connection therewith and the Guaran- 2 7 tor Loan shall include the loan to the Subsidiary Guarantor of such proceeds, as evidenced by a promissory note or notes substantially in the form of Exhibit A to be issued by the Subsidiary Guarantor in favor of the Issuer. Section 2.2 Term of this Agreement. This Agreement shall remain in full force and effect from the date hereof until the payment in full of all amounts due under this Agreement. Section 2.3 Interest. Interest hereunder shall be paid in arrears on each March 15 and September 15, commencing September 15, 2000, until all principal hereunder is paid in full. Interest hereunder shall be computed (a) on the basis of a three hundred sixty (360) day year, consisting of twelve (12) thirty (30) day months, and (b) at the applicable rates per annum specified on Schedule I. Section 2.4 Principal. (a) Regular Repayment. (i) The Subsidiary Guarantor shall repay the Guarantor Loan in installments to the Issuer on the dates, at the times and in the amounts set forth on Schedule I (as the same may be modified (a) pursuant to Section 8.3 of the Indenture and (b) to reflect any prepayments made pursuant to clause (b) of this Section 2.4). (ii) If any proceeds from the issuance of any Additional Bonds are loaned to the Subsidiary Guarantor by the Issuer, principal payments on the additional promissory note or notes issued by the Subsidiary Guarantor pursuant to Section 2.1(b) shall be payable in scheduled installments which correspond to the repayment of such Additional Bonds pursuant to Schedule I of the Indenture as the same may be modified from time to time. (b) Prepayment. The Subsidiary Guarantor shall prepay the Guarantor Loan pursuant to Section 3.4 of the Indenture (or shall instruct the Depositary Bank to make the required withdrawals and transfers) in such amounts and at such times as may be appropriate to permit the Issuer to redeem the Bonds pursuant to Section 3.1 or Section 3.2 of the Indenture including any Redemption Premium if required thereunder. Following such prepayment, the Subsidiary Guarantor shall furnish the Bond Trustee, on behalf of the Issuer, an Officer's Certificate setting forth the amortization schedule for the remaining Bonds after giving effect to such prepayment and corresponding redemption under the Indenture. 3 8 (c) The Subsidiary Guarantor shall prepay the Guarantor Loan in such amounts and at such times as may be appropriate to permit the Issuer to defease the Bonds pursuant to Section 9.2 of the Indenture. Section 2.5 Obligations of the Subsidiary Guarantor Hereunder Uncondi- tional. The obligation of the Subsidiary Guarantor to make the payments required in Section 2.3 and Section 2.4 shall be absolute and unconditional and the Subsidiary Guarantor shall not discontinue such payments for any reason, including, without limitation, any acts or circumstances that may constitute failure of consideration, eviction or constructive eviction from the Project, including commercial frustration of purpose, or change in Applicable Law. The Subsidiary Guarantor may, however, at its own cost and expense and in its own name or, with the consent of the Issuer and subject to the provision of certain indemnities as the Issuer may require, in the name of the Issuer, prosecute or defend any action or proceeding or take any other action involving third Persons which the Subsidiary Guarantor deems reasonably necessary in order to secure or protect its right of possession, occupancy and use of the Project. Section 2.6 General Terms of Payment. (a) All sums payable to the Issuer hereunder shall be deemed paid to the extent the Collateral Agent shall apply, pursuant to the instructions of either Obligor, amounts held by the Depositary Bank to the payment of the principal of, interest on or any other amounts due in respect of the Guarantor Loan and the principal of, premium (if any), interest on or any other amounts due in respect of the Bonds, each in accordance with the Indenture or any relevant Supplemental Indenture. (b) All payments due or accruing hereunder shall be calculated pursuant to the terms and provisions set forth in the Indenture with respect to the corresponding payment due or accruing on the Bonds. Section 2.7 Security. The obligations of the Subsidiary Guarantor hereunder shall be secured as set forth herein and under the Security Documents. Section 2.8 Pledge of Guarantor Note. The Issuer shall pledge the Guaran- tor Note to the Collateral Agent, acting on behalf of the Secured Parties pursuant to the Issuer Security Agreement. The Subsidiary Guarantor hereby acknowledges and consents to the granting of such pledge and this Section 2.8 shall constitute notice thereof given as of the date of this Agreement. 4 9 ARTICLE III COVENANTS AND AGREEMENTS OF THE SUBSIDIARY GUARANTOR The Subsidiary Guarantor hereby covenants and agrees that from the date of this Agreement, it shall faithfully observe and fulfill, and shall cause to be faithfully observed and fulfilled, each and all of the following covenants until the Debt Termination Date shall have occurred: Section 3.1 Reporting Requirements. The Subsidiary Guarantor shall furnish or cause to be furnished to the Issuer: (a) promptly, and in any event within ten (10) days after the receipt of notice of the occurrence of any litigation, claim, proceeding or controversy pending or the receipt by the Subsidiary Guarantor of a written threat of any such litigation, claim, proceeding or controversy involving or affecting the Subsidiary Guarantor or the Project that would in any case reasonably be expected to result in a Material Adverse Effect, notice of the same; (b) copies of all material notices delivered in connection with any Project Document or otherwise in connection with the Project; and (c) all other information reasonably requested by the Issuer to enable the Issuer to satisfy its obligations under the Indenture. Section 3.2 Existence; Governmental Approvals; Compliance with Applicable Laws. (a) The Subsidiary Guarantor shall at all times preserve and maintain in full force and effect its existence as a limited liability company in good standing under the laws of the State of Delaware and its qualification to do business in each other jurisdiction in which the character of properties owned or leased by it or in which the transaction of its business as conducted or proposed to be conducted makes such qualification necessary, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect; provided, however that (i) the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 3.18 and (ii) the Subsidiary Guarantor may change its status as a limited liability company if the Rating Agencies confirm in writing that the change will not result in a Ratings Downgrade and the Subsidiary Guarantor otherwise complies with its obligations under the Finance Documents. 5 10 (b) The Subsidiary Guarantor shall (i) obtain all Governmental Approvals necessary for the transaction of its business as conducted or proposed to be con-ducted and (ii) maintain its status as an EWG except in either case where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. (c) The Subsidiary Guarantor shall comply with all Applicable Laws (including Environmental Laws) and Governmental Approvals applicable to it, and all other acts, rules, regulations, permits, orders and requirements of any legislative, executive, administrative or judicial body relating to the performance by the Subsidiary Guarantor of its obligations hereunder, except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect. Section 3.3 Title to Assets. The Subsidiary Guarantor shall preserve and maintain good, valid and marketable title or leasehold rights to the Mortgaged Property and its assets constituting part of the Collateral (excluding any real property that is not part of the Mortgaged Property) (subject to no Liens other than Permitted Liens) except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect; provided, however, that nothing in this Section 3.3 shall prevent the Subsidiary Guarantor from disposing of any asset subject to terms and provisions of Section 3.18. Section 3.4 Payment of Taxes and Claims. The Subsidiary Guarantor shall, prior to the time that penalties shall attach thereto, pay and discharge or cause to be paid or discharged all Taxes, assessments and governmental charges or levies imposed upon it or its income or profits except where the failure to do so would not reasonably be expected to result in a Material Adverse Effect; provided that the Subsidiary Guarantor shall not be required to pay any such obligation if (a) such charges are being diligently contested in good faith by appropriate proceedings, and (b) adequate reserves are established with respect to the contested items (in accordance with GAAP). The Subsidiary Guarantor shall promptly pay or cause to be paid any valid, final non-appealable judgment enforcing any such Tax, assessment, governmental charge or levy and shall cause the same to be satisfied of record, as applicable. Section 3.5 Books and Records. The Subsidiary Guarantor shall at all times keep proper books of record and account truly and fairly reflecting the financial condition and results of operations of the Subsidiary Guarantor in which full, true and correct entries in conformity with GAAP and all Applicable Laws shall be made of all dealings and transactions in relation to its business and activities. 6 11 Section 3.6 Right of Inspection. Upon reasonable advance written notice, the Subsidiary Guarantor shall permit the Bond Trustee or its representative to visit and inspect, in the presence of representatives of the Subsidiary Guarantor, if reasonably requested by the Bond Trustee, any of the properties of the Subsidiary Guarantor, and to examine and make copies of the books of record and accounts of the Subsidiary Guarantor as reasonably necessary and discuss the affairs, finances and accounts of the Subsidiary Guarantor with, and be advised as to the same by, its officers, all at such reasonable times and intervals and to such reasonable extent as the Bond Trustee may request. Section 3.7 Use of Proceeds; Depositary Accounts. (a) The Subsidiary Guarantor shall use all proceeds of the Guarantor Loan solely to (i) finance the Acquisition and to pay certain fees, expenses, costs and taxes associated therewith and (ii) repay in full any Indebtedness owed to any Affiliate that is outstanding on the Closing Date. (b) Unless otherwise permitted by the Indenture, the Subsidiary Guarantor shall cause (i) all Project Revenues, (ii) any proceeds received from the sale of assets related to the Project (excluding Assets Specifically Held for Resale) and (iii) all Loss Proceeds, proceeds received in connection with a Title Event or proceeds received in connection with a PPA Buy-Out received by it to be deposited into the Revenue Account. Section 3.8 Performance of Transaction Documents. The Subsidiary Guarantor shall perform all of its material covenants and agreements contained in any of the Transaction Documents to which it is a party, except where such nonperformance would not reasonably be expected to result in a Material Adverse Effect. Section 3.9 Auditors. The Subsidiary Guarantor shall retain PricewaterhouseCoopers LLP or another nationally recognized independent accounting firm in the United States to act as its auditors and authorize such firm to communicate directly with the Bond Trustee and the Collateral Agent. Section 3.10 Operation of the Project. The Subsidiary Guarantor shall maintain and operate the Project in accordance with prudent independent power industry practice. 7 12 Section 3.11 Insurance. (a) The Subsidiary Guarantor shall at all times maintain, with responsible, reputable and financially sound insurance carriers, and provide satisfactory evidence of, customary insurance in such amounts (subject to reasonable and customary deductibles and sublimits) and with terms and conditions in accordance with prudent independent power industry practice. All policies (other than workers' compensation) shall name the Collateral Agent and the Bond Trustee as loss payee or additional insured. (b) Each insurance policy obtained by the Subsidiary Guarantor shall provide for at least ten (10) days' written notice to the Bond Trustee and the Collateral Agent of cancellation, reduction in amount of coverage or any other material change in coverage. Section 3.12 Third Party Consents. The Subsidiary Guarantor shall use commercially reasonable efforts to obtain Third Party Consents with respect to each material Project Document entered into by the Subsidiary Guarantor after the Closing Date. Section 3.13 Permitted Indebtedness. The Subsidiary Guarantor shall not create or incur or suffer to exist any Indebtedness except the following (collectively, "Permitted Guarantor Indebtedness"): (a) Indebtedness incurred pursuant to this Agreement; (b) Indebtedness related to Permitted Liens; (c) Indebtedness outstanding on the Closing Date as set forth on Schedule 3.13; (d) Indebtedness owed to the Issuer pursuant to any intercompany notes that have been pledged to the Collateral Agent; (e) Indebtedness to an Additional Guarantor; and (f) Indebtedness represented by Hedging Agreements; (g) Indebtedness in respect of letters of credit, surety bonds or performance bonds issued in the ordinary course of business;. 8 13 (h) trade indebtedness or other similar Indebtedness incurred in the ordinary course of business (but not in any case for borrowed money); (i) other Indebtedness in an aggregate principal amount not to exceed $15,000,000 (Escalated) at any one time; and (j) Indebtedness related to the Subsidiary Guarantor's obligations to establish certain funds under its power purchase agreements with the EMC's. Section 3.14 Permitted Liens. The Subsidiary Guarantor shall not create or suffer to exist or permit any Lien upon or with respect to any of its properties except Permitted Liens. Section 3.15 Guarantees. The Subsidiary Guarantor shall not become liable, directly or indirectly, in connection with any Guarantee Obligation, except for (a) the Guarantee, (b) endorsements and similar obligations in the ordinary course of business and (c) guarantees existing on the Closing Date as set forth on Schedule 3.15. Section 3.16 Business Activities. The Subsidiary Guarantor shall not engage in any activities other than (a) those contemplated by this Agreement and the other Finance Documents and activities incidental thereto, (b) the acquisition, ownership, operation and maintenance of the Project and the Joint Operating Assets (and, in each case, activities incidental or related thereto) or (c) the acquisition and ownership of Additional Guarantors; provided, that, (i) prior to acquiring or creating any Additional Guarantor, the Subsidiary Guarantor shall obtain written confirmation from each Rating Agency that such action will not result in a Ratings Downgrade; (ii) each Additional Guarantor shall enter into a loan agreement containing covenants substantially similar to those set forth in Sections 3.13, 3.14, 3.15, 3.16, 3.18, 3.19, 3.21 and 3.23 hereof; and (iii) each Additional Guarantor shall enter into a guarantee of payments due on the Bonds substantially similar to the Guarantee. Section 3.17 Assignment of Obligations; Additional Agreements. Other than assignments to the Collateral Agent, the Subsidiary Guarantor shall not assign any of its rights or obligations under any material Project Document or enter into any additional material Project Document unless (a) an Authorized Officer of the Subsidiary Guarantor certifies that the transactions contemplated by such assignment or additional Project Document would not reasonably be expected to result in a Material Adverse Effect or (b) each Rating Agency confirms in writing that the 9 14 assignment or entering into such additional Project Document would not result in a Ratings Downgrade. Section 3.18 Fundamental Changes; Sale of Assets. (a) Except as otherwise permitted under the Indenture or other Finance Documents, the Subsidiary Guarantor shall not enter into any transaction of merger or consolidation, change its form of organization or its business, liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution) except that, if at the time no Default exists or is caused by such action: (i) the Subsidiary Guarantor may merge into the Issuer in a transaction in which the Issuer is the surviving corporation; (ii) the Subsidiary Guarantor may merge into an Additional Guarantor in a transaction in which the surviving entity is an Additional Guarantor and the Issuer's economic interest in the Subsidiary Guarantor's assets shall not have been diminished as a result of such merger; and (iii) the Subsidiary Guarantor may liquidate or dissolve if the assets of the Subsidiary Guarantor are transferred to an Additional Guarantor (provided that the Issuer's economic interest in such assets would not be diminished as a result thereof) if the Subsidiary Guarantor determines in good faith that such liquidation or dissolution in the best interests of the Subsidiary Guarantor and would not reasonably be expected to result in a Material Adverse Effect. (b) The Subsidiary Guarantor shall not sell, lease, transfer, assign or otherwise dispose of (in one transaction or in a series of transactions) any of its assets unless such transaction is a Permitted Asset Sale. (c) The Subsidiary Guarantor shall not amend its certificate of formation or any other organizational document unless such amendment is otherwise permitted by Section 3.2 hereof or in connection with a name change. Section 3.19 Investments; Transactions with Affiliates. (a) The Subsidiary Guarantor shall not directly or indirectly, make investments, loans or advances or acquire the stock, obligations or securities of any Person except: (i) loans to any Additional Guarantor with the funds borrowed by the Issuer in accordance with the Indenture and on-lent to the Subsidiary Guarantor or as otherwise on deposit in the Revenue Account; (ii) investments in Cash Equivalents; 10 15 (iii) investments outstanding on the Closing Date as set forth on Schedule 3.19; (iv) operating deposits with banks; (v) investments by the Subsidiary Guarantor in any Additional Guarantors; (vi) investments in another Person, if as a result of such investment (x) such other Person becomes an Additional Guarantor or (y) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to the Subsidiary Guarantor or an Additional Guarantor; (vii) investments representing capital stock or obligations issued to the Subsidiary Guarantor in settlement of claims against any other Person by reason of a composition or readjustment of debt or a reorganization of any debtor of the Subsidiary Guarantor; (viii) investments acquired by Subsidiary Guarantor in connection with any asset sale permitted under this Agreement to the extent such investments are non-cash proceeds as permitted under this Agreement; (ix) any investment to the extent that the consideration therefore is capital stock (other than redeemable capital stock) of the Subsidiary Guarantor; (x) investments consisting of security deposits with utilities and other Persons made in the ordinary course of business; (xi) Hedging Agreements; (xii) amounts constituting Restricted Payments which the Subsidiary Guarantor would be permitted to make under Section 3.21; and (xiii) additional investments up to but not exceeding $10,000,000 (Escalated) outstanding at any one time in the aggregate among the Obligors and any Additional Guarantor. 11 16 For purposes of clause (xiii) of this Section, the aggregate amount of an investment at any time shall be deemed to be equal to (A) the aggregate amount of cash, together with the aggregate fair market value of property, including any securities, loaned, advanced, contributed, transferred or otherwise invested that gives rise to such investment minus (B) the aggregate amount of dividends, distributions or other payments received in cash or other property in respect of such investment; the amount of an investment shall not in any event be reduced by reason of any write-off of such investment not increased by any increase in the amount of earnings retained in the Person in which such Investment is made that have not been dividend, distributed or otherwise paid out. (b) The Subsidiary Guarantor shall not enter into any transaction or series of related transactions with any Affiliate except (i) transactions in the ordinary course of business at prices and on terms not less favorable than a comparable transaction entered into on an arm's-length basis; (ii) transactions between or among the Issuer, the Subsidiary Guarantor or any Additional Guarantor not involving any other Affiliate; (iii) any Restricted Payment otherwise permitted by the terms and conditions of the Indenture and this Agreement, and (iv) transactions that are contemplated by any Transaction Document entered into on or prior to the Closing Date or any extension, renewal or replacement thereof that would not reasonably be expected to result in a Material Adverse Effect. Notwithstanding the foregoing, the restrictions set forth in this covenant shall not apply to (i) reasonable and customary directors' fees, indemnification and similar arrangements, consulting fees, employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of the Subsidiary Guarantor entered into in the ordinary course of business, (ii) loans and advances to officers directors and employees of the Subsidiary Guarantor for reasonable travel, entertainment, moving and other relocation expenses, in each case made in the ordinary course of business, (iii) the incurrence of intercompany Indebtedness which constitutes Permitted Indebtedness and (iv) transactions pursuant to agreements in effect on the date hereof. Section 3.20 Finance Documents; Project Documents. (a) The Subsidiary Guarantor shall not consent to, enter into or grant any amendment, waiver, consent, change or modification to the Finance Documents, or assign any of its obligations thereunder, except in accordance with this Agreement. 12 17 (b) The Subsidiary Guarantor shall not consent to, enter into or grant any amendment, waiver, consent or change or modification, or permit the cancellation or termination of, any Project Document unless such action (i) would not reasonably be expected to result in a Material Adverse Effect or (ii) shall otherwise be permitted by the terms and conditions of this Agreement. Section 3.21 Restricted Payments. The Subsidiary Guarantor shall not declare nor make any Restricted Payments except for payments permitted under Section 6.7 of the Indenture. Section 3.22 Investment Company Act. The Subsidiary Guarantor shall not take any action which will cause it to be in violation of the Investment Company Act of 1940 (as such act may be amended, modified or supplemented from time to time) including all rules and regulations promulgated thereunder. Section 3.23 Taxation. The Subsidiary Guarantor shall not elect or cause itself to be treated as a corporation for United States federal or state income tax purposes and shall not take any action which will cause it to be treated as a corporation for United States federal or state income tax purposes unless in connection with a change permitted under Section 3.2. Section 3.24 Further Assurances. (a) The Subsidiary Guarantor shall execute and deliver, from time to time as requested by the Bond Trustee or the Collateral Agent or as necessary, at the Subsidiary Guarantor's expense, such other documents in connection with the rights and remedies of the Bond Trustee and the Holders granted or provided for by the Finance Documents and to consummate the transactions contemplated therein. (b) The Subsidiary Guarantor shall, at its own expense, take all reasonable actions necessary to establish, maintain, protect, perfect and continue the perfection of the Liens created by the Security Documents and its rights and title and the rights and title of the Bond Trustee and the Holders to the Guarantor Collateral in such manner and in such places as in the opinion of counsel to the Subsidiary Guarantor, the Bond Trustee or the Collateral Agent is required by Applicable Law in order to fully preserve and protect the rights of the Collateral Agent and the Bond Trustee. 13 18 ARTICLE IV EVENTS OF DEFAULT; REMEDIES Section 4.1 Events of Default. The term "Guarantor Event of Default," whenever used herein, shall mean any of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or shall come about or be affected by operation of law, or be pursuant to or in compliance with any Applicable Law), and any such event shall continue to be Guarantor Event of Default if and for so long as it shall not have been remedied: (a) the Subsidiary Guarantor shall fail to pay any principal of, premium (if any) and interest due with respect to any Guarantor Loan when the same becomes due and payable, whether by scheduled maturity or required prepayment or redemption or by acceleration or otherwise and such failure continues for fifteen (15) or more days following the due date for payment; (b) an Indenture Event of Default shall have occurred and be continuing; (c) the Subsidiary Guarantor shall default in the performance or observance of any covenant or agreement contained in Section 3.2 (with respect to the maintenance of the corporate existence of the Subsidiary Guarantor only), Section 3.4, Section 3.10, Section 3.13, Section 3.14, Section 3.15, Section 3.16, Section 3.18, Section 3.20, Section 3.21, Section 3.22 or Section 3.24 and such failure shall continue uncured for thirty (30) or more days from the earliest to occur of (i) the date an Authorized Officer of the Subsidiary Guarantor obtains actual knowledge of such failure or (ii) the date on which an Authorized Officer of the Subsidiary Guarantor receives written notice from the Bond Trustee, the Collateral Agent or any Holder of such Default; (d) the Subsidiary Guarantor shall default in the performance or observance of any of its covenants or material obligations contained in this Agreement (other than those referred to in clause (c) of this Section 5.1) and such failure shall continue uncured for thirty (30) or more days from the earliest to occur of (i) the date an Authorized Officer of the Subsidiary Guarantor obtains actual knowledge of such failure or (ii) the date on which an Authorized Officer of the Subsidiary Guarantor receives written notice from the Bond Trustee, the Collateral Agent or any Holder of such Default; provided that if the Subsidiary Guarantor commences and diligently pursues efforts to cure such default within such thirty (30) day period and delivers 14 19 written notice thereof to the Bond Trustee, the Subsidiary Guarantor may continue to effect such cure of the default and such default shall not be deemed a "Guarantor Event of Default" for an additional sixty (60) days following the end of the initial thirty (30) day period so long as the Subsidiary Guarantor is diligently pursuing such cure; (e) the Subsidiary Guarantor shall (i) apply for or authorize or approve or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or all or a substantial part of its property, (ii) admit in writing its inability or be generally unable to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code, (v) file a petition seeking to take advantage of any other Debtor Relief Law, (vi) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law or (vii) take any action for the purpose of effecting any of the foregoing including, without limitation, commencing a shareholder vote in connection with any of the foregoing; (f) a proceeding or case shall be commenced without the application or consent of the Subsidiary Guarantor in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution, winding-up or the composition or readjustment of debts or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Subsidiary Guarantor or all or a substantial part of its property under any Debtor Relief Law and such proceeding or case shall continue undismissed, or any order, judgment or decree approving any of the foregoing shall be entered and continue unstayed and in effect, for a period of sixty (60) or more consecutive days, or any order for relief against the Subsidiary Guarantor shall be entered in any involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law; (g) any Security Document to which the Subsidiary Guarantor is party shall cease to be in full force and effect or, except to the extent permitted by the terms and conditions of any Security Document, any Lien purported to be granted thereby with respect to any Guarantor Collateral described therein shall cease to be a valid and perfected Lien in favor of the Collateral Agent for the benefit of the Secured Parties on the Guarantor Collateral described therein with the priority purported to be created thereby and such cessation has resulted in a Material Adverse Effect; provided that the Subsidiary Guarantor shall have thirty (30) days from the 15 20 earliest to occur of (i) the date an Authorized Officer of the Subsidiary Guarantor obtains actual knowledge thereof or (ii) the date on which an Authorized Officer of the Subsidiary Guarantor receives written notice from the Bond Trustee, the Collateral Agent or any Holder of such Default to cure such cessation (if curable) or to furnish to the Collateral Agent all documents or instruments required to cure any such cessation (if curable); (h) Indebtedness for borrowed money of the Subsidiary Guarantor in an amount exceeding $15,000,000 (Escalated) (other than any amount due under or pursuant to the Finance Documents) is required to be prepaid, or shall be declared to be due and payable, other than by scheduled required payment, prior to the stated maturity thereof, as the result of the acceleration of the stated maturity thereof following an event of default thereunder; provided that such default and acceleration has not been annulled or rescinded within thirty (30) days and remains in effect with respect to such Indebtedness; (i) the entry of one or more final and non-appealable judgment or judgments for the payment of money in excess of $25,000,000 (Escalated) (exclusive of amounts fully covered by insurance or indemnity) against the Subsidiary Guarantor, which remain unpaid or unstayed for a period of sixty (60) or more consecutive days; (j) any material Finance Document to which the Subsidiary Guarantor is a party is declared in a final nonappealable judgment to be unenforceable against any the Subsidiary Guarantor, or the Subsidiary Guarantor shall have expressly repudiated its obligations thereunder and ceased to perform such obligations, or defaulted in the performance or observance of any of its material obligations thereunder and such default has continued unremedied for a period of five (5) Business Days or more; (k) any material Project Document to which the Subsidiary Guarantor is a party ceases to be valid and binding and in full force and effect (other than as permitted or contemplated hereunder), any third party thereto denies that it has any liability or obligation under such material Project Document and such third party ceases performance thereunder, or any third party is in default under such material Project Document (subject to any applicable grace period thereunder), and in each case such cessation or default has resulted or would reasonably be expected to result in a Material Adverse Effect; provided, however, that no such event shall be a Guarantor Event of Default if (i) within one hundred eighty (180) days from any 16 21 such occurrence the Subsidiary Guarantor (x) causes the third party to reaffirm the disaffirmed provisions or resume performance (as the case may be) or (y) enters into a replacement document substantially similar to the original document or (ii) each Rating Agency confirms in writing that such event will not result in a Ratings Downgrade; (l) an Event of Loss with respect to the entire Project shall occur for which no Loss Proceeds are received by either Obligor or the Subsidiary Guarantor shall voluntary abandon the entire Project for sixty (60) consecutive days and in each case such Event of Loss or voluntary abandonment has resulted or would reasonably be expect to result in a Material Adverse Effect; provided that the occurrence of an Event of Loss shall not be a Guarantor Event of Default if within thirty (30) days from the occurrence of such Event of Loss, there exists an Approved Restoration Plan in respect of the remediation of the damage, loss or taking giving rise to such Event of Loss; (m) any Governmental Approval required for the operation of the Project is revoked, terminated, withdrawn or ceases to be in full force and effect if such revocation, termination, withdrawal or cessation would reasonably be expected to have a Material Adverse Effect; provided that no such event shall be a Guarantor Event of Default if within sixty (60) days from the occurrence thereof the Subsidiary Guarantor diligently pursues in good faith and (i) obtains an additional Governmental Approval in substitution therefor or replacement thereof or (ii) causes such Governmental Approval to be reissued; provided further that the such event shall not be a Guarantor Event of Default for an additional thirty (30) days following the expiration of the initial sixty (60) day period if within the sixty (60) day period the Guarantor Default has not been cured but the Subsidiary Guarantor continues to diligently pursue in good faith the items set forth in clauses (i) and (ii) above during such additional thirty (30) day period, and (n) the Subsidiary Guarantor shall fail to satisfy its obligations and payments under the Guarantee. Section 4.2 Remedies Upon a Guarantor Event of Default. Subject to the Intercreditor Agreement, if one or more Guarantor Events of Default shall have occurred and be continuing, then: (a) in the case of a Guarantor Event of Default described in clause (a), (b) (with respect to an Indenture Event of Default under clause (a) of Section 5.1 of the 17 22 Indenture) or (n) of Section 4.1, then, in each and every case, upon the written and unrescinded direction (such direction may be rescinded as permitted by the terms of the Indenture) of (i) the One-Third Holders or (ii) the Bond Trustee, notwithstanding the absence of direction from the One-Third Holders, if in the good faith exercise of its discretion the Bond Trustee determines that such action is necessary to protect the interests of the Holders, the Issuer shall declare that portion of the outstanding principal amount of all Guarantor Notes, all interest accrued and unpaid thereon, all premium (if any), all other amounts payable in respect thereof and all other amounts payable under this Agreement to be due and payable, whereupon the same shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived; (b) in the case of a Guarantor Event of Default described in clause (b) (except with respect to an Indenture Event of Default under clause (a), (e) or (f) of Section 5.1 of the Indenture), or clause (c), (d), (g), (h), (i), (j), (k), (l) or (m) of Section 4.1, then, in each and every case, upon the written and unrescinded direction (such direction may be rescinded as permitted by the terms of the Indenture) of (i) the Majority Holders or (ii) the Bond Trustee, notwithstanding the absence of direction from the Majority Holders if in the good faith exercise of its discretion the Bond Trustee determines that such action is necessary to protect the interests of the Holders, the Issuer shall declare that portion of the outstanding principal amount of all Guarantor Notes, all interest accrued and unpaid thereon, all premium (if any), all other amounts payable in respect thereof and all other amounts payable under this Agreement to be due and payable, whereupon the same shall become immediately due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby waived; and (c) in the case of a Guarantor Event of Default described in clause (b) (with respect to an Indenture Event of Default under clause (e) or (f) of Section 5.1 of the Indenture), or clause (e) or (f) of Section 4.1 then, in each and every case, the entire outstanding principal amount of all Guarantor Notes, all interest accrued and unpaid thereon, all premium (if any), all other amounts payable in respect thereof and all other amounts payable under this Agreement shall automatically become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived. Section 4.3 Continuing Lien. (a) The Liens on and security interests in the Collateral granted in this Agreement, the Security Documents and the other Finance Documents to which the Subsidiary Guarantor is a party secure all Indebtedness and 18 23 all obligations of the Subsidiary Guarantor owed to the Issuer in connection with the Guarantor Loan of whatever kind or character, whether now owing, hereafter arising or hereafter to be performed. (b) Notwithstanding anything to the contrary in this Agreement, the Security Documents or the other Finance Documents to which the Subsidiary Guarantor is a party, if on the date the principal balance of the Bonds and the Working Capital Facility is fully paid (the "Pay-Off Date") any other amounts owed by the Subsidiary Guarantor hereunder remain to be paid, the Issuer shall not be obligated to release any collateral remaining subject to the Security Documents, and such collateral shall continue to secure the payment of such amounts as of the Pay-off Date. Section 4.4 Defense of Actions. Subject to the Intercreditor Agreement, upon the occurrence and during the continuance of a Guarantor Event of Default, the Subsidiary Guarantor may (but shall not be obligated to) commence, appear in or defend any action or proceeding purporting to affect the Guarantor Loan, the Guarantor Notes or the respective rights and obligations of the Issuer and any other Person pursuant to this Agreement, the Security Documents or any other Finance Document to which the Subsidiary Guarantor is a party. The Issuer may (but shall not be obligated to) pay all necessary expenses, including reasonable attorneys' fees and expenses, incurred in connection with such proceedings or actions, which expenses the Subsidiary Guarantor hereby agrees to repay to the Issuer promptly upon demand. ARTICLE V GENERAL TERMS AND CONDITIONS Section 5.1 Notices. (a) Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be sufficiently given and shall be deemed given when delivered or mailed by registered or certified mail, postage prepaid, or sent by overnight delivery or telecopy to the Issuer, the Subsidiary Guarantor, the Bond Trustee or the Rating Agencies at their respective addresses specified on Schedule III to the Indenture, or in each case at such other address as shall be designated by such Person in a written notice to the other parties hereto. 19 24 Section 5.2 Amendments and Waivers. No waiver, amendment, modification or termination of any provision of this Agreement, or consent to any departure by the Subsidiary Guarantor therefrom, shall in any event be effective unless such waiver, amendment, modification or termination is in writing, is signed by the parties hereto and is in accordance with the Intercreditor Agreement and Section 8.3 of the Indenture. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 5.3 No Waiver; Remedies Cumulative. No failure or delay on the part of the Issuer in exercising any right, power or privilege hereunder or under any other Finance Document and no course of dealing between the Issuer or the Subsidiary Guarantor shall impair any such right, power or privilege or operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Finance Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies expressly provided herein or in any other Finance Document are cumulative and not exclusive of any rights, powers or remedies which the Issuer would otherwise have, all of which may at the discretion of the Issuer, subject to the Intercreditor Agreement, be pursued separately, successively or concurrently against the Subsidiary Guarantor, the Collateral or any other collateral securing the obligations of the Subsidiary Guarantor hereunder. No notice to or demand on the Subsidiary Guarantor in any case shall entitle the Subsidiary Guarantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Issuer to any other or further action in any circumstances without notice or demand. Section 5.4 Severability. In case any provision in or obligation under this Agreement or any Guarantor Note shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. Section 5.5 Third Party Beneficiaries. Except as provided in Section 5.12, nothing in this Agreement or in any Guarantor Note, express or implied, shall give or be construed to give any Person, other than the parties hereto, the Bond Trustee and the Holders, any benefit or any legal or equitable right, remedy or claim under this Agreement. Notwithstanding the preceding sentence, no Holder shall have any right to pursue any remedy hereunder except pursuant to the Intercreditor Agreement and through the Bond Trustee as permitted under Section 5.5 of the Indenture. 20 25 Section 5.6 Subsidiary Guarantor in Control. In no event shall the rights and interests of the Issuer or the Bond Trustee under this Agreement and the other Finance Documents to which the Subsidiary Guarantor is a party be construed to give the Issuer or the Bond Trustee, or be deemed to indicate that the Issuer or the Bond Trustee has, control of the business, management or properties of the Subsidiary Guarantor or power over the daily management functions and operating decisions made by the Subsidiary Guarantor. Section 5.7 Number and Gender. Whenever used herein, the singular number shall include the plural and the plural the singular, and the use of any gender shall be applicable to all genders. Section 5.8 Section Headings. Captions, section headings and the table of contents appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. Section 5.9 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) THIS AGREEMENT IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). (b) Any legal action or proceeding against the Subsidiary Guarantor with respect to this Agreement may be brought in the courts of the State of New York in the County of New York or of the United States for the Southern District of New York and, by execution and delivery of this Agreement, the Subsidiary Guarantor hereby irrevocably submits and accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Subsidiary Guarantor agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon the Subsidiary Guarantor, and may be enforced in any other jurisdiction by a suit upon such judgment, a certified copy of which shall be conclusive evidence of the judgment. The Subsidiary Guarantor hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 111 Eighth Avenue, New York, N.Y. 10011, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and 21 26 all legal process, summons, notices and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such, the Subsidiary Guarantor agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Bond Trustee. The Subsidiary Guarantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Subsidiary Guarantor at its address referred to in Section 5.1, such service to become effective five (5) days after such mailing. Nothing herein shall affect the right of the Issuer to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Subsidiary Guarantor in any other jurisdiction. (c) The Subsidiary Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Finance Document brought in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (d) WITH REGARD TO THIS AGREEMENT, THE SUBSIDIARY GUARANTOR AND THE ISSUER HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY. Section 5.10 Limitation of Liability. The obligations of the Subsidiary Guarantor or an Affiliate thereof hereunder are solely the corporate obligations of the Subsidiary Guarantor and no recourse shall be had against NRG, the Members or any employee, officer, director, member, shareholder, Affiliate, agent or servant of the Subsidiary Guarantor and NRG (each a "Non-Recourse Person") with respect to this Agreement, any of the obligations of the Subsidiary Guarantor hereunder or any obligation of the Subsidiary Guarantor for the payment of any amount payable hereunder for any claim based on, arising out of or relating to this Agreement; provided, however, that nothing in this Section 5.10 shall be deemed to affect or diminish (a) the obligations of any such Non-Recourse Person under any Transaction Document to which it is party, (b) the rights and remedies of the Issuer against any such Non-Recourse Person under any Transaction Document to which any such Non-Recourse Person is a party, (c) the rights and remedies of the Issuer with respect to 22 27 the Collateral or (d) the obligations of any such Non-Recourse Person under any Transaction Document as a result of such Person's fraud or willful misconduct. Section 5.11 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. Section 5.12 Successors and Assigns. All of the covenants, promises and agreements in this Agreement by or on behalf of the Subsidiary Guarantor or the Issuer shall bind and inure to the benefit of their respective successors and assigns, regardless of whether so expressed, except that the Subsidiary Guarantor may not assign or transfer all or any part of its rights and obligations under this Agreement other than with the prior written consent of the Bond Trustee and in accordance with the Indenture and the Intercreditor Agreement. Section 5.13 Maximum Interest Rate. Notwithstanding any provision to the contrary contained herein or in any Guarantor Note, at no time shall the Subsidiary Guarantor be obligated or required to pay interest on the principal balance due hereunder or thereunder at a rate which could be in excess of the maximum interest rate permitted by law to be contracted or agreed to be paid. If by the terms hereof or of any Guarantor Note, the Subsidiary Guarantor is at any time required or obligated to pay interest in excess of such maximum rate, then the rate of interest applicable hereunder or thereunder shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate. Section 5.14 Entire Agreement. This Agreement, together with any other agreements executed in connection herewith, is intended by the parties hereto as a final expression of their agreement as to the matters covered hereby and is intended as a complete and exclusive statement of the terms and conditions hereof. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 23 28 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. LOUISIANA GENERATING LLC By: /s/ Craig A. Mataczynski ------------------------------- Name: Craig A. Mataczynski Title: Vice President NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Mataczynski ------------------------------- Name: Craig A. Mataczynski Title: President 29 SCHEDULE I AMORTIZATION OF PRINCIPAL AND INTEREST RATE
Series A Series B Payment Principal Principal Date Repayment Repayment - -------------------- ------------------ -------------------- September 15, 2000 $ 11,250.00 $ - March 15, 2001 $ 12,500.00 $ - September 15, 2001 $ 12,750.00 $ - March 15, 2002 $ 12,750.00 $ - September 15, 2002 $ 12,750.00 $ - March 15, 2003 $ 12,750.00 $ - September 15, 2003 $ 12,750.00 $ - March 15, 2004 $ 7,500.00 $ - September 15, 2004 $ 7,500.00 $ - March 15, 2005 $ 7,500.00 $ - September 15, 2005 $ 7,500.00 $ - March 15, 2006 $ 7,500.00 $ - September 15, 2006 $ 7,500.00 $ - March 15, 2007 $ 7,500.00 $ - September 15, 2007 $ 7,500.00 $ - March 15, 2008 $ 12,500.00 $ - September 15, 2008 $ 12,500.00 $ - March 15, 2009 $ 13,750.00 $ - September 15, 2009 $ 13,750.00 $ - March 15, 2010 $ 17,500.00 $ - September 15, 2010 $ 17,500.00 $ - March 15, 2011 $ 21,250.00 $ - September 15, 2011 $ 21,250.00 $ - March 15, 2012 $ 22,500.00 $ - September 15, 2012 $ 22,500.00 $ - March 15, 2013 $ 22,500.00 $ - September 15, 2013 $ 23,750.00 $ - March 15, 2014 $ 23,750.00 $ - September 15, 2014 $ 26,250.00 $ -
Schedule I-1 30
Series A Series B Payment Principal Principal Date Repayment Repayment - -------------------- ------------------ -------------------- March 15, 2015 $ 26,250.00 $ - September 15, 2015 $ 27,500.00 $ - March 15, 2016 $ 27,500.00 $ - September 30, 2016 $ - $ 22,500.00 March 15, 2017 $ - $ 22,500.00 September 15, 2017 $ - $ 21,000.00 March 15, 2018 $ - $ 19,500.00 September 15, 2018 $ - $ 19,500.00 March 15, 2019 $ - $ 18,000.00 September 15, 2019 $ - $ 18,000.00 March 15, 2020 $ - $ 16,500.00 September 15, 2020 $ - $ 16,500.00 March 15, 2021 $ - $ 16,500.00 September 15, 2021 $ - $ 16,500.00 March 15, 2022 $ - $ 16,500.00 September 15, 2022 $ - $ 16,500.00 March 15, 2023 $ - $ 15,000.00 September 15, 2023 $ - $ 15,000.00 March 15, 2024 $ - $ 15,000.00 September 15, 2024 $ - $ 15,000.00 ================= ================== $ 500,000.00 $ 300,000.00
Schedule I-2 31 SCHEDULE 3.13 PERMITTED GUARANTOR INDEBTEDNESS None. Schedule 3.13-1 32 SCHEDULE 3.15 PERMITTED LIENS 1. Liens specifically assumed by the Subsidiary Guarantor as part of Assumed Liabilities pursuant to the Fifth Amended and Restated Asset Purchase and Reorganization Agreement, dated as of Secptember 21, 1999, among the Subsidiary Guarantor, Ralph R. Mabey, as Chapter 11 Trustee of Cajun and NRG with respect to certain provisions. Schedule 3.15-1 33 SCHEDULE 3.16 GUARANTEES None. Schedule 3.16-1 34 SCHEDULE 3.19 PERMITTED INVESTMENTS 1. PPA Form A Defense Fund (to be funded on March 31, 2000). 2. PPA Form B Defense Fund (to be funded on March 31, 2000). Schedule 3.19-1 35 EXHIBIT A FORM OF GUARANTOR NOTE US$[________] [DATE] For value received, the undersigned, LOUISIANA GENERATING LLC, a Delaware limited liability company (the "Subsidiary Guarantor"), by this promissory note promises to pay to the order of NRG SOUTH CENTRAL GENERATING LLC, a Delaware limited liability company ("the Issuer"), at the office of The Chase Manhattan Bank, a bank organized and existing under the laws of the State of New York, located at 450 West 33rd Street, 15th Floor, New York, NY 10001, in lawful currency of the United States of America and in immediately available funds, the principal amount of [________] (US$[_________]), or if less, the aggregate unpaid and outstanding principal amount of this Guarantor Note advanced by the Issuer to the Subsidiary Guarantor pursuant to that certain Guarantor Loan Agreement, dated as of March 30, 2000 (the "Guarantor Loan Agreement"), by and among the Subsidiary Guarantor and the Issuer, and as the same may be amended from time to time, and all other amounts owed by the Subsidiary Guarantor to the Issuer hereunder. This is one of the Guarantor Notes entered into pursuant to the Guarantor Loan Agreement and is entitled to the benefits thereof and is subject to all terms, provisions and conditions thereof. Capitalized terms used and not defined herein shall have the meanings set forth in Appendix A of that certain Trust Indenture, dated as of March 30, 2000 (the "Indenture"), by and between the Issuer and The Chase Manhattan Bank, a bank organized and existing under the laws of the State of New York, as Bond Trustee. Reference is hereby made to the indenture and the Security Documents for the provisions, among others, with respect to the custody and application of the Collateral, the nature and extent of the security provided thereunder, the rights, duties and obligations of the Subsidiary Guarantor and the rights of the holder of this Guarantor Note. The principal amount hereof is payable in accordance with the Guarantor Loan Agreement, and such principal amount may be prepaid solely in accordance with the Guarantor Loan Agreement. Exhibit A-1 36 The Subsidiary Guarantor further agrees to pay, in lawful currency of the United States of America and in immediately available funds, interest from the date hereof on the unpaid and outstanding principal amount hereof until such unpaid and outstanding principal amount shall become due and payable (whether at stated maturity, by acceleration or otherwise) at the rates of interest and at the times set forth in the Guarantor Loan Agreement, and the Subsidiary Guarantor agrees to pay all other amounts due, including, without limitation, fees and costs, as stated in the Guarantor Loan Agreement. Upon the occurrence of any one or more Guarantor Events of Default (as defined in Section 4.1 of the Guarantor Loan Agreement) all amounts then remaining unpaid under this Guarantor Note may become or be declared to be immediately due and payable as provided in the Guarantor Loan Agreement, without notice of default, presentment or demand the payment, protest or notice of nonpayment or dishonor, or notices or demands of any kind, all of which are expressly waived by the Subsidiary Guarantor. The obligations hereunder are subject to the limitations set forth in Section 5.10 of the Guarantor Loan Agreement, the provisions of which are hereby incorporated by reference. THIS GUARANTOR NOTE IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES OF AMERICA AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Exhibit A-2 37 IN WITNESS WHEREOF, the Subsidiary Guarantor has caused this Guarantor Note to be duly executed. LOUISIANA GENERATING LLC By: ------------------------------------- Name: Title: Exhibit A-3 EX-4.11 21 y57012ex4-11.txt GUARANTEE 1 EXHIBIT 4.11 GUARANTEE This GUARANTEE (this "Guarantee") is entered into as of March 30, 2000 by LOUISIANA GENERATING LLC, a Delaware limited liability company, (the "Subsidiary Guarantor"), in favor of THE CHASE MANHATTAN BANK, a New York banking corporation (the "Bond Trustee"). All capitalized terms used herein but not specifically defined shall have the respective meanings given to such terms in Appendix A to the Indenture, which Appendix A is hereby incorporated herein by reference as if set forth in full herein. W I T N E S S E T H: WHEREAS, NRG South Central Generating LLC, a Delaware limited liability company (the "Issuer"), has on the date hereof issued and sold the Bonds pursuant to the Indenture and has loaned a portion of the proceeds of such sale to the Subsidiary Guarantor on the terms and conditions set forth in the Guarantor Loan Agreement; and WHEREAS, the Subsidiary Guarantor is a wholly owned subsidiary of the Issuer and anticipates benefitting directly and indirectly from the issuance and sale of the Bonds by the Issuer and, therefore, is willing to guarantee certain of the obligations of the Issuer thereunder in accordance with the terms hereof. NOW, THEREFORE, in consideration of the above premises and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. The Subsidiary Guarantor hereby guarantees to each Holder and the Bond Trustee and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Bonds and all other amounts (including the reasonable fees and expenses of counsel) from time to time owing to the Holders or the Bond Trustee by the Issuer under the Indenture and any Supplemental Indenture and by any Obligor or any Additional Guarantor under any of the other Finance Documents strictly in accordance with the terms thereof (such obligations being herein collectively called the "Guaranteed Obligations"). The Subsidiary Guarantor hereby agrees that if the Issuer shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Subsidiary Guarantor will promptly pay the same, without any demand or notice 2 whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. 2. The obligations of the Subsidiary Guarantor under Section 1 are absolute and unconditional irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Issuer under the Indenture or any other agreement or instrument referred to therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section that the obligations of the Subsidiary Guarantor hereunder shall be absolute and unconditional under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Subsidiary Guarantor, which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Subsidiary Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of the Indenture or any other agreement or instrument referred to therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under the Indenture or any other agreement or instrument referred to therein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (iv) any Lien or security interest granted to, or in favor of, the Bond Trustee, the Collateral Agent or any Holder or Holders as security for any of the Guaranteed Obligations shall fail to be perfected. 2 3 The Subsidiary Guarantor hereby expressly waives diligence, presentment, demand of payment, demand for performance, protest and all notices whatsoever, including without limitation notice of the existence, creation or incurrence of new or additional Guaranteed Obligations and notice of acceptance of this Guarantee, and any requirement that the Bond Trustee or any Holder exhaust any right, power or remedy or proceed against the Issuer under the Indenture or any other agreement or instrument referred to therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. 3. The obligations of the Subsidiary Guarantor under this Agreement shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Issuer in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the Subsidiary Guarantor agrees that it will indemnify the Bond Trustee and each Holder on demand for all reasonable costs and expenses (including reasonable fees of counsel) incurred by the Bond Trustee or such Holder in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 4. The Subsidiary Guarantor hereby agrees that, until the payment and satisfaction in full of all Guaranteed Obligations and the satisfaction and discharge of the Bonds under the Indenture and any Supplemental Indenture, it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 1, whether by subrogation or otherwise, against the Issuer or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. 5. The Subsidiary Guarantor hereby agrees that, as between the Subsidiary Guarantor and the Holders, the obligations of the Issuer under the Indenture may be declared to be forthwith due and payable pursuant to the provisions of the Indenture (and shall be deemed to have become automatically due and payable in the circumstances provided in the Indenture) for purposes of Section 1 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Issuer, and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and 3 4 payable by the Issuer) shall forthwith become due and payable by the Subsidiary Guarantor for purposes of Section 1. 6. The Subsidiary Guarantor hereby acknowledges that the guarantee in this Guarantee constitutes an instrument for the payment of money, and consents and agrees that any Holder or the Bond Trustee, at its sole option, in the event of a dispute by such Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. 7. The guarantee in this Guarantee is a continuing guarantee of payment and shall apply to all Guaranteed Obligations whenever arising. 8. The obligation of the Subsidiary Guarantor to pay the Guaranteed Obligations as set forth in this Guarantee shall terminate upon the Debt Termination Date. 9. In any action or proceeding involving any state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of the Subsidiary Guarantor under Section 1 would otherwise be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 1, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by the Subsidiary Guarantor, any Holder, the Bond Trustee or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. 10. The obligations hereunder are independent of the obligations of the Issuer or any Additional Guarantor, and a separate action or actions may be brought and prosecuted against the Subsidiary Guarantor whether action is brought against either the Issuer or any other Additional Guarantor, or whether either the Issuer or any Additional Guarantor be joined in any such action or actions, and to the extent permitted by Applicable Law, the Subsidiary Guarantor waives the benefit of any statute of limitations affecting its liability hereunder. Each and every failure in the payment of any of the Guaranteed Obligations shall give rise to a separate cause of action under this Guarantee, and separate suits may be brought against the Subsidiary Guarantor hereunder as each cause of action arises. 4 5 11. The Subsidiary Guarantor represents and warrants that: (a) Power and Authority. The Subsidiary Guarantor has the limited liability company power and authority to (i) execute and deliver this Guarantee and perform its obligations hereunder, (ii) to conduct its business as currently conducted and (iii) to own its property. (b) Valid Existence. The Subsidiary Guarantor is duly organized and is validly existing under and pursuant to the laws of the jurisdiction of its organization and is qualified to do business and is in good standing in all jurisdictions necessary for it to conduct its business and own its property except where the failure to so qualify or be in good standing would not have a Material Adverse Effect. (c) Due Authorization. The execution, delivery and performance by the Subsidiary Guarantor of this Guarantee have been duly authorized by all necessary corporate action, and do not and shall not require any further consents or approvals which have not been obtained, or violate any provision of any law or breach any agreement presently in effect with respect to or binding on the Subsidiary Guarantor or its properties except where such violations or breach would not have a Material Adverse Effect. (d) Binding Obligation. This Guarantee is a legal, valid and binding obligation of the Subsidiary Guarantor, enforceable against it in accordance with its terms, except as such enforceability may be limited in each case by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights generally (and to the possible judicial application of foreign laws or governmental action affecting the rights of creditors generally) and except as such enforceability is subject to the application of general principles of equity (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law), including without limitation (i) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (ii) concepts of materiality, reasonableness, good faith and fair dealing. 12. To the extent that the covenant set forth in Section 4 is or is deemed to be ineffective or inapplicable, any obligations of the Issuer to the Subsidiary Guarantor, now or hereafter existing, are hereby subordinated to the Guaranteed 5 6 Obligations. After the occurrence of an Event of Default, such obligations of the Issuer to the Subsidiary Guarantor shall be enforced and performance received by the Subsidiary Guarantor as trustee for the Bond Trustee and the proceeds thereof shall be paid over to the Bond Trustee on account of the Guaranteed Obligations, but without reducing or affecting in any manner the maximum liability of the Subsidiary Guarantor under the other provisions of this Guarantee. 13. The Bond Trustee may, without notice to the Subsidiary Guarantor and without affecting the Subsidiary Guarantor's obligations hereunder, assign this Guarantee, in whole or in part in accordance with the provisions of the Indenture. The Subsidiary Guarantor agrees that the Bond Trustee may, subject to the provisions of the Indenture, disclose to any prospective purchaser and any purchaser of all or part of the Guaranteed Obligations any and all information in the Bond Trustee's possession concerning the Subsidiary Guarantor, this Guarantee and any security for this Guarantee. 14. The Bond Trustee agrees that no members (other than the Issuer), directors, officers, shareholders or employees or agents of the Subsidiary Guarantor shall in any way be liable for the payment of the Bonds, the Guarantor Note or any sums now or hereafter owing under the terms of, or for the performance of any obligation contained in, this Guarantee. 15. No modification or waiver of any of the provisions of this Guarantee shall be binding on the Bond Trustee, except as expressly set forth in a writing duly signed and delivered by the Bond Trustee acting pursuant to the terms or Article 8 of the Indenture. 16. This Guarantee shall be binding upon and inure to the benefit of the Subsidiary Guarantor and the Bond Trustee for the benefit of the Secured Parties and their respective successors and assigns; provided that the Subsidiary Guarantor shall not assign its rights or the Guaranteed Obligations created under this Guarantee without the prior written consent of the Bond Trustee. 17. In case any provision of this Guarantee or the Bonds shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or the Guaranteed Obligations, or of such provision or the Guaranteed Obligations in any jurisdiction, shall not in any way be affected or impaired thereby. 6 7 18. THIS GUARANTEE IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). 19. Any legal action or proceeding against the Subsidiary Guarantor with respect to this Guarantee may be brought in the courts of the State of New York in the County of New York or of the United States for the Southern District of New York and, by execution and delivery of this Guarantee, the Subsidiary Guarantor hereby irrevocably submits and accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Subsidiary Guarantor agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon the Subsidiary Guarantor. The Subsidiary Guarantor hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 111 Eighth Avenue, New York, N.Y. 10011, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notices and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such, the Subsidiary Guarantor agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Bond Trustee. The Subsidiary Guarantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Subsidiary Guarantor at its address referred to in Section 23, such service to become effective thirty (30) days after such mailing. Nothing herein shall affect the right of the Bond Trustee to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Subsidiary Guarantor in any other jurisdiction. 20. The Subsidiary Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guarantee brought in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 7 8 21. WITH REGARD TO THIS GUARANTEE, EACH OF THE SUBSIDIARY GUARANTOR AND THE BOND TRUSTEE HEREBY WAIVES THE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING AND FOR ANY COUNTERCLAIM THEREIN. 22. This Guarantee embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. 23. All notices, demands, requests and other communications required or permitted hereunder shall be in writing, and shall be given and deemed to have been given in accordance with Section 12.5 of the Indenture at the addresses set forth for the Subsidiary Guarantor and the Bond Trustee on Schedule III to the Indenture. 24. This Guarantee may be executed in any number of counterparts, all of which together shall constitute one agreement. 8 9 IN WITNESS WHEREOF, the parties hereto have caused this Guarantee to be duly executed as of the day and year first written above. LOUISIANA GENERATING LLC By: /s/ Craig A. Mataczynski ---------------------------------- Name: Craig A. Mataczynski Title: Vice President THE CHASE MANHATTAN BANK solely in its capacity as Bond Trustee By: /s/ Annette M. Marsula ---------------------------------- Name: Annette M. Marsula Title: Vice President 9 EX-4.12 22 y57012ex4-12.txt DEBT RESERVE GUARANTEE AGREEMENT 1 Exhibit 4.12 ACCEPTABLE GUARANTEE This GUARANTEE AGREEMENT (this "Guarantee"), dated as of March 30, 2000 between NRG Energy, Inc., a corporation duly organized and validly existing under the laws of Delaware (the "Guarantor"), and The Chase Manhattan Bank, as Bond Trustee (the "Bond Trustee") on behalf of Holders of the Bonds. RECITALS 1. NRG South Central Generating LLC (the "Issuer") and Louisiana Generating LLC (with respect to certain sections) have entered into the Indenture dated as of March 30, 2000 with the Bond Trustee (the "Indenture"). 2. In order to fund the Debt Service Reserve Account so that the obligations of the Issuer under Article 6 of the Indenture shall be released, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Guarantor has agreed to guarantee the payment of the Guaranteed Obligation (as defined below). Accordingly, the Guarantor agrees with the Bond Trustee as follows: ARTICLE 1 DEFINITIONS Unless otherwise defined, all capitalized terms used in this Guarantee shall have the meanings given in the Indenture. The rules of interpretation set forth in Article 1 of the Indenture shall apply to this Guarantee. ARTICLE 2 GUARANTEE 2.01 The Guarantee. The Guarantor absolutely, unconditionally and irrevocably guarantees to the Trustee on behalf of the Holders of the Bonds and their respective successors and assigns the prompt payment of up to the Debt Service Reserve Required Balance (as such amount may be reduced or increased from time to time, the "Guaranteed Obligation") upon receipt of a written request from the Issuer therefor. The Guarantor further agrees that it will promptly pay the amount specified in such written notice, but in no event more than the Guaranteed Obligation, on the date of receipt of such written notice. The delivery of such notice by the Depositary Bank to the Guarantor in accordance with Section 6.6 of the Indenture shall constitute sufficient demand on the Guarantor to make the payment specified in such notice. 2.02 Obligations Unconditional. The obligations of the Guarantor under Section 2.01 are absolute, unconditional and irrevocable, irrespective of any actual or asserted lack of value, genuineness, validity, regularity or enforceability of the obligations of the Issuer under the Indenture, any other Transaction Document or any other agreement or instrument NRG South Central Generating Indenture 2 -2- referred to therein, or any substitution, release or exchange of any other guarantee of or security for the Guaranteed Obligation, and, to the fullest extent permitted by Applicable Law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Article 2 that the obligations of the Guarantor under this Guarantee shall be absolute and unconditional, under any and all circumstances. Subject to Section 2.01, the Guarantor expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Bond Trustee or any Holder exhaust any right, power or remedy or proceed against the Issuer, the Subsidiary Guarantor or any Additional Guarantor under the Indenture or any other Transaction Document or any other agreement or instrument referred to therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligation. 2.03 Instrument for the Payment of Money. The Guarantor acknowledges that this guarantee constitutes instrument for the payment of money only, and consents and agrees that the Bond Trustee or any Holder, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion-action under New York CPLR Section 3213. 2.04 Reduction of Guaranteed Obligation. The Guaranteed Obligation shall be reduced automatically in accordance with Section 6.6(d) of the Indenture and the Depositary Bank shall promptly provide to the Guarantor notice of such reduction. Contemporaneous with the giving of such notice, the Bond Trustee shall annotate this Guarantee to reflect the Guaranteed Obligation as so reduced. ARTICLE 3 REPRESENTATIONS AND WARRANTIES The Guarantor represents and warrants that: 3.01 Power and Authority. The Guarantor has the corporate power and authority to (i) execute and deliver this Guarantee and perform its obligations hereunder, (ii) to conduct its business as currently conducted and (iii) to own its property. 3.02 Valid Existence. The Guarantor is duly organized and is validly existing under and pursuant to the laws of the jurisdiction of its organization and is qualified to do business and is in good standing in all jurisdictions necessary for it to conduct its business and own its property except where the failure to so qualify or be in good standing would not reasonably be expected to result in a Material Adverse Effect. 3.03 Due Authorization. The execution, delivery and performance by the Guarantor of this Guarantee have been duly authorized by all necessary corporate action, and do not and shall not require any further consents or approvals which have not been obtained, or violate any provision of any Applicable Law or breach any agreement presently in effect with respect to or binding on the Guarantor or its properties except where such violations or breach would not reasonably be expected to result in a Material Adverse Effect. NRG South Central Generating Indenture 3 -3- 3.04 Binding Obligation. This Guarantee is a legal, valid and binding obligation of the Guarantor, enforceable against it in accordance with its terms, except as such enforceability may be limited in each case by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws affecting the enforceability of creditors' rights generally (and-to the possible judicial application of foreign laws or governmental action affecting the rights of creditors generally) and except as such enforceability is subject to the application of general principles of equity (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law), including without limitation (i) the possible unavailability of specific performance, injunctive relief or any other equitable remedy and (ii) concepts of materiality, reasonableness, good faith and fair dealing. ARTICLE 4 MISCELLANEOUS 4.01 Notices. All notices required or permitted under the terms and provisions of this Guarantee shall be in writing (including by telex or fax) in the English language delivered to the intended recipient. Any such notice shall be effective when received if given in accordance with the provisions of Section 12.5 of the Indenture to the address set out beneath such party's signature to this Guarantee. 4.02 Severability. If any provision hereof is invalid, illegal or unenforceable in any jurisdiction, then to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Bond Trustee and the Holders in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) the invalidity, illegality or unenforceability of any provision hereof in any jurisdiction shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. 4.03 Benefit of Guarantee. This Guarantee shall be binding upon and inure to the benefit of the Guarantor, the Bond Trustee, the Holders and their respective successors, transferees and assigns. 4.04 Language. The language of this Guarantee is the English language and no translation made or to be made hereof shall have any legal validity. 4.05 Governing Law. This Guarantee shall be governed by, and construed in accordance with, the laws of the State of New York applicable to agreements made and to be performed entirely within the State of New York, without regard to principles of conflicts of law thereof (other than Section 5-1401 of the New York General Obligations Law) to the extent the application of such principles would cause the application of the laws of any other jurisdiction. 4.06 Further Assurances. The Guarantor shall execute and deliver all such instruments and take all such actions as may be reasonably necessary to effectuate fully the purposes of this Guarantee. 4.07 Term. This Guarantee shall terminate upon the earlier to occur of indefeasible payment in full of the Guaranteed Obligation and reduction of the Guaranteed Obligation to zero. NRG South Central Generating Indenture 4 - 4 - 4.08 Amendments. Except as otherwise expressly provided in this Guarantee, any provision of this Guarantee may be amended or modified only by an instrument in writing signed by the parties hereto. 4.09 Submission to Jurisdiction and Venue. Any legal action or proceeding against the Guarantor with respect to this Guarantee shall be brought and enforced in the U.S. state or federal courts located in the Borough of Manhattan, The City of New York, New York, and, by execution and delivery of this Guarantee, the Guarantor irrevocably accepts for itself and in respect of its property, generally, irrevocably and unconditionally, the jurisdiction of the aforesaid courts. A judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon the Guarantor and may be enforced in any other jurisdiction by a suit upon such judgment, a certified copy of which shall be conclusive evidence of the judgment. 4.10 Appointment of Process Agent. The Guarantor irrevocably designates, appoints and empowers CT Corporation System, with offices on the date of this Guarantee at 111 Eighth Avenue, New York, New York 10011, as its designee, appointee and agent with respect to any action or proceeding to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notices and documents which may be served in any such action or proceeding and agrees that the failure of any such agent to give any advice of any service of process to it shall not impair or affect the validity of such service or of any judgment based thereon. If for any reason such designee, appointee and agent shall cease to be available to act as such, the Guarantor shall designate a new designee, appointee and agent in the United States on the terms and for the purposes of this provision reasonably satisfactory to the Trustee. The Guarantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it, at its address set forth below, such service to become effective 30 days after such mailing. Nothing in this Guarantee shall affect the right of the Trustee to serve process or to commence legal proceedings or otherwise proceed against the Guarantor in any other jurisdiction in any other manner permitted by law. The Guarantor waives irrevocably, to the extent permitted by law, any objection to the laying of venue in New York, New York, and any claim of inconvenient forum in respect of any such action in New York, New York to which it might otherwise be entitled in any actions arising out of or based on this Guarantee. NRG South Central Generating Indenture 5 IN WITNESS WHEREOF, each party has caused this Guarantee to be duly executed and delivered by its officer thereto duly authorized as of the date first above written. NRG Energy, Inc. Guarantor By: /s/ Craig A. Mataczynski ------------------------------------ Title: Senior Vice President ---------------------------------- Address: 1221 Nicollet Mall Suite 700 Minneapolis, Minnesota 55403 Attention: Vice President and General Counsel Telephone: (612) 373-5300 Telecopy: (612) 373-5392 ---------------------------- THE CHASE MANHATTAN BANK, not in its individual capacity, but solely as Bond Trustee By: /s/ Annette M. Marsula ------------------------------------ Annette M. Marsula Title: Vice President ---------------------------------- Address: The Chase Manhattan Bank Capital Markets Fiduciary Services 450 W. 33rd Street, 15th Floor New York, New York 10001 Attention: Annette Marsula International and Project Finance Group Telephone: (212) 946-7557 Telecopy: (212) 946-8177 EX-4.13 23 y57012ex4-13.txt ASSIGNEMENT AND SECURITY AGREEMENT 1 Exhibit 4.13 ASSIGNMENT AND SECURITY AGREEMENT Dated as of March 30, 2000 by LOUISIANA GENERATING LLC to THE CHASE MANHATTAN BANK, as Collateral Agent 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS; RULES OF INTERPRETATION ............................................. 2 SECTION 1.1. Definitions ......................................................................... 2 SECTION 1.2. Certain Louisiana Terms ............................................................. 6 SECTION 1.3. Rules of Interpretation ............................................................. 6 ARTICLE II ASSIGNMENT AND GRANT OF SECURITY INTERESTS .............................................. 6 SECTION 2.1. Assignment and Grant of Security Interest. .......................................... 6 SECTION 2.2. Security Interest Absolute .......................................................... 8 SECTION 2.3. Power of Attorney ................................................................... 9 SECTION 2.4. Inspection and Verification ......................................................... 11 ARTICLE III GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS ........................................... 12 SECTION 3.1. Title and Authority ................................................................. 12 SECTION 3.2. Validity, Perfection and Priority of Lien. .......................................... 12 SECTION 3.3. No Liens; Other Financing Statements. ............................................... 13 SECTION 3.4. Chief Executive Office; Name; Records. .............................................. 13 SECTION 3.5. Additional Statements and Schedules. ................................................ 14 SECTION 3.6. Further Actions ..................................................................... 14 ARTICLE IV SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT ......................................... 15 SECTION 4.1. Maintenance of Insurance; Protection of Security Interest. .......................... 15 SECTION 4.2. Location of Inventory and Equipment. ................................................ 15 SECTION 4.3 Inventory Records ................................................................... 15
ii 3 ARTICLE V SPECIAL PROVISIONS CONCERNING RECEIVABLES, CONTRACTS AND INSTRUMENTS ............................................... 15 SECTION 5.1. Additional Representations and Warranties ........................................... 15 SECTION 5.2. Maintenance of Records; Legending of Records ........................................ 16 SECTION 5.3. Modification of Terms; No Payment to Grantor ........................................ 16 SECTION 5.4. Collection .......................................................................... 16 SECTION 5.5. Instruments ......................................................................... 17 ARTICLE VI SPECIAL PROVISIONS CONCERNING CONTRACTS ............................................. 17 SECTION 6.1. Security Interest in Contract Rights ................................................ 17 SECTION 6.2. Further Protection .................................................................. 18 SECTION 6.3. Liabilities Under Receivables and Contracts ......................................... 18 SECTION 6.4. Remedies ............................................................................ 18 ARTICLE VII DUTY OF CARE OF COLLATERAL AGENT .................................................... 19 SECTION 7.1. Collateral Agent's Duties; Reasonable Care .......................................... 19 SECTION 7.2. Further Protection .................................................................. 19 ARTICLE VIII REMEDIES UPON OCCURRENCE OF A TRIGGER EVENT ......................................... 19 SECTION 8.1. Remedies; Obtaining the Guarantor Security Agreement Collateral upon Trigger Event ....................................................................... 19 SECTION 8.2. Remedies; Disposition of the Guarantor Security Agreement Collateral. ............... 20 SECTION 8.3. Louisiana Remedies .................................................................. 21 SECTION 8.4. Waiver .............................................................................. 22 SECTION 8.5. Application of Proceeds; Grantor Liable for Deficiency. ............................. 24 SECTION 8.6. No Waiver; Remedies Cumulative ...................................................... 24 SECTION 8.7. Discontinuance of Proceedings ....................................................... 24
iii 4 ARTICLE IX MISCELLANEOUS .................................................................... 25 SECTION 9.1. Notices ........................................................................... 25 SECTION 9.2. Amendment ......................................................................... 25 SECTION 9.3. Successors and Assigns ............................................................ 25 SECTION 9.4. Survival .......................................................................... 25 SECTION 9.5. Headings Descriptive. ............................................................. 25 SECTION 9.6. Severability ...................................................................... 25 SECTION 9.7. Grantor's Duties .................................................................. 26 SECTION 9.8. Termination; Release .............................................................. 26 SECTION 9.9. Reinstatement ..................................................................... 26 SECTION 9.10. Counterparts ...................................................................... 26 SECTION 9.11 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial ................... 27 SECTION 9.12. Authority of Collateral Agent ..................................................... 28 SECTION 9.13. Conflict with Intercreditor Agreement ............................................. 28 SECTION 9.14. Indemnities and Expenses .......................................................... 28 SECTION 9.15. Entire Agreement .................................................................. 28 SECTION 9.16. Independent Security .............................................................. 29 SECTION 9.17. Third Party Beneficiaries ......................................................... 29 SECTION 9.18. Limitation of Liability ........................................................... 29 SECTION 9.19. Merger of Collateral Agent ........................................................ 29
Schedule I - Filing Offices Schedule II - Instruments Schedule III - Copyrights Schedule IV - Patents Schedule V - Trademarks Schedule 4.2 - Location of Inventory and Equipment Exhibit A Legal Description of Site iv 5 ASSIGNMENT AND SECURITY AGREEMENT ASSIGNMENT AND SECURITY AGREEMENT, dated as of March 30, 2000 (this "Agreement"), made by Louisiana Generating LLC (the "Grantor"), in favor of The Chase Manhattan Bank, as collateral agent (together with its successors in such capacity, the "Collateral Agent") for the benefit of the Secured Parties. W I T N E S S E T H: WHEREAS, pursuant to the Acquisition Agreement, the Grantor is acquiring the Project from Cajun; and WHEREAS, the Grantor is a wholly-owned subsidiary of the Issuer, and the Issuer has simultaneously with the execution and delivery of this Agreement issued and sold the Initial Bonds pursuant to the Indenture; and WHEREAS, payments of the principal of, premium (if any), interest on and any other amounts due with respect to the Initial Bonds will be serviced by repayment of the Guarantor Loan and guaranteed (subject to certain limitations) by the Grantor; and WHEREAS, the Working Capital Facility Banks, the Working Capital Facility Agent and the Issuer are parties to the Working Capital Facility providing, subject to the terms and conditions thereof, for the making of loans to the Issuer for working capital purposes; and WHEREAS, to secure its obligations under the Finance Documents, the Grantor is entering into this Agreement with the Collateral Agent, pursuant to which the Collateral Agent, acting on behalf of the Secured Parties, will obtain a continuing Lien on and perfected security interest in, the Guarantor Security Agreement Collateral. NOW THEREFORE, in consideration of the Secured Parties entering into the Finance Documents and to induce the Secured Parties to release the proceeds of the issuance and sale of the Initial Bonds, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Grantor hereby agrees with the Collateral Agent as follows: 6 ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.1. Definitions. (a) For all purposes of this Agreement, capitalized terms used but not otherwise defined herein shall have the meanings set forth in Appendix A to the Trust Indenture, dated as of March 30, 2000, among NRG South Central Generating LLC, the Grantor and The Chase Manhattan Bank as Bond Trustee (the "Indenture"). (b) The following terms shall have the following respective meanings unless the context otherwise requires. The definitions shall be equally applicable to the singular and plural forms of the terms defined. Commercial terms used herein but not defined herein or in Appendix A to the Indenture shall have the meanings specified for such terms in the Uniform Commercial Code as in effect any relevant jurisdiction. "Acquisition Agreement" shall mean the Fifth Amended and Restated Asset Purchase and Reorganization Agreement, dated as of September 21, 1999 among the Grantor, Ralph K. Mabey, as Chapter 11 Trustee of Cajun and, as to certain sections of the agreement only, NRG Energy, Inc. "Agreement" shall have the meaning specified in the preamble hereto. "Chattel Paper" shall mean "chattel paper" as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction. "Contract Rights" shall have the meaning specified in Section 6.1. "Contracts" shall mean all contracts to which the Grantor now is, or hereafter will be, bound, or a party, beneficiary or assignee, including, without limitation, all of the Project Documents, including all exhibits, schedules and appendices thereto, and all other instruments, agreements and documents executed and delivered with respect to such contracts, all Third Party Consents, and all revenues, rentals, Proceeds and other sums of money due and to become due from any of the foregoing, as the same may be modified, supplemented or amended from time to time in accordance with their respective terms. 2 7 "Copyrights" shall mean all of the following now owned or hereafter acquired by the Grantor: (a) all copyright rights in any work subject to the copyright laws of the United States, whether as author, assignee, transferee or otherwise; and (b) all registrations and applications for registration of any such copyright rights in the United States, including registrations, recordings, supplemental registrations and pending applications for registration in the United States Copyright Office, including, without limitation, those listed on Schedule III. "Documents" shall mean "documents" as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction. "Equipment" shall mean all "equipment" (as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction), now or hereafter owned or leased by the Grantor and, in any event, shall include, but shall not be limited to, all equipment used in connection with the Project, all machinery, manufacturing equipment, data processing equipment, computers, tools, office equipment, appliances, furniture, furnishings, fixtures, spare parts, vehicles, motor vehicles, and any manuals, instructions, blueprints, computer software and similar items which relate to the above, and any and all additions to, substitutions for and replacements of any of the foregoing, wherever located, together with all improvements thereon and all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Financing Statements" shall mean all financing statements, recordings, filings or other instruments of registration necessary and appropriate to perfect a security interest or lien by filing in any appropriate filing or recording office in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant applicable law. "Fixtures" shall mean "fixtures" as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction and in any event shall include all goods now or hereafter attached to, placed on, or incorporated in the Site. "General Intangibles" shall mean all "general intangibles" (as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction) now or hereafter owned by the Grantor and shall include, but not be limited to, all Trademarks, trademark applications, trademark registrations, tradenames, fictitious business names, business names, company names, business identifiers, prints, labels, trade styles and service marks (whether or not registered), including logos and/or designs, Copyrights, Patents, patent applications, goodwill of the Grantor's business symbolized by any of the foregoing, trade 3 8 secrets, license rights, license agreements, permits, franchises and any rights to tax refunds to which the Grantor is now or hereafter may be entitled. "Goods" shall mean "goods" as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction. "Grantor" shall have the meaning specified in the preamble hereto. "Guarantor Security Agreement Collateral" shall have the meaning specified in Section 2.1(a). "Instruments" shall mean "instruments" as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction. "Insurance Policies" shall mean all insurance policies to which the Grantor now is, or hereafter will be, a party, including, without limitation, all insurance policies required pursuant to this Agreement and the other Finance Documents. "Insurance Proceeds" shall mean all amounts and proceeds of any kind (including interest, if any, thereon) paid or payable pursuant to any Insurance Policy. "Intellectual Property" shall mean, collectively, Copyrights, Patents and Trademarks. "Inventory" shall mean all of the inventory of the Grantor of every type or description, including all "inventory" as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction, now owned or hereafter acquired and wherever located, including without limitation, whether raw, in process or finished, all materials usable in processing the same and all documents of title covering any inventory, including, but not limited to, work in process, materials used or consumed in the Grantor's business, now owned or hereafter acquired or manufactured by the Grantor and held for sale in the ordinary course of its business, all present and future substitutions therefor, parts and accessories thereof and all additions thereto, and all proceeds thereof and products of such inventory in any form whatsoever. "Inventory Records" shall mean all books, records and other property and General Intangibles at any time relating to the Inventory. 4 9 "Investment Property" shall mean "investment property" as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction. "Patents" shall mean all of the following now owned or hereafter acquired by the Grantor: (a) all letters patent of the United States, all registrations and recordings thereof, and all applications for letters patent of the United States, including registrations, recordings and pending applications in the United States Patent and Trademark Office, including, without limitation, those listed on Schedule IV; and (b) all reissues, continuations, divisions, continuations-in-part, renewals or extensions thereof, and the inventions disclosed or claimed therein, including the right to make, use and/or sell the inventions disclosed or claimed therein. "Proceeds" shall mean "proceeds" as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law and, in any event, shall include, but shall not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or the Grantor from time to time, and claims for insurance, indemnity, warranty or guaranty effected or held for the benefit of the Grantor with respect to any of the Guarantor Security Agreement Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to the Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Guarantor Security Agreement Collateral by any Governmental Authority (or any person acting under color of Governmental Authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Guarantor Security Agreement Collateral. "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect in any relevant jurisdiction and in any event shall include, but not be limited to, all of the Grantor's rights to payment for goods (including, without limitation, electricity) sold or leased, or services performed, by the Grantor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, contract rights (including any and all rights to liquidated damage payments), security agreement, chattel paper, or other evidence of indebtedness or security, together with (i) all security pledged, assigned, hypothecated or granted to or held by the Grantor to secure the foregoing, (ii) all guarantees, warranties, endorsements, indemnifications or collateral on, or of, any of the foregoing, (iii) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (iv) all books, correspondence, credit files, records, ledger cards, invoices and other papers relating thereto, including, without limitation, all similar information stored on a magnetic medium or other similar storage device and other papers and documents in the possession or under the control of the Grantor or any computer bureau from time to time acting for the Grantor, (v) all evidences 5 10 of the filing of Financing Statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (vi) all credit information, reports and memoranda relating thereto, and (vii) all other writings related in any way to the foregoing. "Security Entitlement" shall have the meaning assigned to that term under the Uniform Commercial Code as in effect in any relevant jurisdiction. "Security Interest" shall have the meaning specified in Section 2.1. "Site" shall mean "Cajun I Property" and "Cajun II Property", collectively, as such terms are defined in the Title Insurance Policy delivered pursuant to Section 5(u) of the Purchase Agreement and as described in Exhibit A hereto. "Trademarks" shall mean all of the following now owned or hereafter acquired by the Grantor: (i) all trademarks, service marks, trade names, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office, any State of the United States or any political subdivision thereof, and all extensions or renewals thereof, including, without limitation, those listed on Schedule V; (ii) all goodwill associated therewith or symbolized thereby; and (iii) all other assets, rights and interests that uniquely reflect or embody such goodwill. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if by reason of mandatory provisions of law, the perfection or priority of the security interest granted hereunder in any Guarantor Security Agreement Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction solely for the purposes of the provisions hereof relating to such perfection or priority. SECTION 1.2. Certain Louisiana Terms. To the extent that the laws of the State of Louisiana govern any provision of this Agreement, or there is a provision of this Agreement related to an asset located in the State of Louisiana or in which a mortgage or other 6 11 security interest is perfected under the laws of the State of Louisiana (and nothing in this Section 1.2 is intended to derogate from any choice of law provision contained in this Agreement), then the following definitions shall apply, unless the context requires otherwise: the term "personal property" shall be deemed to include movable property; the term "intangible property" shall be deemed to include incorporeal property; the term "county" shall be deemed to mean parish; and the terms "Uniform Commercial Code", "UCC" or "Code" and words of similar import shall include the Louisiana Commercial Laws, La. R.S. Sections 10:1-101 et seq. SECTION 1.3. Rules of Interpretation. Except as otherwise expressly provided herein, the rules of interpretation set forth in Section 1.1 to the Indenture shall apply to this Agreement. ARTICLE II ASSIGNMENT AND GRANT OF SECURITY INTERESTS SECTION 2.1. Assignment and Grant of Security Interest. (a) As security for the prompt and complete payment and performance when due of all of the Secured Obligations, the Grantor hereby grants to the Collateral Agent, for itself and for the ratable benefit of all the Secured Parties, a continuing security interest of first priority (the "Security Interest") in all of the Grantor's right, title and interest in, to and under the following, in each case, whether now owned or existing or hereafter acquired, arising or created, and wherever located: (i) all Receivables; (ii) all Documents; (iii) all Equipment; (iv) all General Intangibles; (v) all Inventory; (vi) all cash collateral accounts established with respect to the Grantor, and all checking, savings, deposit, securities or other accounts of the Grantor, including, without limitation, the Depositary Accounts and any successor accounts thereto, and all property on deposit therein or credited thereto, including, without limitation, all Investment Property, Security Entitlements, Financial Assets, securities, instruments or cash on deposit therein or credited thereto and all Security Entitlements with respect thereto; (vii) all Contracts and Contract Rights, to the extent assignable pursuant to their terms, including, without limitation, all Contract Rights under the Project Documents to which the Grantor is a party; (viii) all cash, accounts, deposits, securities and insurance policies now or at any time hereafter in the possession or under control of the Grantor or its bailees and any interest therein; (ix) all Insurance Policies and all Loss Proceeds; (x) all Governmental Approvals, provided that any Governmental Approval which by its terms or by operation of law would become void, voidable, terminable or revocable (or would constitute a breach or default thereunder or under applicable law) if mortgaged, pledged or assigned hereunder or if a security interest therein were granted hereunder are expressly excepted and excluded from the Lien and the terms of this Agreement to the extent, and only to the extent, necessary so as to avoid such voidness, voidability, terminability or revocability or breach or default; (xi) all Fixtures, including, 7 12 without limitation, those now or hereafter attached to, placed on, or incorporated in the Site; (xii) all natural gas, fuel oil, electricity and related products; (xiii) without limiting the generality of the foregoing, all other personal property, Goods, Instruments, Chattel Paper, credits, claims, demands, assets, books and records, customer lists, ledger cards, credit files, print-outs and other materials and records pertaining to any of the foregoing, of the Grantor, whether now existing or hereafter acquired from time to time and whether or not of a type which may be subject to a security interest under the UCC as in effect in the State of New York; and (xiv) any and all additions and accessions to any of the foregoing, all improvements thereto, all substitutions and replacements therefor and all products and Proceeds thereof (all of the above collectively, the "Guarantor Security Agreement Collateral"); provided, however, that the Guarantor Security Agreement Collateral hereunder expressly excludes and the Security Interest granted thereupon shall not attach to the Assets Specifically Held for Resale; provided, further that the Security Interest in the Debt Service Reserve Account granted herein to the Collateral Agent shall be for the sole benefit of the Holders of the Bonds and the Bond Trustee. (b) The security interest granted to the Collateral Agent pursuant to this Agreement extends to all Guarantor Security Agreement Collateral of the kind which is the subject of this Agreement which the Grantor may acquire at any time during the continuation of this Agreement, whether such Guarantor Security Agreement Collateral is in transit or in the Grantor's, the Collateral Agent's, any other Secured Party's or any other Person's constructive, actual or exclusive occupancy or possession until the release thereof pursuant to Section 9.8. (c) The assignments and security interests under this Agreement granted to the Collateral Agent shall not relieve the Grantor from the performance of any term, covenant, condition or agreement on the Grantor's part to be performed or observed under or in respect of any of the Guarantor Security Agreement Collateral pledged by it hereunder or from any liability to any Person under or in respect of any of such Guarantor Security Agreement Collateral or impose any obligation on the Collateral Agent to perform or observe any such term, covenant, condition or agreement on the Grantor's part to be so performed or observed or impose any liability on the Collateral Agent for any act or omission on the part of the Grantor or for any breach of any representation or warranty on the part of the Grantor contained in this Agreement or any other Project Document, or in respect of the Guarantor Security Agreement Collateral pledged by it hereunder or made in connection herewith or therewith. The obligations of the Grantor contained in this paragraph shall survive the termination of this Agreement and the discharge of the Grantor's other obligations hereunder. (d) This Agreement shall create a continuing security interest in the Guarantor Security Agreement Collateral until the release thereof pursuant to Section 9.8. 8 13 SECTION 2.2. Security Interest Absolute. The parties hereto shall not challenge or question in any proceeding the validity or enforceability of this Agreement as a whole or any term or provision contained herein or the validity of any Lien or Financing Statement in favor of the Collateral Agent. All rights of the Collateral Agent and the other Secured Parties and all security interests hereunder shall, to the fullest extent permitted by law, be absolute and unconditional irrespective of: (a) any invalidity, irregularity or unenforceability of any Finance Document or any other agreement or instrument relating thereto, or any amendment, change or modification of any of the Finance Documents; (b) any impairment, modification, change, exchange, release or subordination of or limitation on, any liability to, or stay of actions or lien enforcement proceedings against, the Grantor, its property or its estate in bankruptcy resulting from any bankruptcy, arrangement, readjustment, composition, liquidation, rehabilitation or similar proceeding against or otherwise involving or affecting the Grantor; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Finance Document; (d) any change in the time, order or method of attachment or perfection of Liens or the filing or recording of Financing Statements or other Security Documents and irrespective of anything contained in any filing or agreement to which the Collateral Agent or any other Secured Party may now or hereafter be a party; (e) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of, or consent to departure from, any guaranty for all or any of the Secured Obligations; or (f) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Grantor or a third party pledgor, except as otherwise provided herein. SECTION 2.3. Power of Attorney. (a) The Grantor hereby irrevocably constitutes and appoints the Collateral Agent, on behalf of itself and the other Secured Parties, or any Person, officer or agent thereof whom the Collateral Agent may designate, as the Grantor's true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Grantor and in the name of the Grantor or in its own name, at the Grantor's 9 14 cost and expense, to exercise at any time in the Collateral Agent's discretion all or any of the following powers, which, being coupled with an interest, shall be irrevocable until the Debt Termination Date (as defined in the Intercreditor Agreement): (i) to receive, take, endorse, sign, assign and deliver, all in the Collateral Agent's name or the Grantor's name, any and all checks, notes, drafts, and other documents or instruments relating to the Guarantor Security Agreement Collateral; (ii) to receive, open and dispose of all mail addressed to the Grantor and to notify postal authorities to change the address for delivery thereof to such address as the Collateral Agent designates; (iii) to request from account debtors of the Grantor, in the Grantor's name or in the name of the Collateral Agent or the Collateral Agent's designee, information concerning the Receivables and the amounts owing thereon; (iv) to transmit to account debtors indebted on Receivables notice of the Collateral Agent's interest therein; (v) to notify account debtors indebted on Receivables to make payment directly to the Collateral Agent; (vi) to take or bring, in the Grantor's name or in the Collateral Agent's name on behalf of the Secured Parties, all steps, actions, suits or proceedings deemed by the Collateral Agent to be necessary or desirable to enforce or effect collection of the Receivables; (vii) to the fullest extent permitted by law, to prepare, sign and file any Financing Statements or file this Agreement in the name of the Grantor as debtor; (viii) if the Grantor shall have failed to do so in a timely manner, to take or cause to be taken all actions necessary to perform or comply, or cause performance or compliance with, the covenants of the Grantor contained in any Transaction Document; (ix) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Guarantor Security Agreement Collateral; 10 15 (x) to defend any suit, action or proceeding brought against the Grantor with respect to any Guarantor Security Agreement Collateral; (xi) to settle, compromise or adjust any suit, action or proceeding described in the preceding clause (x) and, in connection therewith, to give such discharges or releases as the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, may deem appropriate; (xii) generally, to sell or transfer and make any agreement with respect to or otherwise deal with any of the Guarantor Security Agreement Collateral as fully and completely as though the Secured Parties were the absolute owner thereof for all purposes, and to do, at the Secured Parties' option and the Grantor's expense, at any time, or from time to time, all acts and things which the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, deem necessary to protect, preserve or realize upon the Guarantor Security Agreement Collateral and the Liens of the Secured Parties thereon; (xiii) to execute, in connection with any foreclosure, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Guarantor Security Agreement Collateral; (xiv) to exercise the Grantor's rights under any Contract in accordance with Section 6.1; and (xv) to exercise any and all other rights, remedies, powers and privileges of the Grantor with respect to the Guarantor Security Agreement Collateral; provided, however, that the Collateral Agent shall not exercise its powers under clauses (i), (ii), (iii), (iv), (v), (vi), (ix), (x), (xi), (xii), (xiii), (xiv) or (xv) unless a Trigger Event of which the Collateral Agent has actual knowledge has occurred and is continuing. (b) The Grantor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. The Grantor hereby acknowledges and agrees that in acting pursuant to this power-of-attorney the Collateral Agent shall be acting in its own interest and in the interest of the other Secured Parties and the Grantor acknowledges and agrees that the Collateral Agent and the other Secured Parties shall have no fiduciary duties to the Grantor and the Grantor hereby waives any claims to the rights of a beneficiary of a fiduciary relationship hereunder. To the extent applicable, this power of attorney shall be deemed given pursuant to the provisions of La. R.S. Section 9: 5388. 11 16 SECTION 2.4. Inspection and Verification. The Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right, no more often than once each year, unless an Event of Default has occurred and is continuing, and, if an Event of Default has occurred and is continuing, at any reasonable time or times, in each case upon ten (10) days' notice and at the Grantor's own cost and expense, to inspect the Guarantor Security Agreement Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Guarantor Security Agreement Collateral is located, to discuss the Grantor's affairs with the appropriate officers of the Grantor and its independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Guarantor Security Agreement Collateral, including, in the case of Receivables or Guarantor Security Agreement Collateral in the possession of any third party, by contacting account debtors or the third party possessing such Guarantor Security Agreement Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any other Secured Party. ARTICLE III GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS The Grantor hereby represents, warrants and covenants to the Collateral Agent and the other Secured Parties, which representations, warranties and covenants shall survive execution and delivery of this Agreement and the making and repayment of the Secured Obligations, subject to the provisions of Section 9.9, as follows: SECTION 3.1. Title and Authority. The Grantor has good and valid rights in and title to the Guarantor Security Agreement Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Guarantor Security Agreement Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any Person other than any consent or approval that has been obtained and is in full force and effect. SECTION 3.2. Validity, Perfection and Priority of Lien. (a) This Agreement creates in favor of the Collateral Agent, for itself and for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Guarantor Security Agreement Collateral and the proceeds thereof owned by the Grantor, and when Financing Statements in appropriate form are filed in the offices specified on Schedule I 12 17 hereto, the Lien created under this Agreement will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Grantor in such Guarantor Security Agreement Collateral and the proceeds thereof, in each case prior and superior in right to any other Person, subject only to Permitted Liens. (b) (i) Fully executed Financing Statements or other appropriate filings, recordings or registrations containing a description of the Guarantor Security Agreement Collateral have been delivered to the Collateral Agent for filing in each governmental, municipal or other office specified in Schedule I, which are all the filings, recordings and registrations that are necessary to publish notice of and protect the validity of and to establish a valid and perfected security interest in favor of the Collateral Agent (for the benefit of itself and for the ratable benefit of the Secured Parties) in respect of all Guarantor Security Agreement Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under Applicable Law with respect to the filing of continuation statements and except that recordation of the Security Interest in the United States Patent and Trademark Office may be necessary with respect to Guarantor Security Agreement Collateral consisting of Patents and Trademarks and recordation of the Security Interest, in addition to registration of any unregistered copyrights, in the United States Copyright Office may be necessary with respect to Guarantor Security Agreement Collateral consisting of Copyrights. The Grantor will pay any applicable filing fees and related expenses. The Grantor hereby irrevocably authorizes the Collateral Agent to file any such Financing Statements without its signature as the debtor. (ii) The Instruments listed on Schedule II hereto, which, as of the date hereof, constitute all instruments of the Grantor, and all other Chattel Paper have been stamped to indicate the Security Interest of the Collateral Agent for itself and the ratable benefit of the Secured Parties hereunder. SECTION 3.3. No Liens; Other Financing Statements. (a) Except for the Lien granted to the Collateral Agent for itself and the ratable benefit of the Secured Parties hereunder and Permitted Liens, and, further, except for the interest in and control over the Depositary Accounts of and by the Depositary Bank as provided in the Indenture, the Grantor is, and as to all Guarantor Security Agreement Collateral whether now existing or hereafter acquired after the date hereof, the Grantor will and will continue to be the owner of valid and marketable title in and to each item of the Guarantor Security Agreement Collateral free and clear of any and all Liens other than Permitted Liens and the Grantor shall defend the Guarantor Security 13 18 Agreement Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent or any other Secured Party. (b) Other than Financing Statements filed in connection herewith, there is no Financing Statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Guarantor Security Agreement Collateral except (i) Financing Statements filed in connection with Permitted Liens, and (ii) Financing Statements for which proper termination statements have been delivered to the Collateral Agent for filing. The Grantor will not execute or authorize any Financing Statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Guarantor Security Agreement Collateral to be filed in any public office, except Financing Statements filed or to be filed in respect of and covering the security interests granted hereby to the Collateral Agent by the Grantor and Financing Statements filed in respect of and covering Permitted Liens. SECTION 3.4. Chief Executive Office; Name; Records. (a) The chief executive office and principal place of business of the Grantor is located at 10719 Airline Highway, Baton Rouge, Louisiana, 70816-4271. The Grantor's taxpayer identification number is 41-1870498. Except as permitted by the Indenture, the Grantor will not (i) move its chief executive office, (ii) change its taxpayer identification number or limited liability company status or (iii) change its name from, nor carry on business under any name other than "Louisiana Generating LLC," unless, in the case of clause (i), (ii) or (iii), it has complied with the requirements of Section 3.4(b). The originals of all documents evidencing all Contracts and Receivables of the Grantor, and the only original books of account and records concerning the Guarantor Security Agreement Collateral are, and will continue to be, kept at, and controlled and directed (including, without limitation, for general accounting purposes) from, such chief executive office, or at such new location for such chief executive office as the Grantor may establish in accordance with Section 3.4(b). (b) The Grantor shall not establish a new location for its chief executive office or change its taxpayer identification number, limited liability company status or name or the name under which it presently conducts its business unless (i) it has given to the Collateral Agent not less than thirty (30) days' prior written notice of its intention so to do, clearly describing such new location or specifying such new name (if applicable), as the case may be, and providing such other information in connection therewith as the Collateral Agent may reasonably request, and (ii) with respect to such new location, taxpayer identification number, organizational status or name, as the case may be, the Grantor shall have taken all action, satisfactory to the Collateral Agent, to maintain the security interest of the Collateral Agent in 14 19 the Guarantor Security Agreement Collateral intended to be granted hereby at all times fully perfected and in full force and effect. SECTION 3.5. Additional Statements and Schedules. The Grantor shall execute and deliver to the Collateral Agent, from time to time, for its convenience in maintaining a record of the Guarantor Security Agreement Collateral, such written statements and schedules as the Collateral Agent may reasonably require, designating, identifying or describing the Guarantor Security Agreement Collateral. SECTION 3.6. Further Actions. The Grantor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Guarantor Security Agreement Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, Financing Statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Guarantor Security Agreement Collateral and other property or rights covered by the Security Interest hereby granted by the Grantor to perfect, preserve or protect its security interest in the Guarantor Security Agreement Collateral within thirty (30) days after any request by the Collateral Agent or such earlier date as may be required by applicable law or necessary to preserve or protect the security interests in the Guarantor Security Agreement Collateral granted by the Grantor pursuant to this Agreement, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Lien created hereby and the filing of any Financing Statements or other documents in connection herewith. ARTICLE IV SPECIAL PROVISIONS CONCERNING INVENTORY AND EQUIPMENT SECTION 4.1. Maintenance of Insurance; Protection of Security Interest. The Grantor shall carry with respect to the Guarantor Security Agreement Collateral and its use such insurance, if any, as shall be required under the Indenture. SECTION 4.2. Location of Inventory and Equipment. All Inventory and Equipment to be owned as of the Closing Date (as defined in the Acquisition Agreement) of the Acquisition (as defined in the Indenture) by the Grantor will be located at one of the locations shown on Schedule 4.2 (other than Equipment undergoing repairs). The Grantor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) one of the locations on Schedule 4.2. 15 20 SECTION 4.3 Inventory Records. The Grantor shall maintain, at its own cost and expense, satisfactory and complete Inventory Records. ARTICLE V SPECIAL PROVISIONS CONCERNING RECEIVABLES, CONTRACTS AND INSTRUMENTS SECTION 5.1. Additional Representations and Warranties. As of the time when each of its Receivables arises, the Grantor shall be deemed to have represented and warranted to the best of its knowledge that such Receivable and all records, papers and documents relating thereto (if any) are genuine and in all respects what they purport to be, and that all papers and documents (if any) relating thereto (i) will (subject to dispute, return, replacement, settlement or compromise) represent the genuine, legal, valid and binding obligation of the account debtor evidencing indebtedness unpaid and owed by such account debtor arising out of the performance of labor or services or the sale and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for purposes other than general accounting purposes), (iii) will (subject to dispute, return, replacement, settlement or compromise) evidence true and valid obligations, enforceable in accordance with their respective terms, not subject to the fulfillment of any contract or condition whatsoever unless set forth in the writing and not subject to any defenses, set-offs or counterclaims or stamp or other taxes, and not subject to any provisions prohibiting the Security Interest granted hereunder, and (iv) will be in compliance and will conform with all Applicable Law. SECTION 5.2. Maintenance of Records; Legending of Records. The Grantor will keep and maintain at its own cost and expense satisfactory and complete records of its Receivables for at least five (5) years from the date on which the Receivable comes into existence, including, without limitation, records of all payments received and all credits granted thereon, and the Grantor will make the same available to the Collateral Agent and the other Secured Parties for inspection in accordance with Section 2.4. The Grantor shall, at its own cost and expense, deliver all tangible evidence of its Receivables (including, without limitation, all documents evidencing the Receivables) and books and records that the Collateral Agent may request to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by the Grantor) at any reasonable time during normal business hours upon the Collateral Agent's demand. The Grantor shall, at the Collateral Agent's request and at the Grantor's own cost and expense, legend in form and substance satisfactory to the Collateral Agent, the Guarantor Security Agreement Collateral, as well as books, records and documents of the Grantor evidencing or pertaining to the Guarantor 16 21 Security Agreement Collateral, with an appropriate reference to the fact that the items constituting the Guarantor Security Agreement Collateral have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. SECTION 5.3. Modification of Terms; No Payment to Grantor. The Grantor shall not, other than in the ordinary course of business, rescind or cancel any indebtedness evidenced by any Receivable or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or interest therein, without the prior written consent of the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein. The Grantor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and will do nothing to impair the rights of the Collateral Agent in the Receivables. SECTION 5.4. Collection. The Grantor shall take all commercially reasonable actions to cause to be collected from the account debtors of each of the Receivables, as and when due (including Receivables that are delinquent, such Receivables to be collected in accordance with generally accepted commercial collection procedures), any and all amounts owing under or on account of such Receivables, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivables. SECTION 5.5. Instruments. If any of the Receivables becomes evidenced by an Instrument having a face value in excess of $5,000 and a maturity of thirty (30) days or longer, the Grantor shall promptly notify the Collateral Agent thereof in writing, and within ten (10) days of a request by the Collateral Agent therefor, shall deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. Notwithstanding the foregoing, at such time that an Event of Default shall have occurred and be continuing, or at such time as the Grantor shall own or acquire Instruments which in the aggregate exceed $20,000, the Grantor shall deliver all Instruments to the Collateral Agent within ten (10) days, appropriately endorsed to the order of the Collateral Agent as further security hereunder. ARTICLE VI SPECIAL PROVISIONS CONCERNING CONTRACTS SECTION 6.1. Security Interest in Contract Rights. The Grantor's grant, pursuant to Section 2.1, to the Collateral Agent, of a security interest in all of its right, title and interest in and to each and all of the Contracts and the contract rights thereunder, includes, but is not limited to: 17 22 (i) all (A) rights to payment under any Contract and (B) payments due and to become due under any Contract, in each case whether as contractual obligations, damages or otherwise; (ii) all of its claims, rights, powers, privileges and remedies under any Contract; and (iii) all of its rights under any Contract to make determinations, to exercise any election (including, without limitation, election of remedies) or option or to give or receive any notice, consent, waiver or approval together with full power and authority with respect to any Contract to demand, receive, enforce, collect or receipt for any of the foregoing rights or any property the subject of any of the Contracts, to enforce or execute any checks or other instruments or orders, to file any claims and to take any action which, in the opinion of the Collateral Agent, may be necessary or advisable in connection with any of the foregoing (the Contracts, together with all of the foregoing in this Section 6.1, the "Contract Rights"); provided, however, that, unless a Trigger Event shall have occurred and be continuing, notwithstanding anything else herein to the contrary, the Grantor may, subject to the terms and provisions of the Finance Documents, exclusively exercise all of its rights, powers, privileges and remedies under the Contracts. SECTION 6.2. Further Protection. The Grantor warrants and forever shall defend the title to the Contract Rights against the claims and demands of any Person other than the Collateral Agent and the Secured Parties, and hereby grants the Collateral Agent full power and authority, upon the occurrence and during the continuance of a Trigger Event, to take all actions as the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, reasonably deems necessary or advisable to effectuate the provisions set forth in this sentence. SECTION 6.3. Liabilities Under Receivables and Contracts. Anything herein to the contrary notwithstanding (including, without limitation, the grant of any rights to the Collateral Agent), the Grantor shall remain liable under each of the Receivables and Contracts to observe and perform all the conditions and obligations to be observed and performed by it thereunder and under or with respect to the Guarantor Security Agreement Collateral, all in accordance with the terms of any agreement giving rise to each such Receivable, Contract or procurement of Guarantor Security Agreement Collateral. Neither the Collateral Agent nor any other Secured Party shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) or Contract or with respect to the Guarantor Security Agreement 18 23 Collateral by reason of or arising out of this Agreement or the receipt by the Collateral Agent of any payment relating to such Receivable, Contract or Guarantor Security Agreement Collateral pursuant hereto, nor shall the Collateral Agent or any other Secured Party be obligated in any manner to perform any of the obligations of the Grantor under or pursuant to any Receivable (or any agreement giving rise thereto) or under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Receivable (or any agreement giving rise thereto) or under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. SECTION 6.4. Remedies. Upon the occurrence of any Trigger Event, the Collateral Agent shall have the rights set forth in Article VIII, and, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, may (i) enforce all remedies, rights, powers and privileges of the Grantor under any or all of the Contracts, (ii) sell any or all of the Contract Rights at public or private sale upon at least ten (10) days' prior written notice and/or (iii) substitute itself or any nominee or trustee in lieu of the Grantor as party to any of the Contracts and to notify the obligor of any Contract Right (the Grantor hereby agreeing to deliver any such notice at the request of the Collateral Agent) that all payments and performance under the relevant Contract shall be made or rendered to the Collateral Agent or such other Person as the Collateral Agent may designate. ARTICLE VII DUTY OF CARE OF COLLATERAL AGENT SECTION 7.1. Collateral Agent's Duties; Reasonable Care. The Collateral Agent shall have the duty to exercise reasonable care in the custody and preservation of any Guarantor Security Agreement Collateral in its possession, which duty shall be fully satisfied if the Collateral Agent maintains safe custody of such Guarantor Security Agreement Collateral in accordance with customary banking standards. SECTION 7.2. Further Protection. In acting hereunder, the Collateral Agent shall be entitled to the same rights, indemnities and immunities as afforded to it under the Intercreditor Agreement. 19 24 ARTICLE VIII REMEDIES UPON OCCURRENCE OF A TRIGGER EVENT SECTION 8.1. Remedies; Obtaining the Guarantor Security Agreement Collateral upon Trigger Event. (a) Upon the occurrence and during the continuance of a Trigger Event, the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, shall be entitled to exercise on behalf of itself and the other Secured Parties, all the rights and remedies of a secured party under the UCC as in effect in any relevant jurisdiction and all rights now or hereafter existing under all other Applicable Law to enforce this Agreement and the security interests contained herein, and, in addition, subject to any Applicable Laws then in effect, the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, may, but is under no obligation to, in addition to its other rights and remedies hereunder, including without limitation under Section 8.2 and Section 8.6, and also the rights of the Collateral Agent and the other Secured Parties under any of the Transaction Documents, do any of the following to the fullest extent permitted by applicable law: (i) personally, or by agents, trustees or attorneys, immediately take possession of the Guarantor Security Agreement Collateral or any part thereof, from the Grantor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Grantor's premises or such other Person's premises where any of the Guarantor Security Agreement Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of the Grantor; (ii) instruct the obligor or obligors of any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Guarantor Security Agreement Collateral to make any payment required by the terms of such instrument or agreement directly to the Collateral Agent; and (iii) take possession of the Guarantor Security Agreement Collateral or any part thereof, by directing the Grantor in writing to turn over the same to the Collateral Agent at the Project Site or, to the extent such Guarantor Security Agreement Collateral may be moved, to deliver the same to the Collateral Agent at any other place or places designated by the Collateral Agent, in which event the Grantor shall, at its own expense, (A) forthwith turn over the same to the Collateral Agent at one of the locations on Schedule 4.2 or cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent, as the case may be, (B) store and keep any Guarantor Security Agreement Collateral so turned over or delivered to the Collateral Agent at one of the locations on 20 25 Schedule 4.2 or at such place or places pending further action by the Collateral Agent as provided in Section 8.2, and (C) while the Guarantor Security Agreement Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain the Guarantor Security Agreement Collateral in good condition. (b) The Grantor's obligation to turn over or deliver the Guarantor Security Agreement Collateral as set forth above is of the essence of this Agreement and, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to obtain a decree requiring specific performance by the Grantor of said obligation. (c) When Guarantor Security Agreement Collateral is in the Collateral Agent's possession, (i) the Grantor shall pay (or reimburse the Collateral Agent on demand for) all reasonable expenses (including the cost of any insurance and payment of taxes or other charges) incurred in the custody, preservation, use or operation of the Guarantor Security Agreement Collateral, and the obligation to reimburse all such expenses shall be secured hereby, and (ii) the risk of accidental loss or damage shall be on the Grantor to the extent of any deficiency in any effective insurance coverage. SECTION 8.2. Remedies; Disposition of the Guarantor Security Agreement Collateral. Any Guarantor Security Agreement Collateral repossessed by the Collateral Agent under or pursuant to Section 8.1 and any other Guarantor Security Agreement Collateral, whether or not so repossessed by the Collateral Agent, may, to the extent permitted by any contract terms governing such Guarantor Security Agreement Collateral and to the fullest extent permitted by applicable law, be sold, leased or otherwise disposed of under one or more contracts or as an entirety, whether by public or private sale and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms (whether cash or credit, and in the case of credit, without assumption of future credit risk) as the Collateral Agent may, in compliance with Applicable Law, determine to be commercially reasonable. If any Guarantor Security Agreement Collateral is sold by the Collateral Agent upon credit or for future delivery, the Collateral Agent shall not be liable for the failure of the purchaser to pay for the same and in such event the Collateral Agent may resell the Guarantor Security Agreement Collateral. In no event shall the Grantor be credited with any part of the proceeds of sale of any Guarantor Security Agreement Collateral until payment thereof in cash or cash equivalents has actually been received by the Collateral Agent. Any of the Guarantor Security Agreement Collateral may be sold, leased or otherwise disposed of, or options or contracts may be entered to do so, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. 21 26 Any such disposition shall be made upon not less than ten (10) days' written notice to the Grantor specifying the time such disposition is to be made and, if such disposition shall be a public sale, specifying the place of such sale. Any such sale may be adjourned by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the extent permitted by Applicable Law, the Collateral Agent or any other Secured Party may itself bid for and become the buyer of the Guarantor Security Agreement Collateral or any item thereof offered for sale at a public auction without accountability to the Grantor. SECTION 8.3. Louisiana Remedies. To the extent that the laws of the State of Louisiana govern any provision of this Agreement, or there is a provision of this Agreement related to an asset located in the State of Louisiana or in which a security interest is perfected under the laws of the State of Louisiana (and nothing in this Section 8.3 is intended to derogate from any choice of law provision contained in this Agreement), in addition to all other rights and remedies provided or permitted by Louisiana and other laws, if a Trigger Event shall have occurred, the Collateral Agent shall have the right to cause the Guarantor Security Agreement Collateral to be seized and sold under Louisiana executory or ordinary process, at the Collateral Agent's sole option, without appraisement, appraisement being hereby expressly waived, as an entirety or in portions as the Collateral Agent may determine, to the highest bidder for cash, and otherwise exercise the rights, powers and remedies afforded herein and under applicable Louisiana law. For purposes of Louisiana executory process, the Guarantor acknowledges the liens and security interests herein created and the Secured Obligations, and the Guarantor does hereby confess judgment in favor of the Secured Parties for the full amount of the Secured Obligations, whether now existing or hereafter arising. Any and all declarations of fact made by authentic act before a notary public in the presence of two witnesses by a person declaring that such facts lie within his or her knowledge shall constitute authentic evidence of such facts for purpose of executory process. The Guarantor waives: (a) the benefit of appraisement as provided in Louisiana Code of Civil Procedure Articles 2332, 2336, 2723 and 2724, and all other laws conferring the same; (b) the demand and three days' delay accorded by Louisiana Code of Civil Procedure Articles 2639 and 2721; (c) the notice of seizure required by Louisiana Code of Civil Procedure Articles 2293 and 2721; (d) the three days' delay provided by Louisiana Code of Civil Procedure Articles 2331 and 2722; and (e) the benefit of the other provisions of Louisiana Code of Civil Procedures Articles 2331, 2722 and 2723, not specifically mentioned above. In the event the Guarantor Security Agreement Collateral or any part thereof is seized as an incident to an action for the recognition of enforcement of this Agreement by executory process, ordinary process, sequestration, writ of fieri facias or otherwise, the Guarantor and the Collateral Agent agree that the court issuing any such order shall, if petitioned for by the Collateral Agent, direct the applicable marshal or sheriff to appoint as a keeper of the Guarantor Security Agreement Collateral, the Collateral Agent or any agent 22 27 designated by the Collateral Agent at the time such seizure is effected. This designation of a keeper will be pursuant to La. R.S. Sections 9:5136-9:5140.2. The Collateral Agent or its agent shall be entitled to all the rights and benefits of a keeper afforded thereunder as the same may be amended, and shall be entitled to reasonable compensation, in excess of its reasonable costs and expenses incurred in the administration or preservation of the Guarantor Security Agreement Collateral, an amount equal to One Thousand Dollars ($1,000) per day. References in this Agreement to a "receiver" or words of similar input shall include a keeper appointed pursuant to the provisions of this Section 8.3. The Collateral Agent shall not be under any obligation to petition such court for the appointment of a keeper. SECTION 8.4. Waiver. (a) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, THE GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL IN ACCORDANCE WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, AND THE GRANTOR HEREBY FURTHER WAIVES: (i) all damages occasioned by such taking of possession except any damages which are finally judicially determined to have been the direct result of the Collateral Agent's gross negligence or wilful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's and the other Secured Parties' rights hereunder; (iii) demand of performance or other demand, notice of intent to demand or accelerate, notice of acceleration, presentment, protest, advertisement or notice of any kind to or upon the Grantor or any other Person; and (iv) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Guarantor Security Agreement Collateral or any portion thereof, and the Grantor, for itself and all who may claim under it, insofar as it or they may now or hereafter lawfully do so, hereby waives the benefit of such laws. 23 28 (b) Without limiting the generality of the foregoing, the Grantor hereby: (i) authorizes the Collateral Agent, in its sole discretion and without notice to or demand upon the Grantor and without otherwise affecting the obligations of the Grantor hereunder from time to time, to take and hold other collateral granted to it by any other Person (in addition to the Guarantor Security Agreement Collateral) for payment of any Secured Obligations, or any part thereof, and to exchange, enforce or release such other collateral or any part thereof, and to accept and hold any endorsement or guarantee of payment of the Secured Obligations or any part thereof, and to release or substitute any endorser or guarantor or any other Person granting security for or in any way obligated upon any Secured Obligations, or any part thereof; and (ii) waives and releases any and all right to require the Collateral Agent or the other Secured Parties to collect any of the Secured Obligations from any specific item or items of Guarantor Security Agreement Collateral or from any other party liable as guarantor or in any other manner in respect of any of the Secured Obligations or from any collateral (other than the Guarantor Security Agreement Collateral) for any of the Secured Obligations. (c) Any sale of, or the grant of options to purchase, or any other realization upon, any Guarantor Security Agreement Collateral shall, provided that it is done in accordance with applicable law and this Agreement, operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Grantor therein and thereto, and shall be a perpetual bar both at law and in equity against the Grantor and against any and all Persons claiming or attempting to claim the Guarantor Security Agreement Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the Grantor. SECTION 8.5. Application of Proceeds; Grantor Liable for Deficiency. The Collateral Agent shall apply the net proceeds of any collection, sale or other realization of all or any part of the Guarantor Security Agreement Collateral pursuant to this Agreement, and any other cash at the time of such collection, sale or other realization held by the Collateral Agent under this Agreement, in accordance with Article V of the Intercreditor Agreement. The Grantor shall remain liable to the extent of any deficiency between the amount of proceeds of the Guarantor Security Agreement Collateral and the aggregated amount of the Secured Obligations in accordance with the Finance Documents. SECTION 8.6. No Waiver; Remedies Cumulative. No failure or delay on the part of any Secured Party in exercising any right, remedy, power or privilege hereunder and no course of dealing between the Grantor and any Secured Party shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. A waiver by any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which any Secured Party would otherwise have on 24 29 any future occasion. The rights and remedies herein expressly provided are cumulative and may be exercised singly or concurrently and as often and in such order as any Secured Party deems expedient and are not exclusive of any rights or remedies which the Secured Parties would otherwise have whether by agreement or now or hereafter existing under Applicable Law. No notice to or demand on the Grantor in any case shall entitle the Grantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Secured Parties to any other or future action in any circumstances without notice or demand. SECTION 8.7. Discontinuance of Proceedings. In case any Secured Party shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to such Secured Party, then, in every such case, subject to the terms of any final non-appealable judgment rendered in any such proceeding, the Grantor, the Secured Parties and each holder of any of the Secured Obligations shall be restored to their former positions and rights hereunder with respect to the Guarantor Security Agreement Collateral, subject to the Security Interest created under this Agreement, and all rights, remedies and powers of the Secured Parties shall continue as if no such proceeding had been instituted. ARTICLE IX MISCELLANEOUS SECTION 9.1. Notices. Unless otherwise specifically herein provided, all notices required or permitted under the terms and provisions hereof shall be in writing and any such notice shall become effective if given in accordance with the provisions of Section 12.5 of the Indenture. SECTION 9.2. Amendment. No waiver, amendment, modification or termination of any provision of this Agreement, or consent to any departure by the Grantor therefrom, shall in any event be effective without the prior written consent of the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, and none of the Guarantor Security Agreement Collateral shall be released without the written consent of the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 9.3. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Grantor and the Secured Parties, all future holders of the Secured 25 30 Obligations and their respective successors, transferees and assigns (to the extent such successors, transferees and assigns are permitted under the Finance Documents and the documents regarding additional Permitted Indebtedness), except that the Grantor may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent and in accordance with this Agreement. SECTION 9.4. Survival. All agreements, statements, representations and warranties made by the Grantor herein or in any certificate or other instrument delivered by the Grantor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Parties and shall survive the execution and delivery of this Agreement and the other Finance Documents regardless of any investigation made by any Secured Party or made on their behalf. SECTION 9.5. Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. SECTION 9.6. Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 9.7. Grantor's Duties. Anything herein contained to the contrary notwithstanding, the Grantor shall remain liable to perform all of its obligations under or with respect to the Guarantor Security Agreement Collateral, and the Secured Parties shall not have any obligations or liabilities under or with respect to any Guarantor Security Agreement Collateral by reason of or arising out of this Agreement, nor shall the Secured Parties be required or obligated in any manner to perform or fulfill any of the obligations of the Grantor under or with respect to any Guarantor Security Agreement Collateral. SECTION 9.8. Termination; Release. (a) Upon the occurrence of the Debt Termination Date, this Agreement shall terminate (except as provided in Section 9.4), and the Collateral Agent, at the written request and expense of the Grantor, will promptly execute and deliver to the Grantor the proper instruments (including UCC termination statements on form UCC-3) acknowledging the termination of this Agreement, and will duly assign, transfer and deliver to the Grantor (without recourse and without any representation or warranty of any kind) such of the Guarantor Security Agreement Collateral as may be in the possession of the Collateral Agent and has not theretofore been disposed of or otherwise applied or released. 26 31 (b) Upon the sale or disposition of any portion of the Guarantor Security Agreement Collateral permitted pursuant to the terms of the Finance Documents, including, but not limited to, any Permitted Asset Sale, the purchaser of such Guarantor Security Agreement Collateral shall, upon such purchase, acquire good title to the Guarantor Security Agreement Collateral so purchased, free of the security interest created by this Agreement. The Collateral Agent, upon the request, and at the expense, of the Grantor, shall execute and deliver all such documentation necessary to evidence such release of the security interest created in such Guarantor Security Agreement Collateral pursuant to this Agreement. SECTION 9.9. Reinstatement. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by any Secured Party in respect of the Secured Obligations is rescinded or must otherwise be restored or returned by such Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Grantor or upon the appointment of any intervenor or conservator of, or trustee or similar official for, the Grantor or any substantial part of its assets, or upon the entry of an order by a bankruptcy court avoiding payment of such amount, or otherwise, all as though such payments had not been made. SECTION 9.10. Counterparts. This Agreement may be executed in any number of counterparts, each 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. SECTION 9.11 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) THIS AGREEMENT IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). Regardless of any provision in any other Finance Document, for purposes of the UCC, New York shall be deemed to be the Depositary Bank's location and the Depositary Accounts (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York, without regard to the conflict of law rules thereof (other than Section 5-1401 of the New York General Obligations Law). (b) Any legal action or proceeding against the Grantor with respect to this Agreement may be brought in the courts of the State of New York in the County of New York or of the State of Louisiana in any parish or of the United States for the Southern District of New York or any federal district of Louisiana and, by execution and delivery of this Agree- 27 32 ment, the Grantor hereby irrevocably submits and accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Grantor agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon the Grantor, and may be enforced in any other jurisdiction, by a suit upon such judgment, a certified copy of which shall be conclusive evidence of the judgment. The Grantor hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 111 Eighth Avenue, New York, N.Y. 10011, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notice and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such agent, the Grantor agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Collateral Agent. The Grantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Grantor at its address referred to in Section 12.5(a) of the Indenture, such service to become effective thirty (30) days after such mailing. Nothing herein shall affect the right of the Collateral Agent or any other Person to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Grantor in any other jurisdiction. (c) The Grantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (d) WITH REGARD TO THIS AGREEMENT, EACH PARTY HERETO HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY. SECTION 9.12. Authority of Collateral Agent. The Grantor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Agent and the other Secured Parties, be governed by this Agreement, the other Finance Documents and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantor, the Collateral Agent shall be conclusively presumed to be 28 33 acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and the Grantor shall not be under any obligation, or entitlement, to make any inquiry respecting such authority. SECTION 9.13. Conflict with Intercreditor Agreement. In case of a conflict between any provision of this Agreement and any provision of the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. No such conflict shall be deemed to exist merely because this Agreement imposes greater obligations on the Grantor than the Intercreditor Agreement. SECTION 9.14. Indemnities and Expenses. The obligation of the Grantor to pay the costs and expenses of, and to indemnify, defend and hold harmless, the Collateral Agent, its agents, officers, directors and representatives and the other Secured Parties under and in connection with this Agreement shall be as provided in Section 2.4 of the Intercreditor Agreement as in effect as of the date hereof. No amendment to such Section 2.4 or termination of the Intercreditor Agreement shall affect the provisions of this Section 9.16 unless such amendment or termination shall have been consented to by the parties to this Agreement in accordance with the provisions hereof and of the other Finance Documents. SECTION 9.15. Entire Agreement. This Agreement, together with any other agreement executed in connection herewith, is intended by the parties as a final expression of their agreement as to the matters covered hereby and is intended as a complete and exclusive statement of the terms and conditions thereof. SECTION 9.16. Independent Security. The security provided for in this Agreement shall be in addition to and shall be independent of every other security which the Collateral Agent or the other Secured Parties may at any time hold for any of the Secured Obligations hereby secured, whether or not under the Security Documents. The execution of any other Security Document shall not modify or supersede the security interest or any rights or obligations contained in this Agreement and shall not in any way affect, impair or invalidate the effectiveness and validity of this Agreement or any term or condition hereof. The Grantor hereby waives its right to plead or claim in any court that the execution of any other Security Document is a cause for extinguishing, invalidating, impairing or modifying the effectiveness and validity of this Agreement or any term or condition contained herein. The Collateral Agent shall be at liberty to accept further security from the Grantor or from any third party and/or release such security without notifying the Grantor and without affecting in any way the obligations of the Grantor under the Security Documents or the other Finance Documents. The Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, shall determine if any security conferred upon the Collateral Agent and the 29 34 other Secured Parties under the Security Documents shall be enforced by the Collateral Agent, as well as the sequence of securities to be so enforced. SECTION 9.17. Third Party Beneficiaries. The agreements of the parties hereto are intended to benefit the Secured Parties and their respective successors and assigns. SECTION 9.18. Limitation of Liability. The provisions of Section 12.11 of the Indenture shall apply to this Agreement. SECTION 9.19. Merger of Collateral Agent. Any corporation into which the Collateral Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Collateral Agent shall be a party, or any corporation succeeding to the business of the Collateral Agent shall be the successor of the Collateral Agent hereunder without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto except where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 30 35 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written. LOUISIANA GENERATING LLC, as Grantor By: /s/ Craig A. Mataczynski --------------------------------------- Name: Craig A. Mataczynski Title: Vice President THE CHASE MANHATTAN BANK, solely in its capacity as Collateral Agent By: /s/ Annette M. Marsula -------------------------------------- Name: Annette M. Marsula Title: Vice President 31 36 A C K N O W L E D G M E N T STATE OF Minnesota COUNTY OF Hennepin Before me, the undersigned Notary Public, duly commissioned, qualified and sworn within and for the State and County aforesaid, personally came and appeared Craig A. Mataczynski, who acknowledged that he/she is a Vice President of Louisiana Generating LLC., a Delaware limited liability company (the "Company"), that as such duly authorized Vice President , by and with the authority of the Board of Directors of the Company, he/she signed and executed the foregoing instrument for and on behalf of the Company, as his/her and its free and voluntary act and deed, for the uses, purposes and benefits therein expressed. /s/ Craig A. Mataczynski ------------------------------- (Signature) Sworn to and subscribed before me this 30 day of March, 2000 /s/ Kathryn J. Osteraas [Notary Public STAMP] - -------------------------- NOTARY PUBLIC My commission expires: 1-31-2005 32 37 Schedule I to Assignment and Security Agreement Filing Offices Office of the Clerk and Recorder of Mortgages, Parish of Pointe Coupee of the State of Louisiana. Sch. I-1 38 Schedule II to Assignment and Security Agreement Instruments None. Sch. II - 1 39 Schedule III to Assignment and Security Agreement Copyrights None. Sch. III - 1 40 Schedule IV to Assignment and Security Agreement Patents None. Sch. IV - 1 41 Schedule V to Assignment and Security Agreement Trademarks None. Sch. V - 1 42 Schedule 4.2 to Assignment and Security Agreement Location of Inventory and Equipment 1. 5500 Hall Street St. Louis, Missouri 63147 2. Frank W. Hake Assoc. 1790 Dock Street Memphis, Tennessee 38113 3. Cajun Electric Power Cooperative, Inc. 10719 Airline Highway Baton Rouge, Louisiana 70816-4213 4. 9951 Cajun 2 Road Louisiana Highway 981 New Roads, Louisiana 70760 5. River Road Highway 415 Jarreau, Louisiana 70749 6. Cajun Electric Power Cooperative, Inc. 112 Telly Street New Roads, Louisiana 70760 Sch. 4.2 - 1 43 Exhibit A LEGAL DESCRIPTION OF SITE Exhibit A-1 CAJUN I POWER PLANT Two certain tracts of land located in the Parish of Pointe Coupee, State of Louisiana, SECTIONS 16 AND 17, T4S-R11E AND SECTION 91, T4S-R11E, on the West bank of the Mississippi River, being a portion of a tract known as "NINA PLANTATION", and more particularly described as Tract "A" and Tract "B" according to a map of survey prepared by Cletus Langlois, Registered Professional Land Surveyor dated March 24, 2000, and entitled "ALTA/ACSM Land Title Survey: Cajun I Property (7808 River Road, HWY 415, Jarreau, LA. 70749) Being a Portion of "Nina Plantation" Situated in Sections 16 & 17, Township 4 South, Range 11 East & Sections 90 & 91, Township 5 South, Range 11 East, Southeastern Land District, West of the Mississippi River, Parish of Pointe Coupee, State of Louisiana for Louisiana Generating, L.L.C.; The Chase Manhattan Bank, as Collateral Agent & First American Title Insurance Company" (the "Survey"). TRACT A: A certain tract or parcel of land designated as "Tract A" being located in Section Sixteen (16), Township Four South (T-4-S), Range Eleven East (R-11-E) and Sections Ninety and Ninety One (90 & 91), Township Five South (T-5-S), Range Eleven East (R-11-E), Southeastern Land District, West of the Mississippi River, Parish of Pointe Coupee, State of Louisiana more particularly described as follows: Commencing at United States Geological Survey Monument P.B.M. 162/d having a lambert coordinate of North 733,848.01 feet, East 1,992,848.17 feet; thence South 17(degrees)05'12" East a distance of 3318.92 to a true Point of Beginning being a placed one-half inch diameter iron pipe on the westerly right-of-way limits of Louisiana State Highways Number 414 and 415; thence South 12(degrees)09'55" East along said westerly right-of-way limits of Louisiana State Highways Number 414 and 415 a distance of 2431.12 feet to a found one-half inch diameter iron pipe; thence North 65(degrees)24'55" West a distance of 192.70 feet to a calculated point being in an existing canal; thence North 59(degrees)25'25" West in said drainage canal a distance of 133.00 feet to a calculated point; thence South 69(degrees)34'05" West in said drainage canal a distance of 74.00 feet to a calculated point; thence South 18(degrees)02'05" West in said drainage canal a distance of 105.00 feet to a calculated point; thence South 29(degrees)02'05" West in said drainage canal a distance of 96.00 feet to a calculated point; thence South 72(degrees)06'05" West in said drainage canal a distance of 89.00 feet to a calculated point; thence North 45(degrees)41'55" West in said drainage canal a distance of 93.00 feet to a calculated point; thence North 6(degrees)59'35" East in said drainage canal a distance of 177.00 feet to a calculated point; thence North 84(degrees)50'25" West in said drainage canal a distance of 211.00 feet to a calculated point; thence South 71(degrees)14'35" West in said drainage canal a distance of 237.00 feet to a calculated point; thence North 38(degrees)59'55" West in said drainage canal a distance of 238.00 feet to a calculated point; thence North 65(degrees)42'55" West in said drainage canal a distance of 188.00 feet to a calculated point; thence North 52(degrees)50'55" West in said drainage canal a distance of 446.00 feet to a calculated point; Thence North 25(degrees)30'25" West in said drainage canal a distance of 184.00 feet to a calculated point; thence North 0(degrees)09'25" West in said drainage canal a distance of 234.00 feet to a calculated point; thence North 21(degrees)06'25" West in said drainage canal a distance of 93.00 feet to a calculated point; thence North 45(degrees)37'55" West in said drainage canal a distance of 111.000 feet to a calculated point; thence North 28(degrees)19'55" West in said drainage canal a distance of 244.00 feet to a calculated point; 44 thence North 58(degrees)02'55" West in said drainage canal a distance of 136.43 feet to a calculated point; thence North 30(degrees)33'28" West a distance of 451.62 feet to a calculated point being an existing drainage ditch; thence North 65(degrees)30'05" East in said drainage ditch a distance of 318.25 feet to a calculated point; thence North 76(degrees)45'05" East in said drainage ditch a distance of 276.83 feet to a placed one-half inch diameter iron pipe; thence North 75(degrees)59'05" East in said drainage ditch a distance of 1300.27 feet to the true Point of Beginning. Said above described tract or parcel of land contains 75.53 acres as shown on the Survey. TRACT B: A certain tract or parcel of land designated as "Tract B" located in Sections Sixteen (16) & Seventeen (17), Township 4 South (T-4-S), Range Eleven East (R-11-E) Southeastern Land District, West of the Mississippi River, Parish of Pointe Coupee, State of Louisiana more particularly described as follows: Commencing at United States Geological Survey Monument P.B.M. 162/d having a lambert coordinate of North 733,848.01 feet, East 1,992,848.17 feet; thence South 17(degrees)05'12" East a distance of 3318.92 feet to a placed one-half inch diameter iron pipe being on the westerly right-of-way limits of Louisiana State Highways Number 414 and 415; thence South 12(degrees)09'55" East along said westerly right-of-way limits of Louisiana State Highway Number 414 and 415 a distance of 449.58 feet to a calculated point; thence North 68(degrees)45'05" East a distance of 54.69 feet to a true Point of Beginning being a found concrete monument on the easterly right-of-way limits of Louisiana State Highways Number 414 and 415; thence North 68(degrees)45'05" East a distance of 1671.23 feet to a calculated point being at the average low water plane of the Mississippi River; thence South 10(degrees)24'18" East along said low water plane of the Mississippi River a distance of 1126.06 feet to a calculated point; thence South 68(degrees)45'05" West a distance of 1636.20 feet to a found concrete monument being on the easterly right-of-way limits of Louisiana State Highways Number 414 and 415; thence North-12(degrees)09'55" West along said easterly right-of-way limits of Louisiana State Highway Numbers 414 and 415 a distance of 1120.00 feet to the true Point of Beginning. Said above described tract or parcel of land contains 41.99 acres as shown on the Survey. LESS AND EXCEPT: A certain tract or parcel of land designated as Lease Site "C" being located in Section Sixteen (16), Township Four South (T-4-S), Range Eleven East (R-11-E) southeastern land district, west of the Mississippi River, Parish of Pointe Coupee, State of Louisiana more particularly described as follows: Commencing at United State Geological Survey Monument P.B.M. 162/d having a Lambert Coordinate of North 733,848.01 feet, East 1,992,848.17 feet; thence south 17(degrees)05'12" East a distance of 3318.92 feet to a true point of beginning being a found one-half inch diameter iron pipe on the westerly right-of-way limits of Louisiana State Highways number 414 and 415; then South 12(degrees)09'55" East along said westerly right-of-way limits of Louisiana State Highways number 414 and 415 a distance of 552.06 feet to a calculated point; then South 77(degrees)55'19" West a distance of 755.60 feet to a calculated point; then North 12(degrees)20'41" West a distance of 160.60 feet to a calculated point; then South 77(degrees)45'12" West a distance of 368.05 feet to a calculated point; then South 12(degrees)03'57" East a distance of 160.30 feet to a calculated point; then South 77(degrees)55'45" West a distance of 215.72 feet to a calculated point; then South 49(degrees)13'50" West a distance of 326.71 feet to a 45 calculated point in a drainage canal; then North 28(degrees)19' 55" West in the drainage canal a distance of 71.30 feet to a calculated point; then North 58(degrees)02' 55" West in the drainage canal a distance of 136.43 feet to a calculated point; then North 30(degrees)33' 28" West a distance of 451.62 feet to a calculated point in an existing drainage ditch; then North 65(degrees)30' 05" East in the drainage ditch a distance of 318.25 feet to a calculated point; then North 76(degrees)45' 05" East in the drainage ditch a distance of 276.83 feet to a found one-half inch diameter iron pipe; then North 75(degrees)59' 05" East in the drainage ditch a distance of 1300.27 feet to the true point of beginning, the above described tract or parcel of land containing 20.97 acres as shown on a survey entitled: "Map Showing Lease Site "C", Cajun 1 property being a portion of Tract "A", Cajun 1 property & "Nina" Plantation" by Patin Engineers & Surveyors, Inc. certified by Celtus Langlois, State of Louisiana registered professional land surveyor number 4723 dated March 24, 2000. CAJUN II - COOLING TOWER - TRACT 1 PROPERTY A certain tract or parcel of land containing 24.22 acres and being designated as Tract "1", located in Section 5, Township 4 South - Range 11 East, Pointe Coupee Parish, Louisiana, and being more particularly described as follows: From a POINT OF REFERENCE being the northwest corner of Section 6, Township 4 South - Range 11 East, then proceed North a distance of 534.91' to a point and corner; then proceed East a distance of 1,459.59' to the POINT OF BEGINNING; from the POINT OF BEGINNING proceed N 18(degrees)29'37" W a distance of 692.66' to a point and corner; then proceed N 71(degrees)30'23" E a distance of 1,207.11' to a point and corner; then proceed S 18(degrees)29'37" E a distance of 51.13' to a point and corner; then proceed N 71(degrees)30'23" E a distance of 1,215.70' to a point and corner; then proceed S 18(degrees)28'31" E a distance of 199.64' to a point and corner; then proceed S 71(degrees)30'23" W a distance of 1,269.37' to a point and corner; then proceed S 18(degrees)29'37" E a distance of 441.96' to a point and corner; then proceed S 71(degrees)30'23" W a distance of 1,153.43' to the POINT OF BEGINNING, containing 24.22 acres and is more fully shown on a map titled "Survey showing Cooling Towers Serving Units #1 and #2 For Cajun Electric Power Co-op, Inc." by E.J. Giering III, P.L.S. and dated March 31, 1983. CAJUN II - WATER INTAKE - TRACT 2 PROPERTY A certain tract or parcel of land containing 48.53 acres and being designated as Tract "2", located in Section 5 and Section 6, Township 4 South - Range 11 East, Pointe Coupee Parish, Louisiana, and being more particularly described as follows: From a POINT OF REFERENCE being the northwest corner of Section 6, Township 4 South - Range 11 East, proceed S 20(degrees)22'03" E a distance of 659.48' to an iron bar on the Section Line between Section 6 and Section 35; then proceed N 71(degrees)30'46" E a distance of 3,136.49' to the POINT OF BEGINNING of Tract 2; then from the POINT OF BEGINNING, proceed N 18(degrees)29'12" W a distance of 1,347.89' to a point and corner; then proceed N 71(degrees)30'23" a distance 46 of 135.63' to a point and corner; then proceed S 18(degrees)26'55" E a distance of 1,089.25' to a point and corner; then proceed N 71(degrees)28'26" E a distance of 2,250.41' to a point and corner on the westerly right-of-way line of LA. Highway 981; then proceed N 21(degrees)33'53" W along the right-of-way line, a distance of 742.52' to a point and corner; then proceed N 75(degrees)34'59" E, crossing LA. Highway 981 and the right descending bank levee of the Mississippi River, a distance of 1,274.96' to a Mississippi River traverse line; then proceed S 14(degrees)52'25" E a distance of 912.96' to a point and corner; then proceed S 71(degrees)30'46" W crossing the right descending bank levee and L.A. Highway 981, a distance of 1,160.35' to an iron rod on the westerly right-of-way line of L.A. Highway 981; then proceed S 71(degrees) 30'46" W a distance of 2,399.31' to the POINT OF BEGINNING and containing 48.53 acres and is more fully shown on a map titled "Survey showing Water Intake Pump Station & Water Lines for Cajun Electric Power Co-op, Inc." by E.J. Giering III, P.L.S. and dated March 31, 1983. CAJUN II -- SWITCHYARD -- TRACT 3 PROPERTY A certain tract or parcel of land containing 11.94 acres and being designated as Tract "3", located in Section 5 and Section 6, Township 4 South - Range 11 East, Pointe Coupee Parish, Louisiana, and being more particularly described as follows: From a POINT OF REFERENCE being the northwest corner of Section 6, Township 4 South - Range 11 East, proceed North a distance of 961.68' to a point and corner; then proceed East a distance of 3,200.73' to the POINT OF BEGINNING; then from the POINT OF BEGINNING proceed N 18(degrees)26'55" W a distance of 701.45' to a point and corner; then proceed N 71(degrees)30'17" E a distance of 740.77' to a point and corner; then proceed S 18 (degrees)32'57" E a distance of 701.52' to a point and corner; then proceed S 71(degrees)30'36" W a distance of 742.00' to the POINT OF BEGINNING and containing 11.94 acres and is more fully shown on a map titled "Survey showing Switchyard For Cajun Electric Power Co-op, Inc." by E.J. Giering III, P.L.S. and dated March 31, 1983. CAJUN II -- COAL UNITS 1 & 2 -- TRACT 4 PROPERTY A certain tract or parcel of land containing 18.18 acres and being designated as Tract "4", located in Section 4 and Section 5, Township 4 South - Range 11 East, Point Coupee Parish, Louisiana, and being more particularly described as follows: From a POINT OF REFERENCE being the northwest corner of Section 6, Township 4 South - Range 11 East, proceed North a distance of 1,631.49' to a point and corner; then proceed East a distance of 2,698.52'; then proceed N 71(degrees)27'53" E a distance of 380.0' to the POINT OF BEGINNING; then from the POINT OF BEGINNING proceed N 18(degrees)32'07" W a distance of 327.0' to a point and corner; then proceed S 71(degrees)27'53" W a distance of 67.0' to a point and corner; then proceed N 18(degrees)32'07" W a distance of 44.0' to a point and corner; then proceed N 71(degrees)27'53" E a distance of 67.0' to a point and corner; then proceed N 18(degrees)32'07" W a distance of 845.0' to a point and corner; then proceed N 71(degrees)27'53" E a distance of 710.0' to a point and corner; then proceed S 18(degrees)32'07" E a distance of 793.75' to a point and corner; then proceed S 47 71(degree)27'53" W a distance of 110.0' to a point and corner; then proceed S 18(degree)32'07" E a distance of 78.9' to a point and corner; then proceed S 71(degree)27'53" W a distance of 81.0' to a point and corner; then proceed S 18(degree)32'07" E a distance of 343.35' to a point and corner; then proceed S 71(degree)27'53" W a distance of 519.0' to the POINT OF BEGINNING and containing 18.18 acres and is more fully shown on a map titled "Survey showing 18.18 Acre Tract in Sections 4 & 5 of T 4 S - R 11 E, Pointe Coupee Parish, Louisiana" by A.J. Brouillette, P.L.S. and dated March 31, 1983. CAJUN II - COAL UNIT 3 - TRACT 5 PROPERTY A certain tract or parcel of land containing 10.54 acres and being designated as Tract "5", located in Sections 4 and 5, Township 4 South - Range 11 East, Pointe Coupee Parish, Louisiana, and being more particularly described as follows: From a POINT OF REFERENCE being the northwest corner of Section 6, Township 4 South - Range 11 East, proceed North a distance of 1,631.49' to a point and corner; then proceed East a distance of 2,698.52' to the POINT OF BEGINNING; then from the POINT OF BEGINNING proceed N 18(degree)32'07" W a distance of 1,216.0' to a point and corner; then proceed N 71(degree)27'53" E a distance of 380.0' to a point and corner; then proceed S 18(degree)32'07" E a distance of 845.0' to a point and corner; then proceed S 71(degree)27'53" W a distance of 67.0' to a point and corner; then proceed S 18(degree)32'07" E a distance of 44.0' to a point and corner; then proceed N 71(degree)27'53" E a distance of 67.0' to a point and corner; then proceed S 18(degree)32'07" E a distance of 327.0' to a point and corner; then proceed S 71(degree)27'53" W a distance of 380.0' to the POINT OF BEGINNING and containing 10.54 acres and is more fully shown on a map titled "Survey showing 10.54 Acre Tract in Sections 4 & 5 of T 4 S- R 11 E, Pointe Coupee Parish, Louisiana" by A.J. Brouillette, P.L.S. and dated October 5, 1979. CAJUN II COMMON FACILITIES PROPERTY A certain tract or parcel of land located in Sections 31, 32, 86 and 87, Township 4 South, Range 10 East and Sections 3, 4, 5, 6, 35, 37, and 38, Township 4 South, Range 11 East, Pointe Coupee Parish, Louisiana, being more particularly described as follows: Begin at the corner common to Section 86 and Section 87, T4S-R10E and Section 35 and Section 36, T4S-R11E, then proceed S 00 degrees 44' 39" E 1657.62 feet (S 00 degrees 00'00" W per title) to a point and corner; then N 69 degrees 52'18" W (N 70 degrees 31' 00" W per title) a distance of 330.50 feet to a point; then N 63 degrees 15' 05" W a distance of 335.83 feet (N 62 degrees 30' 00" W 346.96 feet per title) to a point and corner; then S 21 degrees 47' 53" W 7240.38 feet (S 22 degrees 32' 58" W 7248.55 feet per title) to a point and corner; then N 50 degrees 55' 15" W 404.03 feet (N 50 degrees 23' 23" W 404.93 feet per title) to a point; then along the arc of a curve to the left a distance of 374.37 feet (374.18 feet per title) the curve having a radius of 5679.65 feet with a delta of 3 degrees 46' 36" (3 degrees 46' 29" per title) to a point and corner; then S 18 degrees 45' 05" W 516.65 feet (S 19 degrees 22' 47" W 514.00 feet per title) to a point and corner; then N 62 degrees 42' 09" W 61.12 feet (N 61 degrees 55' 34" W 60.51 feet per title) to a point and corner; then N 18 degrees 30' 51" E 7620.48 feet (N 19 48 degrees 22' 47" E 7643.23 feet per title) to a point and corner; then S 68 degrees 06' 12" E (S 67 degrees 33' 00" E per title) 134.00 feet to a point; then S 67 degrees 57' 24" E (S 62 degrees 30' 00" E per title) 171.77 feet to a point and corner; then N 25 degrees 54' 58" E (N 26 degrees 28' 00" E per title) 1863.19 feet to a point; then along the arc of a curve to the right a distance of 805.90 feet (810.41 feet per title) the curve having a radius of 1059.37 feet with a delta of 43 degrees 35' 14" (43 degrees 49' 51" per title) to a point and corner; then N 00 degrees 33' 01" W 926.70 feet (N 00 degrees 08' 00" E 937.87 feet per title) to a point; then N 14 degrees 05' 12" E 794.58 feet to a two inch iron pipe (N 14 degrees 30' 00" E 792.0 feet per title); then N 13 degrees 41' 49" E 1649.98 feet (N 14 degrees 15' 40" E 1654.807 feet per title) to a half inch iron rod; then N 71 degrees 14' 40" E 6430.36 feet to a point and corner marked by a half inch iron rod; then N 16 degrees 55' 57" W 253.77 feet to a point and corner marked by a half inch iron rod; then N 71 degrees 21' 02" E 2891.01 feet to a point; then N 76 degrees 02' 17" E 394.16 feet to a point and corner; then S 36 degrees 28' 35" E 340.83 feet to a point; then S 23 degrees 26' 38" E 1350.818 feet to a point; then S 23 degrees 51' 38" E 24.8 feet to a point and corner; then N 68 degrees 53' 47" E 202.772 feet to a point and corner; then N 60 degrees 26' 28" E 462.252 feet to a point; then N 53 degrees 54' 46" E 400.308 feet to a point; then N 54 degrees 19' 00" E 234.022 feet to a point; then N 54 degrees 19' 00" E 111.421 feet (calculated) more or less a sufficient distance to the low water mark of the Mississippi River; then proceed downstream along the low water mark of the Mississippi River a sufficient distance to reach a point of intersection of the southeastern boundary of the property herein described; then N 70 degrees 57' 14" W 1238.40 feet more or less for a sufficient distance to reach a point marked by an iron rod; S 70 degrees 57' 14" W 5535.73 feet (S 71 degrees 30' 46" W 5568.978 feet per title) to a point and corner marked by an iron bar; then N 20 degrees 22' 03" W 659.48 feet (N 20 degrees 45' 00" W 661.67 feet per title) to a point and corner marked by an axle; then S 71 degrees 14' 01" W 1350.50 feet (S 71 degrees 54' 00" W 1331.88 feet per title) to a two inch iron pipe; then S 71 degrees 15' 00" W 3589.98 feet (3494.70 feet per title) to a point and corner marked by an axle; then N 30 degrees 43' 32" W 814.80 feet (N 28 degrees 45' 00" W 795.22 feet per title) to a point and corner marked by a fence corner; then S 70 degrees 59' 15" W 1012.53 feet (S 72 degrees 03' 00" W 1006.47 feet per title) to a point marked by a concrete monument; then along the arc of a curve to the left a distance of 86.83 feet (86.13 feet per title) the curve having a radius of 899.37 feet with a delta of 5 degrees 31' 54" (5 degrees 29' 13" per title) to a point and corner marked by a concrete monument; then S 00 degrees 36' 39" E 1051.08 feet (S 00 degrees 08' 00" W 1050.01 feet per title) to a two inch iron pipe which is the Point of Beginning, as shown on the map of survey prepared by Neel-Schaffer, Inc. Brown & Butler, dated September 4, 1996, last revised March 27, 2000, entitled "ALTA/ACSM Land Title Survey of a 2428.6(double dagger) Acre Tract in Sections 31, 32, 86 and 87, T-4-S, R-10-E, and Sections 3, 4, 5, 6, 35, 37 and 38, T-4-S, R-11-E, Pointe Coupee Parish, Louisiana"; LESS AND EXCEPT: five (5) tracts or parcels of land, together with all improvements thereon, more particularly described above as: Cajun II Cooling Tower -- Tract 1 Property; Cajun II Water Intake -- Tract 2 Property; Cajun II Switchyard -- Tract 3 Property; Cajun II Coal Units 1 & 2 -- Tract 4 Property; Cajun II Coal Unit 3 -- Tract 5 Property; and 49 the Cajun II - Ballpark Tract, a certain 15-acre tract or parcel of land, located in Sections 31 & 32, Township 4 South - Range 10 East, Pointe Coupee Parish, Louisiana, and being more particularly described as follows: From a POINT OF REFERENCE being the Northeast corner of Section 87, T-4-S, R-10-E proceed S 0(degrees)44'39" E a distance of 1657.62' to a point and corner; then proceed N 69(degrees)52'18" W a distance of 330.50' to a point and corner; then proceed N 63(degrees)15'05" W a distance of 335.83' to a point and corner; then proceed S 21(degrees)47'53" W a distance of 5991.98' to the POINT OF BEGINNING; from the POINT OF BEGINNING, continue S 21(degrees)47'53" W a distance of 1143.40' to a point and corner on the northerly right-of-way line of the Union Pacific Railway Company; then proceed N 51(degrees)00'40" W along the northerly right-of-way line a distance of 240.80' to a point and corner; then proceed along a curve to the right, being 25' east of and parallel to the centerline of a railroad spur, (the curve having a radius of 930.37', a long chord of which bears N 8(degrees)19'39" W - 945.49'), a distance of 991.79' to a point and corner; then proceed N 19(degrees)23'19" E a distance of 254.68' parallel to the centerline of a railroad spur to a point and corner; then proceed S 68(degrees)12'07" E a distance of 715.28' to the POINT OF BEGINNING and containing 15.00 acres. The Cajun II - Cooling Tower - Tract 1, Water Intake - Tract 2, Switchyard - Tract 3, Coal Units 1 & 2 - Tract 4, Coal Unit 3 - Tract 5 and the Cajun II - Common Facilities Property are collectively referred to as "Cajun II Property" and are more particularly shown on a map of survey prepared by Neel-Schaffer, Inc. Brown & Butler, dated September 4, 1996, last revised March 27, 2000, entitled "ALTA/ACSM Land Title Survey of a 2428.6(double dagger) Acre Tract in Sections 31, 32, 86 and 87, T-4-S, R-10-E, and Sections 3, 4, 5, 6, 35, 37 and 38. T-4-S, R-11-E, Pointe Coupee Parish, Louisiana". EX-4.14 24 y57012ex4-14.txt ASSIGNMENT AND SECURITY AGREEMENT 1 Exhibit 4.14 ASSIGNMENT AND SECURITY AGREEMENT Dated as of March 30, 2000 by NRG POWER MARKETING INC. to THE CHASE MANHATTAN BANK, as Collateral Agent 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS; RULES OF INTERPRETATION .................. 2 SECTION 1.1. Definitions .......................................... 2 SECTION 1.2. Rules of Interpretation .............................. 3 ARTICLE II ASSIGNMENT AND GRANT OF SECURITY INTERESTS ............... 3 SECTION 2.1. Assignment and Grant of Security Interest ............ 3 SECTION 2.2. Security Interest Absolute ........................... 5 SECTION 2.3. Power of Attorney .................................... 6 SECTION 2.4. Inspection and Verification .......................... 8 ARTICLE III GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS ............ 8 SECTION 3.1. Title and Authority .................................. 9 SECTION 3.2. Validity, Perfection and Priority of Lien ............ 9 SECTION 3.3. No Liens; Other Financing Statements ................. 9 SECTION 3.4. Chief Executive Office; Name; Records ................ 10 SECTION 3.5. Additional Statements and Schedules .................. 11 SECTION 3.6. Further Actions ...................................... 11 ARTICLE IV CASH PROCEEDS OF COLLATERAL ....................... 11 ARTICLE V SPECIAL PROVISIONS CONCERNING ASSIGNED REVENUES ............................ 12 SECTION 5.1. Additional Representations and Warranties ............ 12 SECTION 5.2. Maintenance of Records; Legending of Records ......... 12 SECTION 5.3. Modification of Terms; No Payment to Grantor ......... 13 SECTION 5.4. Collection ........................................... 13
i 3 SECTION 5.5. Instruments .......................................... 13 ARTICLE VI DUTY OF CARE OF COLLATERAL AGENT .................... 13 SECTION 6.1. Collateral Agent's Duties; Reasonable Care ........... 13 SECTION 6.2. Further Protection ................................... 14 ARTICLE VII REMEDIES UPON OCCURRENCE OF A TRIGGER EVENT ............... 14 SECTION 7.1. Remedies; Obtaining the Power Marketing Security Agreement Collateral upon Trigger Event .............. 14 SECTION 7.2. Remedies; Disposition of the Power Marketing Security Agreement Collateral ........................ 15 SECTION 7.3. Waiver ............................................... 16 SECTION 7.4. Application of Proceeds; Grantor Liable for Deficiency ........................................... 17 SECTION 7.5. No Waiver; Remedies Cumulative ....................... 17 SECTION 7.6. Discontinuance of Proceedings ........................ 18 ARTICLE VIII MISCELLANEOUS ............................ 18 SECTION 8.1. Notices .............................................. 18 SECTION 8.2. Amendment ............................................ 18 SECTION 8.3. Successors and Assigns ............................... 19 SECTION 8.4. Survival ............................................. 19 SECTION 8.5. Headings Descriptive ................................. 19 SECTION 8.6. Severability ......................................... 19 SECTION 8.7. Grantor's Duties ..................................... 19 SECTION 8.8. Termination; Release ................................. 19 SECTION 8.9. Reinstatement ........................................ 20 SECTION 8.10. Counterparts ......................................... 20 SECTION 8.11. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial ................................. 20 SECTION 8.12. Authority of Collateral Agent ........................ 21 SECTION 8.13. Conflict with Intercreditor Agreement ................ 22 SECTION 8.14. Indemnities and Expenses ............................. 22 SECTION 8.15. Entire Agreement ..................................... 22 SECTION 8.16. Independent Security ................................. 22
ii 4 SECTION 8.17. Third Party Beneficiaries ........................... 23 SECTION 8.18. Limitation of Liability ............................ 23 SECTION 8.19. Merger of Collateral Agent ......................... 23
Schedule I - Filing Offices iii 5 ASSIGNMENT AND SECURITY AGREEMENT ASSIGNMENT AND SECURITY AGREEMENT, dated as of March 30, 2000 (this "Agreement"), made by NRG Power Marketing, Inc., a Delaware corporation (the "Grantor"), in favor of The Chase Manhattan Bank, as collateral agent (together with its successors in such capacity, the "Collateral Agent") for the benefit of the Secured Parties. W I T N E S S E T H: WHEREAS, pursuant to the Acquisition Agreement, the Subsidiary Guarantor, a wholly owned subsidiary of the Issuer, is acquiring the Project from Cajun; and WHEREAS, the Issuer has simultaneously with the execution and delivery of this Agreement issued and sold the Initial Bonds pursuant to the Indenture; and WHEREAS, payments of the principal of, premium (if any), interest on and any other amounts due with respect to the Initial Bonds will be serviced by repayment of the Guarantor Loan and guaranteed (subject to certain limitations) by the Subsidiary Guarantor; and WHEREAS, the Working Capital Facility Banks, the Working Capital Facility Agent and the Issuer are parties to the Working Capital Facility providing, subject to the terms and conditions thereof, for the making of loans to the Issuer for working capital purposes; and WHEREAS, the Grantor is an Affiliate of the Issuer and Subsidiary Guarantor and anticipates benefitting directly and indirectly from the issuance and sale of the Initial Bonds and the entry by the Issuer into the Working Capital Facility and therefore, is willing to secure the obligations of the Issuer and the Subsidiary Guarantor under the Finance Documents by entering into this Agreement with the Collateral Agent, pursuant to which the Collateral Agent, acting on behalf of the Secured Parties, will obtain a continuing Lien on and perfected security interest in, the Power Marketing Security Agreement Collateral. NOW THEREFORE, in consideration of the Secured Parties entering into the Finance Documents and to induce the Secured Parties to release the proceeds of the issuance and sale of the Initial Bonds, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Grantor hereby agrees with the Collateral Agent as follows: 6 ARTICLE I DEFINITIONS; RULES OF INTERPRETATION SECTION 1.1. Definitions. (a) For all purposes of this Agreement, capitalized terms used but not otherwise defined herein shall have the meanings set forth in Appendix A to the Trust Indenture, dated as of March 30, 2000, among NRG South Central Generating LLC, Louisiana Generating LLC and The Chase Manhattan Bank, as Bond Trustee (the "Indenture"). (b) The following terms shall have the following respective meanings unless the context otherwise requires. The definitions shall be equally applicable to the singular and plural forms of the terms defined. Commercial terms used herein but not defined herein or in Appendix A to the Indenture shall have the meanings specified for such terms in the UCC as in effect in the State of New York. "Agreement" shall have the meaning specified in the preamble hereto. "Assigned Revenues" have the meaning specified in Section 2.1(a). "Financing Statements" shall mean all financing statements, recordings, filings or other instruments of registration necessary and appropriate to perfect a security interest or lien by filing in any appropriate filing or recording office in accordance with the UCC as enacted in any and all relevant jurisdictions or any other relevant applicable law. "Grantor" shall have the meaning specified in the preamble hereto. "Instruments" shall mean "instruments" as such term is defined in the UCC as in effect in any relevant jurisdiction. "Power Marketing Security Agreement Collateral" shall have the meaning specified in Section 2.1(a). "Proceeds" shall mean "proceeds" as such term is defined in the UCC as in effect in any relevant jurisdiction or under other relevant law and, in any event, shall include, but shall not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or the Grantor from time to time, and claims for insurance, indemnity, warranty or guaranty effected or held for the benefit of the Grantor with 2 7 respect to any of the Power Marketing Security Agreement Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to the Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Power Marketing Security Agreement Collateral by any Governmental Authority (or any person acting under color of Governmental Authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Power Marketing Security Agreement Collateral. "Security Interest" shall have the meaning specified in Section 2.1(a). "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided that, if by reason of mandatory provisions of law, the perfection or priority of the security interest granted hereunder in any Power Marketing Security Agreement Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of New York, the term "UCC" shall mean the Uniform Commercial Code as in effect in such other jurisdiction solely for the purposes of the provisions hereof relating to such perfection or priority. SECTION 1.2. Rules of Interpretation. Except as otherwise expressly provided herein, the rules of interpretation set forth in Section 1.1 to the Indenture shall apply to this Agreement. ARTICLE II ASSIGNMENT AND GRANT OF SECURITY INTERESTS SECTION 2.1. Assignment and Grant of Security Interest. (a) As security for the prompt and complete payment and performance when due of all of the Secured Obligations, the Grantor hereby grants to the Collateral Agent, for itself and for the ratable benefit of all the Secured Parties, a continuing security interest of first priority (the "Security Interest") in all of the Grantor's right, title and interest in, to and under the following, in each case, whether now owned or existing or hereafter acquired, arising or created, and wherever located: (i) all revenues from all current and future power sales agreements, contracts and documents entered into by the Grantor associated with the Issuer, the Subsidiary Guarantor and any Additional Guarantor, as each such agreement, contract and document may be amended, supplemented, modified or replaced and in effect from time to time (said revenues collectively, the "Assigned Revenues"), including, without limitation: (i) all rights of the Grantor to receive moneys due and to become due under or pursuant to the Assigned Revenues and (ii) all rights of the Grantor to receive proceeds 3 8 of any insurance, bond, indemnity, warranty or guaranty with respect to the Assigned Revenues; and (ii) all Proceeds, rents, profits, income, benefits, substitutions and replacements of, and to any of the property of the Grantor described in the preceding clauses of this Section 2.1 (including, without limitation, all causes of action, claims and warranties now or hereafter held by the Grantor in respect of any of the items listed above) and, to the extent related to any property described in said clauses or such proceeds, all books, correspondence, credit files, records, invoices and other papers, including without limitation all tapes, cards, computer runs and other papers and documents in the possession or under the control of the Grantor or any computer bureau or service company from time to time acting for the Grantor (all of the above collectively, the "Power Marketing Security Agreement Collateral"). (b) The security interest granted to the Collateral Agent pursuant to this Agreement extends to all Power Marketing Security Agreement Collateral of the kind which is the subject of this Agreement which the Grantor may acquire at any time during the continuation of this Agreement, whether such Power Marketing Security Agreement Collateral is in transit or in the Grantor's, the Collateral Agent's, any other Secured Party's or any other Person's constructive, actual or exclusive occupancy or possession until the release thereof pursuant to Section 8.8. (c) The assignments and security interests under this Agreement granted to the Collateral Agent shall not relieve the Grantor from the performance of any term, covenant, condition or agreement on the Grantor's part to be performed or observed under or in respect of any of the Power Marketing Security Agreement Collateral pledged by it hereunder or from any liability to any Person under or in respect of any of such Power Marketing Security Agreement Collateral or impose any obligation on the Collateral Agent to perform or observe any such term, covenant, condition or agreement on the Grantor's part to be so performed or observed or impose any liability on the Collateral Agent for any act or omission on the part of the Grantor or for any breach of any representation or warranty on the part of the Grantor contained in this Agreement or any other Project Document, or in respect of the Power Marketing Security Agreement Collateral pledged by it hereunder or made in connection herewith or therewith. The obligations of the Grantor contained in this paragraph shall survive the termination of this Agreement and the discharge of the Grantor's other obligations hereunder. (d) This Agreement shall create a continuing security interest in the Power Marketing Security Agreement Collateral until the release thereof pursuant to Section 8.8. 4 9 SECTION 2.2. Security Interest Absolute. The parties hereto shall not challenge or question in any proceeding the validity or enforceability of this Agreement as a whole or any term or provision contained herein or the validity of any Lien or Financing Statement in favor of the Collateral Agent. All rights of the Collateral Agent and the other Secured Parties and all security interests hereunder shall, to the fullest extent permitted by law, be absolute and unconditional irrespective of: (a) any invalidity, irregularity or unenforceability of any Finance Document or any other agreement or instrument relating thereto, or any amendment, change or modification of any of the Finance Documents; (b) any impairment, modification, change, exchange, release or subordination of or limitation on, any liability to, or stay of actions or lien enforcement proceedings against, the Grantor, its property or its estate in bankruptcy resulting from any bankruptcy, arrangement, readjustment, composition, liquidation, rehabilitation or similar proceeding against or otherwise involving or affecting the Grantor; (c) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from any Finance Document; (d) any change in the time, order or method of attachment or perfection of Liens or the filing or recording of Financing Statements or other Security Documents and irrespective of anything contained in any filing or agreement to which the Collateral Agent or any other Secured Party may now or hereafter be a party; (e) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of, or consent to departure from, any guaranty for all or any of the Secured Obligations; or (f) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Grantor or a third party pledgor, except as otherwise provided herein. SECTION 2.3. Power of Attorney. (a) The Grantor hereby irrevocably constitutes and appoints the Collateral Agent, on behalf of itself and the other Secured Parties, or any Person, officer or agent thereof whom the Collateral Agent may designate, as the Grantor's true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Grantor and in the name of the Grantor or in its own name, at the Grantor's 5 10 cost and expense, to exercise at any time in the Collateral Agent's discretion all or any of the following powers, which, being coupled with an interest, shall be irrevocable until the Debt Termination Date (as defined in the Intercreditor Agreement): (i) to receive, take, endorse, sign, assign and deliver, all in the Collateral Agent's name or the Grantor's name, any and all checks, notes, drafts, and other documents or instruments relating to the Power Marketing Security Agreement Collateral; (ii) to receive, open and dispose of all mail addressed to the Grantor and to notify postal authorities to change the address for delivery thereof to such address as the Collateral Agent designates; (iii) to request from account debtors of the Grantor, in the Grantor's name or in the name of the Collateral Agent or the Collateral Agent's designee, information concerning the Power Marketing Security Agreement Collateral and the amounts owing thereon; (iv) to transmit to account debtors indebted on the Power Marketing Security Agreement Collateral notice of the Collateral Agent's interest therein; (v) to notify account debtors indebted on the Power Marketing Security Agreement Collateral to make payment directly to the Collateral Agent; (vi) to take or bring, in the Grantor's name or in the Collateral Agent's name on behalf of the Secured Parties, all steps, actions, suits or proceedings deemed by the Collateral Agent to be necessary or desirable to enforce or effect collection of any amounts owing on the Power Marketing Security Agreement Collateral; (vii) to the fullest extent permitted by law, to prepare, sign and file any Financing Statements or file this Agreement in the name of the Grantor as debtor; (viii) if the Grantor shall have failed to do so in a timely manner, to take or cause to be taken all actions necessary to perform or comply, or cause performance or compliance with, the covenants of the Grantor contained in any Transaction Document; (ix) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, 6 11 notices and other documents in connection with any of the Power Marketing Security Agreement Collateral; (x) to defend any suit, action or proceeding brought against the Grantor with respect to any Power Marketing Security Agreement Collateral; (xi) to settle, compromise or adjust any suit, action or proceeding described in the preceding clause (x) and, in connection therewith, to give such discharges or releases as the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, may deem appropriate; (xii) generally, to sell or transfer and make any agreement with respect to or otherwise deal with any of the Power Marketing Security Agreement Collateral as fully and completely as though the Secured Parties were the absolute owner thereof for all purposes, and to do, at the Secured Parties' option and the Grantor's expense, at any time, or from time to time, all acts and things which the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, deem necessary to protect, preserve or realize upon the Power Marketing Security Agreement Collateral and the Liens of the Secured Parties thereon; (xiii) to execute, in connection with any foreclosure, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Power Marketing Security Agreement Collateral; (xiv) to exercise the Grantor's rights under any power sale agreement, contract or document under which the Assigned Revenues arise; and (xv) to exercise any and all other rights, remedies, powers and privileges of the Grantor with respect to the Power Marketing Security Agreement Collateral; provided, however, that the Collateral Agent shall not exercise its powers under clauses (i), (ii), (iii), (iv), (v), (vi),(ix), (x), (xi), (xii), (xiii), (xiv) or (xv) unless a Trigger Event of which the Collateral Agent has actual knowledge has occurred and is continuing. (b) The Grantor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. The Grantor hereby acknowledges and agrees that in acting pursuant to this power-of-attorney the Collateral Agent shall be acting in its own interest and in the interest of the other Secured Parties and the Grantor acknowledges and agrees that the Collateral Agent and the other Secured Parties shall have no fiduciary duties to the Grantor and 7 12 the Grantor hereby waives any claims to the rights of a beneficiary of a fiduciary relationship hereunder. SECTION 2.4. Inspection and Verification. The Collateral Agent and such Persons as the Collateral Agent may reasonably designate shall have the right, no more often than once each year, unless an Event of Default has occurred and is continuing, and, if an Event of Default has occurred and is continuing, at any reasonable time or times, in each case upon ten (10) days' notice and at the Grantor's own cost and expense, to inspect the Power Marketing Security Agreement Collateral, all records related thereto (and to make extracts and copies from such records) and the premises upon which any of the Power Marketing Security Agreement Collateral is located, to discuss the Grantor's affairs with the appropriate officers of the Grantor and its independent accountants and to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Power Marketing Security Agreement Collateral, including, in the case of Power Marketing Security Agreement Collateral in the possession of any third party, by contacting account debtors or the third party possessing such Power Marketing Security Agreement Collateral for the purpose of making such a verification. The Collateral Agent shall have the absolute right to share any information it gains from such inspection or verification with any other Secured Party. ARTICLE III GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS The Grantor hereby represents, warrants and covenants to the Collateral Agent and the other Secured Parties, which representations, warranties and covenants shall survive execution and delivery of this Agreement and the making and repayment of the Secured Obligations, subject to the provisions of Section 8.9, as follows: SECTION 3.1. Title and Authority. The Grantor has good and valid rights in and title to the Power Marketing Security Agreement Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Collateral Agent the Security Interest in such Power Marketing Security Agreement Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any Person other than any consent or approval that has been obtained and is in full force and effect. 8 13 SECTION 3.2. Validity, Perfection and Priority of Lien. (a) This Agreement creates in favor of the Collateral Agent, for itself and for the ratable benefit of the Secured Parties, a legal, valid and enforceable security interest in the Power Marketing Security Agreement Collateral and the proceeds thereof owned by the Grantor, and when Financing Statements in appropriate form are filed in the offices specified on Schedule I hereto, the Lien created under this Agreement will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Grantor in such Power Marketing Security Agreement Collateral and the proceeds thereof, in each case prior and superior in right to any other Person, subject only to Permitted Liens. (b) (i) Fully executed Financing Statements or other appropriate filings, recordings or registrations containing a description of the Power Marketing Security Agreement Collateral have been delivered to the Collateral Agent for filing in each governmental, municipal or other office specified in Schedule I, which are all the filings, recordings and registrations that are necessary to publish notice of and protect the validity of and to establish a valid and perfected security interest in favor of the Collateral Agent (for the benefit of itself and for the ratable benefit of the Secured Parties) in respect of all Power Marketing Security Agreement Collateral in which the Security Interest may be perfected by filing, recording or registration in the United States (or any political subdivision thereof) and its territories and possessions, and no further or subsequent filing, refiling, recording, rerecording, registration or reregistration is necessary in any such jurisdiction, except as provided under Applicable Law with respect to the filing of continuation statements. The Grantor will pay any applicable filing fees and related expenses. The Grantor hereby irrevocably authorizes the Collateral Agent to file any such Financing Statements without its signature as the debtor. SECTION 3.3. No Liens; Other Financing Statements. (a) Except for the Lien granted to the Collateral Agent for itself and the ratable benefit of the Secured Parties hereunder and Permitted Liens, the Grantor is, and as to all Power Marketing Security Agreement Collateral whether now existing or hereafter acquired after the date hereof, the Grantor will and will continue to be the owner of valid and marketable title in and to each item of the Power Marketing Security Agreement Collateral free and clear of any and all Liens other than Permitted Liens and the Grantor shall defend the Power Marketing Security Agreement Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent or any other Secured Party. (b) Other than Financing Statements filed in connection herewith, there is no Financing Statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Power Marketing 9 14 Security Agreement Collateral except (i) Financing Statements filed in connection with Permitted Liens, and (ii) Financing Statements for which proper termination statements have been delivered to the Collateral Agent for filing. The Grantor will not execute or authorize any Financing Statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Power Marketing Security Agreement Collateral to be filed in any public office, except Financing Statements filed or to be filed in respect of and covering the security interests granted hereby to the Collateral Agent by the Grantor and Financing Statements filed in respect of and covering Permitted Liens. SECTION 3.4. Chief Executive Office; Name; Records. (a) The chief executive office and principal place of business of the Grantor is located at 1221 Nicollet Mall, Suite 700, Minneapolis, Minnesota 55403. Except as permitted by the Indenture, the Grantor will not (i) move its chief executive office, or (ii) change its name from, nor carry on business under any name other than "NRG Power Marketing, Inc.," unless it has complied with the requirements of Section 3.4(b). The originals of all documents evidencing all Assigned Revenues of the Grantor, and the only original books of account and records concerning the Power Marketing Security Agreement Collateral are, and will continue to be, kept at, and controlled and directed (including, without limitation, for general accounting purposes) from, such chief executive office, or at such new location for such chief executive office as the Grantor may establish in accordance with Section 3.4(b). (b) The Grantor shall not establish a new location for its chief executive office or change its name or the name under which it presently conducts its business unless (i) it has given to the Collateral Agent not less than thirty (30) days' prior written notice of its intention so to do, clearly describing such new location or specifying such new name, as the case may be, and providing such other information in connection therewith as the Collateral Agent may reasonably request, and (ii) with respect to such new location or such new name, as the case may be, the Grantor shall have taken all action, satisfactory to the Collateral Agent, to maintain the security interest of the Collateral Agent in the Power Marketing Security Agreement Collateral intended to be granted hereby at all times fully perfected and in full force and effect. SECTION 3.5. Additional Statements and Schedules. The Grantor shall execute and deliver to the Collateral Agent, from time to time, for its convenience in maintaining a record of the Power Marketing Security Agreement Collateral, such written statements and schedules as the Collateral Agent may reasonably require, designating, identifying or describing the Power Marketing Security Agreement Collateral. SECTION 3.6. Further Actions. The Grantor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time 10 15 such lists, descriptions and designations of its Power Marketing Security Agreement Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, Financing Statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Power Marketing Security Agreement Collateral and other property or rights covered by the Security Interest hereby granted by the Grantor to perfect, preserve or protect its security interest in the Power Marketing Security Agreement Collateral within thirty (30) days after any request by the Collateral Agent or such earlier date as may be required by applicable law or necessary to preserve or protect the security interests in the Power Marketing Security Agreement Collateral granted by the Grantor pursuant to this Agreement, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement, the granting of the Lien created hereby and the filing of any Financing Statements or other documents in connection herewith. ARTICLE IV CASH PROCEEDS OF COLLATERAL Upon the occurrence and during the continuance of an Event of Default, the Grantor shall deposit the cash proceeds of any of the Power Marketing Security Agreement Collateral required to be delivered to the Collateral Agent pursuant hereto into the Revenue Account. In addition to the foregoing, the Grantor agrees that, at any time after the occurrence and during the continuance of an Event of Default, if the proceeds of any Power Marketing Security Agreement Collateral hereunder shall be received by it, the Grantor shall, upon the request of the Collateral Agent, as promptly as possible deposit such proceeds into the Revenue Account. Until so deposited, all such proceeds shall be held in trust by the Grantor for and as the property of the Collateral Agent and shall not be commingled with any other funds or property of the Grantor. ARTICLE V SPECIAL PROVISIONS CONCERNING ASSIGNED REVENUES SECTION 5.1. Additional Representations and Warranties. As of the time when each of its Assigned Revenues arises, the Grantor shall be deemed to have represented and warranted to the best of its knowledge that such Assigned Revenue and all records, papers and documents relating thereto (if any) are genuine and in all respects what they purport to be, and that all papers and documents (if any) relating thereto (i) will (subject to dispute, return, replacement, settlement or compromise) represent the genuine, legal, valid and binding 11 16 obligation of the account debtor evidencing indebtedness unpaid and owed by such account debtor arising out of the performance of labor or services or the sale and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for purposes other than general accounting purposes), (iii) will (subject to dispute, return, replacement, settlement or compromise) evidence true and valid obligations, enforceable in accordance with their respective terms, not subject to the fulfillment of any contract or condition whatsoever unless set forth in the writing and not subject to any defenses, set-offs or counterclaims or stamp or other taxes, and not subject to any provisions prohibiting the Security Interest granted hereunder, and (iv) will be in compliance and will conform with all Applicable Law. SECTION 5.2. Maintenance of Records; Legending of Records. The Grantor will keep and maintain at its own cost and expense satisfactory and complete records of its Assigned Revenues for at least five (5) years from the date on which the Assigned Revenue comes into existence, including, without limitation, records of all payments received and all credits granted thereon, and the Grantor will make the same available to the Collateral Agent and the other Secured Parties for inspection in accordance with Section 2.4. The Grantor shall, at its own cost and expense, deliver all tangible evidence of its Assigned Revenues (including, without limitation, all documents evidencing the Assigned Revenues) and books and records that the Collateral Agent may request to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by the Grantor) at any reasonable time during normal business hours upon the Collateral Agent's demand. The Grantor shall, at the Collateral Agent's request and at the Grantor's own cost and expense, legend in form and substance satisfactory to the Collateral Agent, the Power Marketing Security Agreement Collateral, as well as books, records and documents of the Grantor evidencing or pertaining to the Power Marketing Security Agreement Collateral, with an appropriate reference to the fact that the items constituting the Power Marketing Security Agreement Collateral have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. SECTION 5.3. Modification of Terms; No Payment to Grantor. The Grantor shall not, other than in the ordinary course of business, rescind or cancel any indebtedness evidenced by any Assigned Revenue or make any adjustment with respect thereto, or extend or renew the same, or compromise or settle any dispute, claim, suit or legal proceeding relating thereto, or sell any Assigned Revenue or interest therein, without the prior written consent of the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein. The Grantor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Assigned Revenues and will do nothing to impair the rights of the Collateral Agent in the Assigned Revenues. 12 17 SECTION 5.4. Collection. The Grantor shall take all commercially reasonable actions to cause to be collected from the account debtors of each of the Assigned Revenues, as and when due (including Assigned Revenues that are delinquent, such Assigned Revenues to be collected in accordance with generally accepted commercial collection procedures), any and all amounts owing under or on account of such Assigned Revenues, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Assigned Revenues. SECTION 5.5. Instruments. If any of the Assigned Revenues becomes evidenced by an Instrument having a face value in excess of $5,000 and a maturity of thirty (30) days or longer, the Grantor shall promptly notify the Collateral Agent thereof in writing, and within ten (10) days of a request by the Collateral Agent therefor, shall deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. Notwithstanding the foregoing, at such time that an Event of Default shall have occurred and be continuing, or at such time as the Grantor shall own or acquire Instruments which in the aggregate exceed $20,000, the Grantor shall deliver all Instruments to the Collateral Agent within ten (10) days, appropriately endorsed to the order of the Collateral Agent as further security hereunder. ARTICLE VI DUTY OF CARE OF COLLATERAL AGENT SECTION 6.1. Collateral Agent's Duties; Reasonable Care. The Collateral Agent shall have the duty to exercise reasonable care in the custody and preservation of any Power Marketing Security Agreement Collateral in its possession, which duty shall be fully satisfied if the Collateral Agent maintains safe custody of such Power Marketing Security Agreement Collateral in accordance with customary banking standards. SECTION 6.2. Further Protection. In acting hereunder, the Collateral Agent shall be entitled to the same rights, indemnities and immunities as afforded to it under the Intercreditor Agreement. ARTICLE VII REMEDIES UPON OCCURRENCE OF A TRIGGER EVENT SECTION 7.1. Remedies; Obtaining the Power Marketing Security Agreement Collateral upon Trigger Event. (a) Upon the occurrence and during the continuance of a Trigger Event, the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as 13 18 otherwise expressly provided herein, shall be entitled to exercise on behalf of itself and the other Secured Parties, all the rights and remedies of a secured party under the UCC as in effect in any relevant jurisdiction and all rights now or hereafter existing under all other Applicable Law to enforce this Agreement and the security interests contained herein, and, in addition, subject to any Applicable Laws then in effect, the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, may, but is under no obligation to, in addition to its other rights and remedies hereunder, including without limitation under Section 7.2 and Section 7.6, and also the rights of the Collateral Agent and the other Secured Parties under any of the Transaction Documents, do any of the following to the fullest extent permitted by applicable law: (i) personally, or by agents, trustees or attorneys, immediately take possession of the Power Marketing Security Agreement Collateral or any part thereof, from the Grantor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Grantor's premises or such other Person's premises where any of the Power Marketing Security Agreement Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of the Grantor; (ii) instruct the obligor or obligors of any agreement, instrument or other obligation (including, without limitation, the Assigned Revenues) constituting the Power Marketing Security Agreement Collateral to make any payment required by the terms of such instrument or agreement directly to the Collateral Agent; and (iii) take possession of the Power Marketing Security Agreement Collateral or any part thereof, by directing the Grantor in writing to turn over the same to the Collateral Agent at its chief executive office or, to the extent such Power Marketing Security Agreement Collateral may be moved, to deliver the same to the Collateral Agent at any other place or places designated by the Collateral Agent, in which event the Grantor shall, at its own expense (A) forthwith turn over the same to the Collateral Agent at one of the places designated by the Collateral Agent, (B) store and keep any Power Marketing Security Agreement Collateral so turned over or delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2 and (C) while the Power Marketing Security Agreement Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain the Power Marketing Security Agreement Collateral in good condition. (b) The Grantor's obligation to turn over or deliver the Power Marketing Security Agreement Collateral as set forth above is of the essence of this Agreement and, 14 19 accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to obtain a decree requiring specific performance by the Grantor of said obligation. (c) When Power Marketing Security Agreement Collateral is in the Collateral Agent's possession, the Grantor shall pay (or reimburse the Collateral Agent on demand for) all reasonable expenses (including the cost of any insurance and payment of taxes or other charges) incurred in the custody, preservation, use or operation of the Power Marketing Security Agreement Collateral, and the obligation to reimburse all such expenses shall be secured hereby. SECTION 7.2. Remedies; Disposition of the Power Marketing Security Agreement Collateral. Any Power Marketing Security Agreement Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 and any other Power Marketing Security Agreement Collateral, whether or not so repossessed by the Collateral Agent, may, to the extent permitted by any contract terms governing such Power Marketing Security Agreement Collateral and to the fullest extent permitted by applicable law, be sold, leased or otherwise disposed of under one or more contracts or as an entirety, whether by public or private sale and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms (whether cash or credit, and in the case of credit, without assumption of future credit risk) as the Collateral Agent may, in compliance with Applicable Law, determine to be commercially reasonable. If any Power Marketing Security Agreement Collateral is sold by the Collateral Agent upon credit or for future delivery, the Collateral Agent shall not be liable for the failure of the purchaser to pay for the same and in such event the Collateral Agent may resell the Power Marketing Security Agreement Collateral. In no event shall the Grantor be credited with any part of the proceeds of sale of any Power Marketing Security Agreement Collateral until payment thereof in cash or cash equivalents has actually been received by the Collateral Agent. Any of the Power Marketing Security Agreement Collateral may be sold, leased or otherwise disposed of, or options or contracts may be entered to do so, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair which the Collateral Agent shall determine to be commercially reasonable. Any such disposition shall be made upon not less than ten (10) days' written notice to the Grantor specifying the time such disposition is to be made and, if such disposition shall be a public sale, specifying the place of such sale. Any such sale may be adjourned by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the extent permitted by Applicable Law, the Collateral Agent or any other Secured Party may itself bid for and become the buyer of the Power Marketing Security 15 20 Agreement Collateral or any item thereof offered for sale at a public auction without accountability to the Grantor. SECTION 7.3. Waiver. (a) EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, THE GRANTOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL IN ACCORDANCE WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE GRANTOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, AND THE GRANTOR HEREBY FURTHER WAIVES: (i) all damages occasioned by such taking of possession except any damages which are finally judicially determined to have been the direct result of the Collateral Agent's gross negligence or wilful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's and the other Secured Parties' rights hereunder; (iii) demand of performance or other demand, notice of intent to demand or accelerate, notice of acceleration, presentment, protest, advertisement or notice of any kind to or upon the Grantor or any other Person; and (iv) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Power Marketing Security Agreement Collateral or any portion thereof, and the Grantor, for itself and all who may claim under it, insofar as it or they may now or hereafter lawfully do so, hereby waives the benefit of such laws. (b) Without limiting the generality of the foregoing, the Grantor hereby: (i) authorizes the Collateral Agent, in its sole discretion and without notice to or demand upon the Grantor and without otherwise affecting the obligations of the Grantor hereunder from time to time, to take and hold other collateral granted to it by any other Person (in addition to the Power Marketing Security Agreement Collateral) for payment of any Secured Obligations, or any part thereof, and to exchange, enforce or release such other collateral or any part thereof, 16 21 and to accept and hold any endorsement or guarantee of payment of the Secured Obligations or any part thereof, and to release or substitute any endorser or guarantor or any other Person granting security for or in any way obligated upon any Secured Obligations, or any part thereof; and (ii) waives and releases any and all right to require the Collateral Agent or the other Secured Parties to collect any of the Secured Obligations from any specific item or items of Power Marketing Security Agreement Collateral or from any other party liable as guarantor or in any other manner in respect of any of the Secured Obligations or from any collateral (other than the Power Marketing Security Agreement Collateral) for any of the Secured Obligations. (c) Any sale of, or the grant of options to purchase, or any other realization upon, any Power Marketing Security Agreement Collateral shall, provided that it is done in accordance with applicable law and this Agreement, operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Grantor therein and thereto, and shall be a perpetual bar both at law and in equity against the Grantor and against any and all Persons claiming or attempting to claim the Power Marketing Security Agreement Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the Grantor. SECTION 7.4. Application of Proceeds; Grantor Liable for Deficiency. The Collateral Agent shall apply the net proceeds of any collection, sale or other realization of all or any part of the Power Marketing Security Agreement Collateral pursuant to this Agreement, and any other cash at the time of such collection, sale or other realization held by the Collateral Agent under this Agreement, in accordance with Article V of the Intercreditor Agreement. SECTION 7.5. No Waiver; Remedies Cumulative. No failure or delay on the part of any Secured Party in exercising any right, remedy, power or privilege hereunder and no course of dealing between the Grantor and any Secured Party shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. A waiver by any Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which any Secured Party would otherwise have on any future occasion. The rights and remedies herein expressly provided are cumulative and may be exercised singly or concurrently and as often and in such order as any Secured Party deems expedient and are not exclusive of any rights or remedies which the Secured Parties would otherwise have whether by agreement or now or hereafter existing under Applicable Law. No notice to or demand on the Grantor in any case shall entitle the Grantor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Secured Parties to any other or future action in any circumstances without notice or demand. 17 22 SECTION 7.6. Discontinuance of Proceedings. In case any Secured Party shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to such Secured Party, then, in every such case, subject to the terms of any final non-appealable judgment rendered in any such proceeding, the Grantor, the Secured Parties and each holder of any of the Secured Obligations shall be restored to their former positions and rights hereunder with respect to the Power Marketing Security Agreement Collateral, subject to the Security Interest created under this Agreement, and all rights, remedies and powers of the Secured Parties shall continue as if no such proceeding had been instituted. ARTICLE VIII MISCELLANEOUS SECTION 8.1. Notices. Unless otherwise specifically herein provided, all notices required or permitted under the terms and provisions hereof shall be in writing and any such notice shall become effective if given in accordance with the provisions of Section 12.5 of the Indenture. SECTION 8.2. Amendment. No waiver, amendment, modification or termination of any provision of this Agreement, or consent to any departure by the Grantor therefrom, shall in any event be effective without the prior written consent of the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, and none of the Power Marketing Security Agreement Collateral shall be released without the written consent of the Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 8.3. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Grantor and the Secured Parties, all future holders of the Secured Obligations and their respective successors, transferees and assigns (to the extent such successors, transferees and assigns are permitted under the Finance Documents and the documents regarding additional Permitted Indebtedness), except that the Grantor may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Collateral Agent and in accordance with this Agreement. SECTION 8.4. Survival. All agreements, statements, representations and warranties made by the Grantor herein or in any certificate or other instrument delivered by the Grantor or on its behalf under this Agreement shall be considered to have been relied upon by 18 23 the Secured Parties and shall survive the execution and delivery of this Agreement and the other Finance Documents regardless of any investigation made by any Secured Party or made on their behalf. SECTION 8.5. Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. SECTION 8.6. Severability. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. SECTION 8.7. Grantor's Duties. Anything herein contained to the contrary notwithstanding, the Grantor shall remain liable to perform all of its obligations under or with respect to the Power Marketing Security Agreement Collateral, and the Secured Parties shall not have any obligations or liabilities under or with respect to any Power Marketing Security Agreement Collateral by reason of or arising out of this Agreement, nor shall the Secured Parties be required or obligated in any manner to perform or fulfill any of the obligations of the Grantor under or with respect to any Power Marketing Security Agreement Collateral. SECTION 8.8. Termination; Release. (a) Upon the occurrence of the Debt Termination Date, this Agreement shall terminate (except as provided in Section 8.4), and the Collateral Agent, at the written request and expense of the Grantor, will promptly execute and deliver to the Grantor the proper instruments (including UCC termination statements on form UCC-3) acknowledging the termination of this Agreement, and will duly assign, transfer and deliver to the Grantor (without recourse and without any representation or warranty of any kind) such of the Power Marketing Security Agreement Collateral as may be in the possession of the Collateral Agent and has not theretofore been disposed of or otherwise applied or released. (b) Upon the sale or disposition of any portion of the Power Marketing Security Agreement Collateral permitted pursuant to the terms of the Finance Documents, including, but not limited to, any Permitted Asset Sale, the purchaser of such portion of the Power Marketing Security Agreement Collateral shall, upon such purchase, acquire good title to the Power Marketing Security Agreement Collateral so purchased, free of the security interest created by this Agreement. The Collateral Agent, upon the request, and at the expense, of the Grantor, shall execute and deliver all such documentation necessary to release the security interest created in such Power Marketing Security Agreement Collateral pursuant to this Agreement. 19 24 SECTION 8.9. Reinstatement. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by any Secured Party in respect of the Secured Obligations is rescinded or must otherwise be restored or returned by such Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Grantor or upon the appointment of any intervenor or conservator of, or trustee or similar official for, the Grantor or any substantial part of its assets, or upon the entry of an order by a bankruptcy court avoiding payment of such amount, or otherwise, all as though such payments had not been made. SECTION 8.10. Counterparts. This Agreement may be executed in any number of counterparts, each 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. SECTION 8.11 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) THIS AGREEMENT IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES AND SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). (b) Any legal action or proceeding against the Grantor with respect to this Agreement may be brought in the courts of the State of New York in the County of New York or of the United States for the Southern District of New York and, by execution and delivery of this Agreement, the Grantor hereby irrevocably submits and accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Grantor agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon the Grantor, and may be enforced in any other jurisdiction, by a suit upon such judgment, a certified copy of which shall be conclusive evidence of the judgment. The Grantor hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 111 Eighth Avenue, New York, N.Y. 10011, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notice and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such agent, the Grantor agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Collateral Agent. The Grantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, 20 25 postage prepaid, to the Grantor at its address referred to in Section 12.5(a) of the Indenture, such service to become effective thirty (30) days after such mailing. Nothing herein shall affect the right of the Collateral Agent or any other Person to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Grantor in any other jurisdiction. (c) The Grantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. (d) WITH REGARD TO THIS AGREEMENT, EACH PARTY HERETO HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY. SECTION 8.12. Authority of Collateral Agent. The Grantor acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Collateral Agent and the other Secured Parties, be governed by this Agreement, the other Finance Documents and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Grantor, the Collateral Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and the Grantor shall not be under any obligation, or entitlement, to make any inquiry respecting such authority. SECTION 8.13. Conflict with Intercreditor Agreement. In case of a conflict between any provision of this Agreement and any provision of the Intercreditor Agreement, the provisions of the Intercreditor Agreement shall control. No such conflict shall be deemed to exist merely because this Agreement imposes greater obligations on the Grantor than the Intercreditor Agreement. SECTION 8.14. Indemnities and Expenses. The obligation of the Grantor to pay the costs and expenses of, and to indemnify, defend and hold harmless, the Collateral Agent, its agents, officers, directors and representatives and the other Secured Parties under and in connection with this Agreement shall be as provided in Section 2.4 of the Intercreditor Agreement as in effect as of the date hereof. No amendment to such Section 2.4 or termination of the Intercreditor Agreement shall affect the provisions of this Section 9.16 unless such 21 26 amendment or termination shall have been consented to by the parties to this Agreement in accordance with the provisions hereof and of the other Finance Documents. SECTION 8.15. Entire Agreement. This Agreement, together with any other agreement executed in connection herewith, is intended by the parties as a final expression of their agreement as to the matters covered hereby and is intended as a complete and exclusive statement of the terms and conditions thereof. SECTION 8.16. Independent Security. The security provided for in this Agreement shall be in addition to and shall be independent of every other security which the Collateral Agent or the other Secured Parties may at any time hold for any of the Secured Obligations hereby secured, whether or not under the Security Documents. The execution of any other Security Document shall not modify or supersede the security interest or any rights or obligations contained in this Agreement and shall not in any way affect, impair or invalidate the effectiveness and validity of this Agreement or any term or condition hereof. The Grantor hereby waives its right to plead or claim in any court that the execution of any other Security Document is a cause for extinguishing, invalidating, impairing or modifying the effectiveness and validity of this Agreement or any term or condition contained herein. The Collateral Agent shall be at liberty to accept further security from the Grantor or from any third party and/or release such security without notifying the Grantor and without affecting in any way the obligations of the Grantor under the Security Documents or the other Finance Documents. The Collateral Agent, acting pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, shall determine if any security conferred upon the Collateral Agent and the other Secured Parties under the Security Documents shall be enforced by the Collateral Agent, as well as the sequence of securities to be so enforced. SECTION 8.17. Third Party Beneficiaries. The agreements of the parties hereto are intended to benefit the Secured Parties and their respective successors and assigns. SECTION 8.18. Limitation of Liability. The provisions of Section 12.11 of the Indenture shall apply to this Agreement. SECTION 8.19. Merger of Collateral Agent. Any corporation into which the Collateral Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Collateral Agent shall be a party, or any corporation succeeding to the business of the Collateral Agent shall be the successor of the Collateral Agent hereunder without the execution or filing of any paper with any party hereto or any further act on the part of any of the parties hereto except 22 27 where an instrument of transfer or assignment is required by law to effect such succession, anything herein to the contrary notwithstanding. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 23 28 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their duly authorized officers as of the date first above written. NRG POWER MARKETING INC. as Grantor By: /s/ Craig A. Mataczynski Name: Craig A. Mataczynski Title: President THE CHASE MANHATTAN BANK, as Collateral Agent By: /s/ Annette M. Marsula Name: Annette M. Marsula Title: Vice President 29 Schedule I to Assignment and Security Agreement Filing Offices Office of the Secretary of State of the State of Minnesota Sch. I - 1 EX-4.15 25 y57012ex4-15.txt PLEDGE AND SECURITY AGREEMENT 1 Exhibit 4.15 ================================================================================ PLEDGE AND SECURITY AGREEMENT Dated as of March 30, 2000 by NRG SOUTH CENTRAL GENERATING LLC as Pledgor to THE CHASE MANHATTAN BANK as Collateral Agent ================================================================================ 2 TABLE OF CONTENTS
Page ---- RECITALS ...............................................................................1 AGREEMENT ..............................................................................1 ARTICLE 1 DEFINED TERMS; RULES OF INTERPRETATION Section 1.1 Defined Terms ..............................................................2 Section 1.2 Rules of Interpretation ....................................................3 ARTICLE 2 PLEDGE Section 2.1 Pledged Collateral .........................................................3 Section 2.2 Delivery of Certificates and Instruments ...................................4 Section 2.3 Pledgor's Rights ...........................................................5 Section 2.4 Secured Parties Not Liable .................................................6 Section 2.5 Attorney-in-Fact ...........................................................7 Section 2.6 Collateral Agent May Perform ...............................................7 Section 2.7 Reasonable Care ............................................................7 Section 2.8 Security Interest Absolute .................................................8 Section 2.9 Effective as a Financing Statement .........................................8 ARTICLE 3 REPRESENTATIONS AND WARRANTIES Section 3.1 Necessary Filings ..........................................................9 Section 3.2 No Liens ...................................................................9 Section 3.3 Other Financing Statements .................................................9 Section 3.4 Chief Executive Office .....................................................9 Section 3.5 Consents, etc. .............................................................9
i 3 ARTICLE 4 COVENANTS Section 4.1 Sale of Pledged Collateral ................................................10 Section 4.2 No Other Liens ............................................................10 Section 4.3 Chief Executive Office ....................................................10 Section 4.4 Supplements; Further Assurances, etc ......................................10 Section 4.5 Amendment of Operating Agreement ..........................................10 Section 4.6 Certificates and Instruments ..............................................11 Section 4.7 Financing Statements ......................................................11 Section 4.8 Records; Statements and Schedules .........................................11 Section 4.9 Improper Distributions ....................................................12 Section 4.10 Bankruptcy ...............................................................12 ARTICLE 5 EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT Section 5.1 Remedies Generally ........................................................12 Section 5.2 Sale of Pledged Collateral ................................................12 Section 5.3 Purchase of Pledged Collateral ............................................14 Section 5.4 Application of Proceeds ...................................................14 ARTICLE 6 MISCELLANEOUS PROVISIONS Section 6.1 Notices ...................................................................14 Section 6.2 Continuing Security Interest ..............................................15 Section 6.3 Release ...................................................................15 Section 6.4 Reinstatement .............................................................15 Section 6.5 Independent Security ......................................................15 Section 6.6 Amendments ................................................................16 Section 6.7 Successors and Assigns ....................................................16 Section 6.8 Third Party Beneficiaries .................................................16 Section 6.9 Conflict with Indenture ...................................................16 Section 6.10 Survival .................................................................17 Section 6.11 No Waiver; Remedies Cumulative ...........................................17 Section 6.12 Counterparts .............................................................17 Section 6.13 Headings Descriptive .....................................................17 Section 6.14 Severability .............................................................17 Section 6.15 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial ..........17
ii 4 Section 6.16 Entire Agreement .........................................................19 Section 6.17 Independent Obligations ..................................................19 Section 6.18 Limitation of Liability ..................................................19
iii 5 PLEDGE AND SECURITY AGREEMENT This PLEDGE AND SECURITY AGREEMENT (this "Agreement"), dated as of March 30, 2000, is made by NRG SOUTH CENTRAL GENERATING LLC, a Delaware limited liability company (the "Pledgor") to THE CHASE MANHATTAN BANK, as collateral agent (together with its successors in such capacity, the "Collateral Agent") for the benefit of the Secured Parties. RECITALS WHEREAS, the Subsidiary Guarantor is acquiring the Project from Cajun in the Acquisition; and WHEREAS, in order to, among other things, fund the Acquisition of the Project and to pay financing and other fees, expenses and costs associated with the Acquisition, the Pledgor has determined to issue Bonds pursuant to the Indenture initially in the aggregate principal amount of $800,000,000; and WHEREAS, the Initial Bonds will be issued pursuant to the Indenture, of even date herewith, between the Pledgor, the Subsidiary Guarantor and the Bond Trustee; and WHEREAS, the Pledgor, the Subsidiary Guarantor, the Members, the Collateral Agent, and the Depositary Bank are entering into the other Security Documents, pursuant to which the Collateral Agent, acting on behalf of the Secured Parties, will obtain a continuing Lien on and perfected Security Interest in the Collateral; and WHEREAS, the Pledgor, the Subsidiary Guarantor, the Bond Trustee, the Depositary Bank, the Working Capital Agent and the Collateral Agent have entered into the Intercreditor Agreement; and WHEREAS, as additional security for the Secured Obligations, the Pledgor desires to grant to the Collateral Agent a Lien on and security interest in, the Pledged Collateral. 6 AGREEMENT NOW THEREFORE, in consideration of the Secured Parties entering into the Finance Documents and to induce the Secured Parties to release the proceeds of the issuance and sale of the Initial Bonds, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Pledgor hereby agrees with the Collateral Agent as follows: ARTICLE 1 DEFINED TERMS; RULES OF INTERPRETATION Section 1.1 Defined Terms. (a) Unless otherwise defined herein, terms defined in Appendix A to the Trust Indenture, dated as of March 30, 2000, among the Pledgor, Louisiana Generating LLC and The Chase Manhattan Bank as Bond Trustee (the "Indenture") shall have such defined meanings when used herein. (b) The following terms shall have the following respective meanings: "Bankruptcy Event" shall mean, for any Person: (a) such Person shall (i) apply for or authorize or approve or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or all or a substantial part of its property, (ii) admit in writing its inability or be generally unable to pay its debts as such debts become due, (iii) make a general assignment for the benefit of its creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code, (v) file a petition seeking to take advantage of any other Debtor Relief Law, (vi) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law or (vii) take any action for the purpose of effecting any of the foregoing including, without limitation, commencing a shareholder vote in connection with any of the foregoing; or (b) a proceeding or case shall be commenced without the application or consent of such Person in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution, winding-up or the composition or readjustment of debts or (ii) the appointment of a trustee, receiver, custodian, 2 7 liquidator or the like of such Person or all or a substantial part of its property under any Debtor Relief Law and such proceeding or case shall continue undismissed, or any order, judgment or decree approving any of the foregoing shall be entered and continue unstayed and in effect, for a period of sixty (60) or more consecutive days, or any order for relief against such Person shall be entered in any involuntary case under the Federal Bankruptcy Code or any other Debtor Relief Law. "Financing Statements" shall mean all financing statements, recordings, filings or other instruments of registration necessary and appropriate to perfect a security interest or Lien by filing in any appropriate filing or recording office in accordance with the UCC as enacted in any and all relevant jurisdictions or any other relevant applicable law. "Membership Interests" shall have the meaning ascribed thereto in Section 2.1(a)(i). "Operating Agreement" shall mean the Third Amended and Restated Limited Liability Company Agreement of Louisiana Generating LLC, dated as of March 22, 2000, by the Pledgor. "Pledged Collateral" shall have the meaning ascribed thereto in Section 2.1(a). "Securities Act" shall have the meaning ascribed thereto in Section 5.2(b). Section 1.2 Rules of Interpretation. Except as otherwise expressly provided herein, the rules of interpretation set forth in Section 1.1 to the Indenture shall apply to this Agreement. ARTICLE 2 PLEDGE Section 2.1 Pledged Collateral. (a) As collateral security for the prompt and complete payment and performance when due, whether at stated maturity, by acceleration or otherwise (including the payment of amounts which would become due but for the operation of the automatic stay under Section 362(a) of the U.S. Bankruptcy Code, 11 U.S.C. Section 362(a)), of all of the Secured Obligations, whether 3 8 now existing or hereafter arising and howsoever evidenced, the Pledgor hereby pledges, grants, assigns, hypothecates, transfers and delivers to the Collateral Agent, for its benefit and the ratable benefit of the other Secured Parties, a first priority security interest in the following, whether now existing or hereafter from time to time acquired (collectively, the "Pledged Collateral"): (i) all of the Pledgor's membership interests in the Subsidiary Guarantor (the "Membership Interests") and all of the Pledgor's rights to acquire membership interests in the Subsidiary Guarantor in addition to or in exchange or substitution for the Membership Interests; (ii) all of the Pledgor's rights, privileges, authority and powers as a member of the Subsidiary Guarantor under the Operating Agreement; (iii) all certificates or other documents (if any) representing any and all of the foregoing in clauses (i) and (ii), including, without limitation, the certificates listed on Schedule I hereto; (iv) all dividends, distributions, cash, securities, instruments and other property or proceeds of any kind to which the Pledgor may be entitled in its capacity as a member of the Subsidiary Guarantor by way of distribution, return of capital or otherwise; (v) any other claim which the Pledgor now has or may in the future acquire in its capacity as a member of the Subsidiary Guarantor against the Subsidiary Guarantor and its property; and (vi) all proceeds, products and accessions of and to any of the property described in the preceding clauses (i) through (v). (b) As used herein, the term "proceeds" shall be construed in its broadest sense and shall include whatever is received or receivable when any of the Membership Interests, or any proceeds thereof, are sold, collected, exchanged or otherwise disposed of, whether voluntarily or involuntarily, and shall include, without limitation, all rights to payment, including interest and premiums, with respect to any of the Membership Interests or any proceeds thereof. Section 2.2 Delivery of Certificates and Instruments. All certificates or instruments representing or evidencing the Membership Interests shall be delivered 4 9 to and held by or on behalf of the Collateral Agent pursuant hereto and shall be in suitable form for transfer by delivery and shall be accompanied by duly executed instruments of transfer or assignment in blank in the form as attached as Exhibit A hereto, all in form and substance satisfactory to the Collateral Agent. The Collateral Agent shall have the right, at any time following the occurrence and during the continuation of an Event of Default, in its discretion and without notice to the Pledgor, to transfer to or to register in its name or in the name of any of its nominees any or all of the Membership Interests. Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent shall have the right to exchange certificates or instruments representing or evidencing any of the Membership Interests for certificates or instruments of smaller or larger denominations. Section 2.3 Pledgor's Rights. (a) Distributions. Unless a Trigger Event shall have occurred, the Pledgor shall be entitled to receive and retain any and all distributions paid in respect of the Membership Interests (whether in cash or other property) in compliance with the terms of the other Project Documents; provided, however, that any and all (i) distributions paid or payable in respect of the Membership Interests (whether paid in cash, securities or other property) in connection with (A) any partial or total liquidation or dissolution of the Subsidiary Guarantor, (B) any distribution of capital of the Subsidiary Guarantor, (C) any recapitalization or reclassification of the capital of the Subsidiary Guarantor and (D) any reorganization of the Subsidiary Guarantor, and (ii) property (whether cash, securities or other property) paid, payable or otherwise distributed in redemption of, or in exchange for, the property described in clause (i) immediately above, shall be, and shall be forthwith delivered to the Collateral Agent to hold as, Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of the Pledgor, be forthwith delivered to the Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). Upon the occurrence of a Trigger Event, all rights of the Pledgor to receive the distributions which it would otherwise be authorized to receive and retain pursuant to the preceding sentence shall cease, and all such rights shall thereupon become vested in the Collateral Agent which shall 5 10 thereupon have the sole right to receive and hold as Pledged Collateral such distributions. (b) Other Rights. Unless a Trigger Event shall have occurred, the Pledgor shall be entitled to exercise all voting and other rights with respect to the Membership Interests; provided, however, that no vote shall be cast, right exercised or other action taken which would knowingly have a Material Adverse Effect or which would knowingly be materially inconsistent with or knowingly result in any violation of any provision of this Agreement or any other Finance Document unless so required by law. Upon the occurrence of a Trigger Event and upon election by the Collateral Agent, all voting and other rights of the Pledgor with respect to the Membership Interests which the Pledgor would otherwise be entitled to exercise pursuant to the terms of this Agreement shall cease, and all such rights shall be vested in the Collateral Agent which shall thereupon have the sole right to exercise such rights. (c) Turnover. All distributions and other amounts which are received by the Pledgor contrary to the provisions of this Agreement shall be received in trust for the benefit of the Collateral Agent, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Collateral Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). Section 2.4 Secured Parties Not Liable. Notwithstanding any other provision contained in this Agreement, the Pledgor shall remain liable under the Operating Agreement to observe and perform all of the conditions and obligations to be observed and performed by the Pledgor thereunder. None of the Collateral Agent, any other Secured Party or any of their respective directors, officers, employees, affiliates or agents shall have any obligations or liability under or with respect to any Pledged Collateral by reason of or arising out of this Agreement, except as set forth in Section 9-207 of the UCC as in effect from time to time in the State of New York, or the receipt by the Collateral Agent of any payment relating to any Pledged Collateral, nor shall any of the Collateral Agent, any other Secured Party or any of their respective directors, officers, employees, affiliates or agents be obligated in any manner to (a) perform any of the obligations of the Pledgor under or pursuant to the Operating Agreement or any other agreement to which the Pledgor is a party, (b) make any payment or inquire as to the nature or sufficiency of any payment or performance with respect to any Pledged Collateral, (c) present or file any claim or collect the payment of any amounts or take any action to enforce any performance with respect to the Pledged Collateral or (d) take any other action whatsoever with 6 11 respect to the Pledged Collateral, in each case, other than as required under this Agreement and the other Security Documents. Section 2.5 Attorney-in-Fact. (a) The Pledgor hereby appoints the Collateral Agent, on behalf of the Secured Parties, or any Person, officer or agent whom the Collateral Agent may designate, as its true and lawful attorney-in-fact and proxy, with full irrevocable power and authority in the place and stead of the Pledgor and in the name of the Pledgor or in its own name, at the Pledgor's reasonable cost and expense, from time to time in the Collateral Agent's reasonable discretion to take any action and to execute any instrument which the Collateral Agent may reasonably deem necessary or advisable to enforce its rights under this Agreement, including, without limitation, authority to receive, endorse and collect all instruments made payable to the Pledgor representing any distribution, interest payment or other payment in respect of the Pledged Collateral or any part thereof to be paid over to the Collateral Agent pursuant to Section 2.3(c) and to give full discharge for the same. (b) The Pledgor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof, in each case pursuant to the powers granted hereunder. The Pledgor hereby acknowledges and agrees that the Collateral Agent shall have no fiduciary duties to the Pledgor and the Pledgor hereby waives any claims or rights of a beneficiary of a fiduciary relationship hereunder. Section 2.6 Collateral Agent May Perform. If the Pledgor fails to perform any agreement contained herein after receipt of a written request to do so from the Collateral Agent, the Collateral Agent may (but shall not be obligated to) itself perform, or cause performance of, such agreement, and the reasonable expenses of the Collateral Agent, including the reasonable fees and expenses of its counsel, incurred in connection therewith shall be payable by the Pledgor under Section 5.5; provided that if a Bankruptcy Event shall have occurred with respect to the Pledgor, the written request described in this Section 2.6 shall not be required and shall be deemed to have been delivered upon the failure of the Pledgor to perform such agreement. Section 2.7 Reasonable Care. The Collateral Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment substantially equivalent to that which the Collateral Agent accords its own property of the type of which the Pledged Collateral consists, it being understood that the Collateral Agent shall have no responsibility for (a) ascertaining or taking action with respect to calls, conver- 7 12 sions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Collateral Agent has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral. Section 2.8 Security Interest Absolute. All rights of the Collateral Agent and security interests hereunder, and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of: (a) any lack of validity or enforceability of any of the Finance Documents or any other agreement or instrument relating thereto; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any other amendment or waiver of or any consent to any departure from the Finance Documents or any other agreement or instrument relating thereto; (c) any exchange, release or non-perfection of any other collateral, or any release or amendment or waiver of or consent to any departure from any guaranty, for all or any of the Secured Obligations; or (d) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Pledgor, except as otherwise provided herein. Section 2.9 Effective as a Financing Statement. This Agreement shall also be effective as a Financing Statement covering any Pledged Collateral and may be filed in any appropriate filing or recording office. A carbon, photographic, facsimile or other reproduction of this Agreement or of any Financing Statement relating to this Agreement shall be sufficient as a Financing Statement for any of the purposes referred to in the preceding sentence. ARTICLE 3 REPRESENTATIONS AND WARRANTIES The Pledgor represents and warrants, as of the date of this Agreement and the Closing Date, as follows, which representations and warranties shall survive the execution and delivery of this Agreement and the making and repayment of the Secured Obligations: 8 13 Section 3.1 Necessary Filings. All filings, registrations and recordings necessary or appropriate to create, preserve, protect and perfect the security interest granted to the Collateral Agent hereby in respect of the Pledged Collateral have been accomplished and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Pledged Collateral constitutes (i) a valid and enforceable perfected security interest therein as collateral security for the Secured Obligations to the extent that a security interest may be perfected by filing and/or the other actions specified herein, and (ii) is prior to all other Liens on the Pledged Collateral in existence on the date hereof. Section 3.2 No Liens. The Pledgor is the owner of all of its right, title and interest in the Pledged Collateral pledged by it hereunder free from any Lien or other right, title or interest of any Person other than the Lien created pursuant to this Agreement and other than Permitted Liens. Section 3.3 Other Financing Statements. There is no Financing Statement (or similar statement or instrument of registration under the law of any jurisdiction) executed by the Pledgor, or, to the knowledge of the Pledgor after due inquiry, by any other Person covering or purporting to cover any interest of any kind in the Pledged Collateral hereunder, except Financing Statements filed or to be filed in respect of and covering the security interests granted hereby by the Pledgor. Section 3.4 Chief Executive Office. The chief executive office of the Pledgor and the office where the Pledgor keeps its records concerning the Pledged Collateral is located at: 1221 Nicollet Mall, Suite 700, Minneapolis, Minnesota 55403. Section 3.5 Consents, etc. No consent, authorization, approval or other action by, and no notice to or filing with, any governmental authority is required either (i) for the pledge by the Pledgor of the Pledged Collateral pursuant to this Agreement or for the due execution, delivery or performance of this Agreement by the Pledgor, or (ii) for the exercise by the Collateral Agent of the voting or other rights provided for in this Agreement or of the remedies in respect of the Pledged Collateral pursuant to this Agreement, except as may be required in connection with the disposition of the Pledged Collateral by laws affecting the offering and sale of securities generally. 9 14 ARTICLE 4 COVENANTS The Pledgor hereby covenants and agrees from and after the date of this Agreement until the termination of this Agreement in accordance with the provisions of Section 6.3: Section 4.1 Sale of Pledged Collateral. Except as otherwise permitted by the Finance Documents, the Pledgor shall not sell or otherwise dispose of, or grant any option or warrant with respect to, any of the Pledged Collateral. Section 4.2 No Other Liens. The Pledgor shall not create, incur or permit to exist, shall defend the Pledged Collateral owned by it against and shall take such other action as is reasonably necessary to remove, any Lien or claim on or to the Pledged Collateral, other than the Lien created pursuant to this Agreement, and shall defend the right, title and interest of the Collateral Agent in and to the Pledged Collateral against the claims and demands of all Persons whomsoever. Section 4.3 Chief Executive Office. The Pledgor shall not establish a new location for its chief executive office or change its name until (i) it has given to the Collateral Agent not less than thirty (30) days prior written notice of its intention so to do, clearly describing such new location or specifying such new name, as the case may be, and (ii) with respect to such new location or such new name, as the case may be, it shall have taken all action, satisfactory to the Collateral Agent, to maintain the security interest of the Collateral Agent in the Pledged Collateral intended to be granted hereby at all times fully perfected and in full force and effect. Section 4.4 Supplements; Further Assurances, etc. The Pledgor shall at any time and from time to time, at the reasonable expense of the Pledgor, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. Section 4.5 Amendment of Operating Agreement. Except as otherwise specifically provided in the Finance Documents, the Pledgor shall not, without the prior written consent of the Collateral Agent, acting upon directions from the Secured Parties pursuant to the Intercreditor Agreement, or as otherwise expressly. 10 15 provided herein, agree to or permit (a) the cancellation or termination of the Operating Agreement, except upon the expiration of the stated term thereof, or (b) any amendment, supplement, or modification of, or waiver with respect to any of the provisions of, the Operating Agreement, except to the extent that such amendment, supplement, modification or waiver would not reasonably be expected to result in a Material Adverse Effect. Section 4.6 Certificates and Instruments. The Pledgor shall deliver all certificates or other documents representing the Pledged Collateral to the Collateral Agent with all necessary instruments of transfer or assignment duly indorsed in blank. In the event the Pledgor obtains possession of any other certificates, or other securities or instruments forming a part of the Pledged Collateral, the Pledgor shall promptly deliver same to the Collateral Agent together with all necessary instruments of transfer or assignment duly indorsed in blank. Prior to any such delivery, any Pledged Collateral in the Pledgor's possession shall be held by the Pledgor in trust for the Collateral Agent. Section 4.7 Financing Statements. The Pledgor shall sign and deliver to the Collateral Agent and the other Secured Parties such Financing Statements (or similar statements or instruments of registration under the law of any jurisdiction), as are necessary under applicable law to establish and maintain the security interests contemplated hereunder as valid, enforceable, first priority security interests as provided herein and the other rights and security contemplated herein, all in accordance with the UCC as enacted in any and all relevant jurisdictions or any other applicable law. The Pledgor shall pay any applicable filing fees and related expenses. The Pledgor authorizes the Collateral Agent to file any such Financing Statements (or similar statements or instruments of registration under the law of any jurisdiction) without the signature of the Pledgor. Section 4.8 Records; Statements and Schedules. The Pledgor shall keep and maintain, at its own cost and expense, records of the Pledged Collateral owned by it, including, but not limited to, records of all payments received with respect thereto, and upon reasonable notice, and during normal business hours, the Pledgor shall make the same available to the Collateral Agent for inspection at the Pledgor's chief executive office, at the Pledgor's own cost and expense. The Pledgor shall furnish to the Collateral Agent from time to time statements and schedules further identifying and describing the Pledged Collateral and such other reports in connection with the Pledged Collateral as the Collateral Agent may reasonably request, all in reasonable detail. 11 16 Section 4.9 Improper Distributions. Notwithstanding any other provision contained in this Agreement, the Pledgor shall not accept any distributions, dividends or other payments (or any collateral in lieu thereof) in respect of the Pledged Collateral, except to the extent the same are expressly permitted by the terms of this Agreement and the other Finance Documents. Section 4.10 Bankruptcy. The Pledgor shall not authorize or permit the Subsidiary Guarantor to (a) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to the Subsidiary Guarantor or the Subsidiary Guarantor's debts under any Bankruptcy Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of the Subsidiary Guarantor or any substantial part of the Subsidiary Guarantor's property, (b) consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against the Subsidiary Guarantor or (c) make a general assignment for the benefit of the Subsidiary Guarantor's creditors. The Pledgor shall not commence or join with any other Person (other than the Collateral Agent and the other Secured Parties) in commencing any proceeding against the Subsidiary Guarantor under any Bankruptcy Law now or hereafter in effect in any jurisdiction. ARTICLE 5 EXERCISE OF REMEDIES UPON AN EVENT OF DEFAULT _______The provisions of this Article 5 shall apply only upon the occurrence and during the continuance of an Event of Default. Section 5.1 Remedies Generally. If an Event of Default shall have occurred and be continuing, the Collateral Agent, upon directions from the Secured Parties pursuant the Intercreditor Agreement, or as otherwise expressly provided herein, may exercise, in addition to all other rights and remedies granted in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the UCC in effect from time to time in any relevant jurisdiction and all other rights and remedies available at law or in equity. Section 5.2 Sale of Pledged Collateral. (a) Without limiting the generality of Section 5.1, the Collateral Agent, upon directions from the Secured Parties pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, 12 17 may, with notice as required by applicable law, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale or at any of the Collateral Agent's corporate trust office or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Collateral Agent may reasonably deem commercially reasonable, irrespective of the impact of any such sales on the market price of the Pledged Collateral at any such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of the Pledgor, and the Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Assuming that such sales are made in compliance with federal and state securities laws and the UCC, the Collateral Agent shall incur no liability as a result of the sale of the Pledged Collateral, or any part thereof, at any public or private sale. The Pledgor hereby waives any claims against the Collateral Agent arising by reason of the fact that the price at which any Pledged Collateral may have been sold at such a private sale, if commercially reasonable, was less than the price which might have been obtained at a public sale, even if the Collateral Agent accepts the first offer received and does not offer the Pledged Collateral to more than one offeree. (b) The Pledgor recognizes that the Collateral Agent, upon directions from the Secured Parties pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, may elect to sell all or any part of the Pledged Collateral to one or more purchasers in privately negotiated transactions in which the purchasers will be obligated to agree, among other things, to acquire the Pledged Collateral for their own account, for investment and not with a view to the distribution or resale thereof. The Pledgor acknowledges that any such private sales may be at prices and on terms less favorable than those obtainable through a public sale (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act of 1933, as amended (the "Securities Act")), and the Pledgor and the Collateral Agent agree that such private sales shall be made in a commercially reasonable manner and that the Collateral Agent has no obligation to engage in 13 18 public sales and no obligation to delay sale of any Pledged Collateral to permit the issuer thereof to register the Pledged Collateral for a form of public sale requiring registration under the Securities Act. If the Collateral Agent, upon directions from the Secured Parties pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, determines to exercise its right to sell any or all of the Pledged Collateral, upon written request, the Pledgor shall, from time to time, furnish to the Collateral Agent all such information as the Collateral Agent may request in order to determine the number of shares and other instruments included in the Pledged Collateral which may be sold by the Collateral Agent as exempt transactions under the Securities Act and rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect. Section 5.3 Purchase of Pledged Collateral. The Collateral Agent may be a purchaser of the Pledged Collateral or any part thereof or any right or interest therein at any sale thereof, whether pursuant to foreclosure, power of sale or otherwise hereunder and the Collateral Agent may apply the purchase price to the payment of the Secured Obligations. Any purchaser of all or any part of the Pledged Collateral shall, upon any such purchase, acquire good title to the Pledged Collateral so purchased, free of the security interests created by this Agreement. Section 5.4 Application of Proceeds. The Collateral Agent shall apply any proceeds from time to time held by it and the net proceeds of any collection, recovery, receipt, appropriation, realization or sale with respect to the Pledged Collateral in accordance with Section 5.3 of the Intercreditor Agreement. For avoidance of doubt, it is understood that the Subsidiary Guarantor shall remain liable to the extent of any deficiency between the amount of proceeds of the Pledged Collateral and the aggregated amount of the Secured Obligations in accordance with the Finance Documents. ARTICLE 6 MISCELLANEOUS PROVISIONS Section 6.1 Notices. Unless otherwise specifically herein provided, all notices required or permitted under the terms and provisions hereof shall be in writing and any such notice shall become effective if given in accordance with the provisions of Section 12.5 of the Indenture 14 19 Section 6.2 Continuing Security Interest. This Agreement shall create a continuing security interest in the Pledged Collateral until the release thereof pursuant to Section 6.3. Section 6.3 Release. (a) Upon the indefeasible payment in full of the Secured Obligations in cash or cash equivalents and the termination of all commitments of the Secured Parties under the Finance Documents, the Collateral Agent, upon the written request, and at the expense, of the Pledgor, shall execute and deliver all such documentation necessary to release the security interest created pursuant to this Agreement. (b) Upon the sale or disposition of any portion of the Pledged Collateral permitted pursuant to the terms of the Finance Documents, including, but not limited to, any Permitted Asset Sale, the purchaser of such portion of the Pledged Collateral shall, upon such purchase, acquire good title to the Pledged Collateral so purchased, free of the security interests created by this Agreement. The Collateral Agent, upon the written request, and at the expense, of the Pledgor, shall execute and deliver all such documentation necessary to evidence such release of the security interest created in such Pledged Collateral pursuant to this Agreement. Section 6.4 Reinstatement. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any amount received by the Collateral Agent or any other Secured Party hereunder or pursuant hereto is rescinded or must otherwise be restored or returned by the Collateral Agent or such Secured Party upon a Bankruptcy Event of the Pledgor or the Subsidiary Guarantor or upon the appointment of any intervenor or conservator of, or trustee or similar official for, the Pledgor or the Subsidiary Guarantor or any substantial part of the Pledgor's or the Subsidiary Guarantor's assets, or upon the entry of an order by any court avoiding the payment of such amount, or otherwise, all as though such payments had not been made. Section 6.5 Independent Security. The security provided for in this Agreement shall be in addition to and shall be independent of every other security which the Secured Parties may at any time hold for any of the Secured Obligations hereby secured, whether or not under the Finance Documents. The execution of any other Finance Document shall not modify or supersede the security interest or any rights or obligations contained in this Agreement and shall not in any way affect, impair or invalidate the effectiveness and validity of this Agreement or any term or condition hereof. The Pledgor hereby waives its right to plead or claim in any court that the 15 20 execution of any other Finance Document is a cause for extinguishing, invalidating, impairing or modifying the effectiveness and validity of this Agreement or any term or condition contained herein. The Collateral Agent shall be at liberty to accept further security from the Pledgor or from any third party and/or release such security without notifying the Pledgor and without affecting in any way the obligations of the Pledgor under the Finance Documents. The Collateral Agent, upon written directions from the Secured Parties pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, shall determine if any security conferred upon the Collateral Agent under the Finance Documents shall be enforced by the Collateral Agent, as well as the sequence of securities to be so enforced. Section 6.6 Amendments. No waiver, amendment, modification or termination of any provision of this Agreement, or consent to any departure by the Pledgor therefrom, shall in any event be effective without the prior written consent of the Collateral Agent, acting upon written directions from the Secured Parties pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein, and none of the Pledged Collateral shall be released without the written consent of the Collateral Agent, acting upon directions from the Secured Parties pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Section 6.7 Successors and Assigns. This Agreement shall be binding upon the Pledgor and its successors and assigns and shall inure to the benefit of the Collateral Agent and the other Secured Parties and their respective successors and assigns. The Pledgor may not assign or otherwise transfer any of its rights or obligations under this Agreement without the written consent of the Collateral Agent, acting upon written directions from the Secured Parties pursuant to the Intercreditor Agreement, or as otherwise expressly provided herein. Section 6.8 Third Party Beneficiaries. The agreements of the parties hereto are intended to benefit the Secured Parties and their respective successors and assigns. Section 6.9 Conflict with Indenture. In case of a conflict between any provision of this Agreement and any provision of the Indenture, the provisions of the Indenture shall control and govern. No such conflict shall be deemed to exist thereby because this Agreement imposes greater obligations on the Subsidiary Guarantor or the Pledgor than the Indenture. 16 21 Section 6.10 Survival. All agreements, statements, representations and warranties made by the Pledgor herein or in any certificate or other instrument delivered by the Pledgor or on its behalf under this Agreement shall be considered to have been relied upon by the Collateral Agent and the other Secured Parties and shall survive the execution and delivery of this Agreement and the other Finance Documents until termination thereof or the indefeasible payment in full in cash or cash equivalents of all of the Secured Obligations and the termination of all commitments of the Secured Parties under the Finance Documents regardless of any investigation made by the Collateral Agent or the other Secured Parties or made on their behalf. Section 6.11 No Waiver; Remedies Cumulative. No failure or delay on the part of the Collateral Agent in exercising any right, power or privilege hereunder and no course of dealing between the Pledgor and the Collateral Agent shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Collateral Agent would otherwise have. Section 6.12 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Section 6.13 Headings Descriptive. The headings of the several Sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. Section 6.14 Severability. In case any provision contained in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. Section 6.15 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. (a) THIS AGREEMENT IS A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK OF THE UNITED STATES AND 17 22 SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). (b) Any legal action or proceeding against the Pledgor with respect to this Agreement may be brought in the courts of the State of New York in the County of New York or of the United States for the Southern District of New York and, by execution and delivery of this Agreement, the Pledgor hereby irrevocably submits and accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. The Pledgor agrees that a judgment, after exhaustion of all available appeals, in any such action or proceeding shall be conclusive and binding upon the Pledgor and may be enforced in any other jurisdiction, by a suit upon such judgment, a certified copy of which shall be conclusive evidence of the judgment. The Pledgor hereby irrevocably designates, appoints and empowers CT Corporation System with offices on the date hereof at 111 Eighth Avenue, New York, N.Y. 10011, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notice and documents which may be served in any such action or proceeding. If for any reason such designee, appointee and agent shall cease to be available to act as such agent, the Pledgor agrees to designate a new designee, appointee and agent in New York City on the terms and for the purposes of this provision satisfactory to the Collateral Agent. The Pledgor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Pledgor at its address referred to in Section 6.1, such service to become effective thirty (30) days after such mailing. Nothing herein shall affect the right of the Collateral Agent or any other Person to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Pledgor in any other jurisdiction. (c) The Pledgor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement in the courts referred to in clause (b) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 18 23 (d) WITH REGARD TO THIS AGREEMENT, EACH PARTY HERETO HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY. Section 6.16 Entire Agreement. This Agreement, together with any other agreement executed in connection herewith, is intended by the parties as a final expression of their agreement as to the matters covered hereby and is intended as a complete and exclusive statement of the terms and conditions thereof. Section 6.17 Independent Obligations. The Pledgor's obligations under this Agreement are independent of those of the Subsidiary Guarantor. The Collateral Agent may bring a separate action against the Pledgor without first proceeding against the Subsidiary Guarantor or any other Person or any other security held by the Collateral Agent and without pursuing any other remedy. Section 6.18 Limitation of Liability. The provisions of Section 12.11 of the Indenture shall apply to this Agreement. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK] 19 24 IN WITNESS WHEREOF, the parties hereto have caused this Pledge and Security Agreement to be duly executed and delivered by their officers thereunto duly authorized as of the date first above written. NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Mataczynski ---------------------------- Name: Craig A. Mataczynski Title: President THE CHASE MANHATTAN BANK, solely in its capacity as the Collateral Agent By: /s/ Annette M. Marsula ---------------------------- Name: Annette M. Marsula Title: Vice President 20 25 Schedule I to Pledge and Security Agreement Certificates Certificate No. 3 representing a 100% interest in Louisiana Generating LLC. Sch. I - 1 26 Exhibit A to Pledge and Security Agreement ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED, NRG SOUTH CENTRAL GENERATING LLC hereby assigns and transfers unto ___________________________ [ ] membership interests of LOUISIANA GENERATING LLC, a Delaware limited liability company (the "Limited Liability Company"), standing in its name on the books of the Limited Liability Company, which is represented by Certificate No. [ ], authorizing any officer of the Limited Liability Company to transfer said membership interests on the books of the within named Limited Liability Company with full power of substitution. DATED as of __________ ___, 20000 NRG SOUTH CENTRAL GENERATING LLC a Delaware limited liability company By: ------------------------------------ Sch. I - 2 EX-5.1 26 y57012ex5-1.txt FORM OF OPINION AND CONSENT 1 Exhibit 5.1 October 25, 2000 (212) 351-4000 C 66241-00035 NRG South Central Generating LLC 901 Marquette Avenue, Suite 2300 Minneapolis, Minnesota 55402-3265 Re: Registration Statement on Form S-4 for NRG South Central Generating LLC Ladies and Gentlemen: We have acted as special counsel for NRG South Central Generating LLC, a Delaware limited liability corporation (the "Issuer"), and its wholly-owned subsidiary, Louisiana Generating LLC, a Delaware limited liability corporation (the "Subsidiary Guarantor"), in connection with the Issuer's registration, on a Form S-4 Registration (the "Registration Statement") under the Securities Act of 1933, as amended, of (i) $500,000,000 aggregate principal amount of 8.962% Series A-1 Senior Secured Bonds due 2016 and (ii) $300,000,000 aggregate principal amount of 9.479% Series B-1 Senior Secured Bonds due 2024 (the "New Bonds"), which are to be guaranteed on a senior secured basis pursuant to a guarantee (the "Guarantee") by the Subsidiary Guarantor. The New Bonds will be offered in exchange for like principal amounts of the Issuer's outstanding 8.962% Series A Senior Secured Bonds due 2016 and 9.479% Series B Senior Secured Bonds due 2024 (the "Old Bonds") pursuant to that certain Exchange and Registration Rights Agreement, dated as of March 30, 2000, by and among the Issuer, the Subsidiary Guarantor, Chase Securities Inc. and Lehman Brothers Inc. (the "Registration Rights Agreement"). The Registration Rights Agreement was executed in connection with the private placement of the Old Bonds. The New Bonds will be issued pursuant to that certain Indenture, dated as of March 30, 2000, by and among the Issuer, the Subsidiary Guarantor and The Chase Manhattan Bank, as Bond Trustee, and The Chase Manhattan Bank, as Depositary Bank, (the "Indenture"). 2 NRG South Central Generating LLC October 25, 2000 Page 2 We are familiar with the actions taken and to be taken by the Issuer and the Subsidiary Guarantor in connection with the registration and offering of the New Bonds. On the basis of such knowledge and such investigation as we have deemed necessary, and subject to the limitations set forth below, we are of the opinion that: (i) the New Bonds have been duly authorized by the Issuer and, when issued in exchange for the Old Bonds pursuant to the terms of the exchange offer described in the Registration Statement and the Indenture, will be validly issued and will constitute legal and binding obligations of the Issuer; and (ii) the Guarantee has been duly authorized by the Subsidiary Guarantor and will be validly issued and will constitute the legal and binding obligation of the Subsidiary Guarantor. Our opinions are subject to limitations imposed by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally, including, without limitation the effect of statutory or other laws regarding fraudulent conveyances or transfers or preferential transfers and (ii) general principles of equity, whether considered at law or at equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing. Our opinions are limited to the effect of the present state of the laws of the State of New York, the United States of America and the State of Delaware. We are not admitted to practice in the State of Delaware, however, we are generally familiar with the Delaware General Corporation Law as presently in effect and have made such inquiries as we consider necessary to render the opinions contained herein. We assume no obligation to revise or supplement our opinions should the present laws, or the interpretation thereof, be changed. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the heading "Legal Matters" contained in the prospectus that forms a part of the Registration Statement. Very truly yours, /s/ Gibson, Dunn & Crutcher LLP GIBSON, DUNN & CRUTCHER LLP SPB/JKM EX-10.1 27 y57012ex10-1.txt WORKING CAPITAL AGREEMENT 1 Exhibit 10.1 EXECUTION COPY WORKING CAPITAL AGREEMENT dated as of April 30, 2000 among NRG SOUTH CENTRAL GENERATING LLC, THE GUARANTORS PARTY HERETO THE LENDERS PARTY HERETO AND THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, AS ADMINISTRATIVE AGENT $40,000,000 2 TABLE OF CONTENTS
Page ---- ARTICLE I. DEFINITIONS ............................................................ 1 SECTION 1.01. Defined Terms .................................................... 1 SECTION 1.02. Terms Generally .................................................. 19 SECTION 1.03. Accounting Terms; GAAP ........................................... 19 SECTION 1.04. Working Capital Facility Agent ................................... 20 ARTICLE II. THE CREDITS ........................................................... 20 SECTION 2.01. The Commitments .................................................. 20 SECTION 2.02. Loans and Borrowings ............................................. 20 SECTION 2.03. Requests for Borrowings .......................................... 21 SECTION 2.04. Funding of Borrowings ............................................ 21 SECTION 2.05. Interest Elections ............................................... 22 SECTION 2.06. Termination and Reduction of the Commitments ..................... 23 SECTION 2.07. Repayment of Loans; Evidence of Debt ............................. 24 SECTION 2.08. Prepayment of Loans .............................................. 25 SECTION 2.09. Fees ............................................................. 26 SECTION 2.10. Interest ......................................................... 26 SECTION 2.11. Alternate Rate of Interest ....................................... 27 SECTION 2.12. Increased Costs .................................................. 28 SECTION 2.13. Break Funding Payments ........................................... 29 SECTION 2.14. Taxes ............................................................ 29 SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs ...... 30 SECTION 2.16. Mitigation Obligations; Replacement of Lenders ................... 32 ARTICLE III. GUARANTEE ............................................................ 33 SECTION 3.01. The Guarantees .................................................... 33 SECTION 3.02. Obligations Unconditional ......................................... 33 SECTION 3.03. Reinstatement ..................................................... 34 SECTION 3.04. Subrogation ....................................................... 34 SECTION 3.05. Remedies .......................................................... 35 SECTION 3.06. Instrument for the Payment of Money ............................... 35 SECTION 3.07. Continuing Guarantees ............................................. 35 SECTION 3.08. Rights of Contribution ............................................ 35 SECTION 3.09. General Limitation on Guarantee Obligations ....................... 36 SECTION 3.10. Effectiveness ..................................................... 36 ARTICLE IV. REPRESENTATIONS AND WARRANTIES ........................................ 37 SECTION 4.01. Organization; Powers .............................................. 37 SECTION 4.02 Authorization; Enforceability ..................................... 37 SECTION 4.03. No Conflicts; Governmental Approvals .............................. 37 SECTION 4.04. Financial Condition ............................................... 38 SECTION 4.05. Actions, Suits and Proceedings .................................... 39
-i- 3 SECTION 4.06. Compliance with Laws and Agreements ............................... 39 SECTION 4.07. Taxes ............................................................. 39 SECTION 4.08. Investment Company Status ......................................... 39 SECTION 4.09. Utility Regulation ................................................ 39 SECTION 4.10. Accounting ........................................................ 40 SECTION 4.11. Insurance ......................................................... 40 SECTION 4.12. Properties ........................................................ 41 SECTION 4.13. Labor; ERISA ...................................................... 41 SECTION 4.14. Environmental Matters ............................................. 41 SECTION 4.15. No Material Adverse Change ........................................ 42 SECTION 4.16. Certificates ...................................................... 42 SECTION 4.17. Use of Credit ..................................................... 42 SECTION 4.18. Disclosure ........................................................ 43 ARTICLE V. CONDITIONS PRECEDENT ................................................... 43 SECTION 5.01. Effective Date .................................................... 43 SECTION 5.02. Conditions Precedent for each Loan ................................ 46 ARTICLE VI. COVENANTS OF THE BORROWER ............................................. 46 SECTION 6.01. Financial Statements and Other Information ........................ 46 SECTION 6.02. Existence; Conduct of Business .................................... 48 SECTION 6.03. Maintenance of Tax Status ......................................... 48 SECTION 6.04. Compliance with Laws and Contractual Obligations .................. 48 SECTION 6.05. Maintenance of Properties; Insurance .............................. 48 SECTION 6.06. Payment of Taxes and Claims ....................................... 49 SECTION 6.07. Books and Records; Inspection Rights .............................. 49 SECTION 6.08. Indebtedness ...................................................... 49 SECTION 6.09. Liens ............................................................. 50 SECTION 6.10. Certain Obligations Respecting Subsidiaries ....................... 50 SECTION 6.11. Restrictive Agreements ............................................ 50 SECTION 6.12. Prohibition on Sale of Assets ..................................... 51 SECTION 6.13. Modifications of Certain Documents ................................ 51 SECTION 6.14. Prohibition on Fundamental Changes ................................ 51 SECTION 6.15. Restricted Payments ............................................... 52 SECTION 6.16. Transactions with Affiliates ...................................... 53 SECTION 6.17. Investments ....................................................... 53 SECTION 6.18. EWG Status ........................................................ 55 SECTION 6.19. Use of Proceeds ................................................... 55 ARTICLE VII. COVENANTS OF THE GUARANTORS .......................................... 55 SECTION 7.01. Existence; Conduct of Business .................................... 55 SECTION 7.02. Compliance with Laws and Contractual Obligations .................. 55 SECTION 7.03. Maintenance of Properties; Insurance .............................. 55 SECTION 7.04. Indebtedness ...................................................... 56 SECTION 7.05. Liens ............................................................. 56
-ii- 4 SECTION 7.06. Prohibition on Fundamental Changes ................................ 56 SECTION 7.07. Restricted Payments ............................................... 57 SECTION 7.08. Transactions with Affiliates ...................................... 57 SECTION 7.09. Investments ....................................................... 57 SECTION 7.10. Operation of Facilities ........................................... 59 SECTION 7.11. Prohibition on Sale of Assets ..................................... 59 SECTION 7.12. Modification of Certain Documents ................................. 59 ARTICLE VIII. EVENTS OF DEFAULT ................................................... 59 SECTION 8.01. Events of Default .................................................. 59 SECTION 8.02 Acceleration; Remedies ............................................. 62 ARTICLE IX. The Administrative Agent .............................................. 62 SECTION 9.01 Appointment ........................................................ 62 SECTION 9.02 Administrative Agent's Rights as a Lender .......................... 63 SECTION 9.03 Duties; Limitation of Liability .................................... 63 SECTION 9.04 Reliance by Administrative Agent ................................... 63 SECTION 9.05 Sub-Agents ......................................................... 64 SECTION 9.06 Resignation ........................................................ 64 SECTION 9.07 Independent Credit Decisions ....................................... 64 SECTION 9.08 Consent by Administrative Agent .................................... 65 ARTICLE X. MISCELLANEOUS .......................................................... 65 SECTION 10.01. Notices .......................................................... 65 SECTION 10.02. Waivers; Amendments .............................................. 65 SECTION 10.03. Expenses; Indemnity; Damage Waiver ............................... 66 SECTION 10.04. Successors and Assigns ........................................... 68 SECTION 10.05. Survival ......................................................... 70 SECTION 10.06. Counterparts; Integration; Effectiveness ......................... 70 SECTION 10.07. Severability ..................................................... 71 SECTION 10.08. Right of Setoff .................................................. 71 SECTION 10.09. Governing Law; Jurisdiction; Etc ................................. 71 SECTION 10.10. WAIVER OF JURY TRIAL ............................................. 72 SECTION 10.11. Headings ......................................................... 72 SECTION 10.12. Treatment of Certain Information; Confidentiality ................ 72
SCHEDULE I - Commitments SCHEDULE II - Encumbrances SCHEDULE III - Restrictive Agreements SCHEDULE IV - Assets Specifically Held for Resale SCHEDULE V - Fees and Rates EXHIBIT A - Form of Assignment and Acceptance EXHIBIT B - Form of Subordination Provisions -iii- 5 WORKING CAPITAL AGREEMENT dated as of April 30, 2000 among NRG SOUTH CENTRAL GENERATING LLC, the GUARANTORS party hereto, the LENDERS party hereto, and THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as Administrative Agent. The Borrower (as hereinafter defined) has requested that the Lenders (as so defined) make loans to it, under the guarantee of the Guarantors (as so defined), in an aggregate principal amount not exceeding $40,000,000, to finance ordinary course working capital needs (other than debt service) of the Borrower and the Guarantors. The Lenders are prepared to make such loans upon the terms and conditions hereof, and, accordingly, the parties hereto agree as follows: ARTICLE I. DEFINITIONS. SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "Additional Guarantor" means any Subsidiary of the Borrower, other than the Initial Guarantor, that the Borrower designates as a Guarantor subsequent to the Effective Date. "Adjusted LIBO Rate" means, for the Interest Period for any Eurodollar Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate for such Interest Period. "Administrative Agent" means The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, in its capacity as Administrative Agent for the Lenders hereunder. "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied to the Lenders by the Administrative Agent. "Affected Property" means, with respect to any Event of Loss, the property of the Borrower or any of the Guarantors that is lost, destroyed, damaged, condemned or otherwise taken as a result of such Event of Loss. "Affiliate" means, with respect to a Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with such first Person. 6 "Agreement" means this Working Capital Agreement dated as of April 30, 2000 among the Borrower, the Guarantors, the Lenders and the Administrative Agent. "Alternate Base Rate" means a fluctuating interest rate per annum equal at all times to the highest of: (a) the rate of interest announced publicly by the Administrative Agent in New York, New York, from time to time, as the Administrative Agent's base rate; or (b) 0.5% per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day, on the next succeeding Business Day) for the three-week period ending on the next previous Friday by the Administrative Agent on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York or, if such publications shall be suspended or terminated, on the basis of quotations for such rates received by the Administrative Agent from three New York certificate of deposit dealers of recognized standing selected by the Administrative Agent, in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent; and (c) for any day, 0.5% per annum above the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Applicable Percentage" means, with respect to any Lender, the percentage of the total Commitments or Loans hereunder represented by the aggregate amount of such Lender's Commitments or Loans hereunder. "Applicable Rate" means, for any day, the rate per annum equal to the rate set forth on Schedule V hereto corresponding to the then senior secured ratings of the Borrower with respect to ABR Loans or Eurodollar Loans, as the case may be. "Approved Restoration Plan" shall mean a plan which provides for the repair, replacement or rebuilding of all or any material portion of the Facilities and which is accompanied by a certificate of an authorized officer of the Borrower or a Guarantor certifying that, after taking into consideration the availability of Loss Proceeds and such other proceeds available for the repair, replacement or restoration of such Facilities, there will be adequate cash flow, including but not limited to any Loss Proceeds, during the period of repair, replacement or restoration to pay all ongoing expenses, including debt service, if any, and no Material Adverse Effect would reasonably be expected to result from such repair, replacement or restoration. -2- 7 "Assets Specifically Held for Resale" means the assets listed on Schedule IV. "Assignment and Acceptance" means an assignment and acceptance substantially in the form of Exhibit A which satisfies the requirements of Section 10.04(b). "Authorized Representative" of any of the Borrower, the Guarantors or any other Person means the person or persons authorized to act on behalf of such entity by its chief executive officer, president, chief operating officer, chief financial officer or any vice president or its Board of Directors or any other governing body of such entity. "Availability Period" means the period from and including the Effective Date to and including the date one Business Day prior to the Maturity Date. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Board of Directors", when used with respect to a corporation, means either the board of directors of such corporation or any committee of that board duly authorized to act for it, and when used with respect to a limited liability company, partnership or other entity other than a corporation, any Person or body authorized by the organizational documents or by the voting equity owners of such entity to act for them. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Borrower to have been adopted by the Board of Directors of the Borrower and to be in full force and effect on the date of such certification. "Bond Documents" means the Indenture, the Offering Circular, the Bonds and the Purchase Agreement. "Bonds" means, collectively, (a) the $500,000,000 8.962% Series A Senior Secured Bonds due 2016 of the Borrower, and (b) the $300,000,000 9.479% Series B Senior Secured Bonds due 2024 of the Borrower. "Borrower" means NRG South Central Generating LLC, a Delaware limited liability company. "Borrower Pledge Agreement" means the Pledge and Security Agreement dated as of March 30, 2000, between the Borrower and the Collateral Agent, as the same shall be modified and supplemented and in effect from time to time. "Borrower Security Agreement" means the Assignment and Security Agreement dated as of March 30, 2000, between the Borrower and the Collateral Agent, as the same shall be modified and supplemented and in effect from time to time. "Borrowing" means (a) all ABR Loans made, converted or continued on the same date or (b) all Eurodollar Loans that have the same Interest Period. For purposes hereof, the date -3- 8 of a Borrowing comprising one or more Loans that have been converted or continued shall be the effective date of the most recent conversion or continuation of such Loan or Loans. "Borrowing Request" means a request by the Borrower for a Borrowing in accordance with Section 2.03. "BTM" means The Bank of Tokyo-Mitsubishi, Ltd., New York Branch. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or the city of Minneapolis, Minnesota are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in Dollar deposits in the London interbank market. "Cajun Electric" means Cajun Electric Power Cooperative, Inc., a non-profit Louisiana electric membership cooperative corporation. "Cajun Facilities" means the interest representing approximately 1,700 MW of non-nuclear electric generating facilities in New Roads, Louisiana, that the Initial Guarantor acquired from Cajun Electric pursuant to a Fifth Amended and Restated Asset Purchase and Reorganization Agreement, dated as of September 21, 1999, among the Initial Guarantor, Ralph K. Mabey, as Chapter 11 Trustee of Cajun Electric and, as to certain sections of the agreement only, NRG Energy, Inc. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.12(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Change of Control" means the acquisition, directly or indirectly, beneficially or of record or otherwise, by any Person or group (within the meaning of the Securities and Exchange Act of 1934, and the rules of the Securities and Exchange Commission as in effect on the date hereof) other than NRG Energy or its Controlled Subsidiaries of Control of the Borrower or any Guarantor; provided that there shall be no Change of Control if the Required Lenders approve the occurrence of such event. "Chase" means The Chase Manhattan Bank. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral Agency and Intercreditor Agreement" means the Collateral Agency and Intercreditor Agreement dated as of March 30, 2000, among the Borrower, the Guarantors, the Trustee, the Collateral Agent and Chase, as Depositary Bank. -4- 9 "Collateral Agent" means Chase, in its capacity as collateral agent under the Collateral Agency and Intercreditor Agreement and the other Financing Documents to which it is a party. "Collateral Documents" means the Borrower Security Agreement, the Borrower Pledge Agreement, each Guarantor Security Agreement, each Member Pledge Agreement, the Collateral Agency and Intercreditor Agreement, each Consent and Agreement, each Intercompany Note, the Indenture (with respect to the Depositary Accounts other than the debt service reserve account thereunder), the Mortgage and any other document providing for any lien, pledge, encumbrance, mortgage or security interest in favor of the Collateral Agent. "Commitment" means, with respect to each Lender, the commitment of such Lender to make one or more Revolving Loans hereunder during the Availability Period, expressed as an amount representing the maximum aggregate principal amount of the Revolving Loans to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.06(b) or 2.08(b) and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 10.04. The initial amount of each Lender's Commitment is set forth on Schedule I, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Consent and Agreement" means each of (i) the Consent and Agreement dated as of March 30, 2000, among NRG Energy, the Borrower and the Collateral Agent; (ii) the Consent and Agreement dated as of March 30, 2000, among NRG Energy, the Initial Guarantor and the Collateral Agent; (iii) the Consent and Agreement dated as of March 30, 2000, among NRG Power Marketing, the Initial Guarantor and the Collateral Agent, and (iv) the Consent and Agreement dated as of March 30, 2000, among NRG Operating, the Initial Guarantor and the Collateral Agent. "Corporate Services Agreement" means each of (i) the Corporate Services Agreement dated as of March 24, 2000, between NRG Energy and the Borrower, and (ii) the Corporate Services Agreement dated as of March 24, 2000, between NRG Energy and the Initial Guarantor. "Debt Service Coverage Ratio" for any period means, on a consolidated basis of the Borrower and the Guarantors (excluding the Unrestricted Subsidiaries and without duplication), the ratio of, (x) all Revenues less Operating and Maintenance Expenses (other than nonrecurring expenses in connection with the issuance of Permitted Indebtedness), less all capital expenditures (unless funded with Permitted Indebtedness), to (y) the aggregate of principal, interest and fees payable on outstanding Permitted Indebtedness (other than Subordinated Indebtedness, fees payable in connection with the issuance of Permitted Indebtedness and principal payments under this Agreement, provided that such amounts remain available to be drawn under the Agreement or are refinanced under a replacement working -5- 10 capital facility) plus payments required to be made under any Interest Rate Agreements, less payments to be received under any Interest Rate Agreement for such period. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Designation Letter" has the meaning given to such term in the Collateral Agency and Intercreditor Agreement. "Dollars" or "$" refers to lawful money of the United States of America. "Effective Date" means the date on or after April 30, 2000, on which the conditions specified in Section 5.01 are satisfied (or waived in accordance with Section 10.02). "Environmental Approvals" means Governmental Approvals required under applicable Environmental Laws. "Environmental Laws" means any and all Laws (as well as obligations, duties and requirements relating thereto under common law) relating to: (i) noise, emissions, discharges, spills, releases or threatened releases of pollutants, contaminants, environmentally regulated materials, materials containing environmentally regulated materials, or hazardous or toxic materials or wastes into ambient air, surface water, groundwater, watercourses, publicly or privately-owned treatment works, drains, sewer systems, wetlands, septic systems or onto land surface or subsurface strata; (ii) the use, treatment, storage, disposal, handling, manufacture, processing, distribution, transportation, or shipment of environmentally regulated materials, materials containing environmentally regulated materials or hazardous and/or toxic wastes, material, products or by-products (or of equipment or apparatus containing environmentally regulated materials); (iii) pollution or the protection of human health, the environment or natural resources or (iv) zoning and land use. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, including the regulations and published interpretations thereunder. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans constituting such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. -6- 11 "Event of Default" has the meaning assigned to such term in Article VIII. "Event of Eminent Domain" means any compulsory transfer or taking or transfer under threat of compulsory transfer or taking of any material part of the collateral intended to be covered by the Collateral Documents by any Governmental Authority. "Event of Loss" means an event which causes all or a material portion of any Facility to be damaged, destroyed or rendered unfit for normal use for any reason whatsoever including, but not limited to, an Event of Eminent Domain. "Facilities" means non-nuclear electric generating, district assets or plants and related facilities and equipment acquired, owned, constructed, developed, operated or maintained by the Borrower, the Initial Guarantor and any Additional Guarantors and, in each case, the business and activities related thereto. "Federal Funds Effective Rate" means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "Financing Documents" means, collectively, this Agreement, the Indenture, the Collateral Agency and Intercreditor Agreement, the Bonds, the Collateral Documents and all other documents related to any of the foregoing or otherwise related to the issuance of the Bonds. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrower is located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in the United States as in effect from time to time. "Good Faith Contest" means the contest of an item if such item is diligently contested in good faith by appropriate proceedings timely instituted and (a) adequate reserves are established if required by and in accordance with GAAP with respect to the contested item and held in cash or Investments and (b) during the period of such contest the enforcement of any contested item is effectively stayed. "Governmental Approvals" means any authorization, consent, approval, order, license, franchise, ruling, permit, certification, waiver, exemption, filing or registration by or with any Governmental Authority (including, without limitation, Environmental Approvals, zoning variances, special exceptions and non-conforming uses) relating to the construction, -7- 12 ownership, operation or maintenance of the Facilities or to the execution, delivery or performance of any Transaction Document. "Governmental Authority" means any nation, state, sovereign or government, any federal, regional, state, municipal, local or political subdivision thereof or any department, commission, board, bureau, agency, instrumentality, judicial or administrative body or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee" means, with respect to any Person, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing in any manner any Indebtedness or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of Borrower arrangements, by agreement to keep-well, to purchase assets, goods, bonds or services, to take-or-pay, or to maintain financial statement conditions or otherwise), (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part) or (iii) to reimburse any Person for the payment by such Person under any letter of credit, surety, bond or other guaranty issued for the benefit of such other Person, provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" or "Guaranteed" used as a verb has a correlative meaning. "Guaranteed Obligations" has the meaning set forth in Section 3.01. "Guarantor" means the Initial Guarantor and any Additional Guarantor. "Guarantor Security Agreement" means each of (i) the Assignment and Security Agreement dated as of March 30, 2000, between the Initial Guarantor and the Collateral Agent, and (ii) an Assignment and Security Agreement between each Additional Guarantor and the Collateral Agent in substantially the same form as the Assignment and Security Agreement between the Initial Guarantor and the Collateral Agent, as each shall be modified and supplemented and in effect from time to time. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreement" means any Interest Rate Agreement, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement entered into in the ordinary course of business and not for speculative purposes. -8- 13 "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person upon which interest charges are customarily paid, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding trade and other accounts payable incurred in the ordinary course of business so long as such trade accounts payable are payable and paid within 90 days of the date the respective goods are delivered or the respective services rendered), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Indebtedness of any other Person guaranteed by such person or for which such Person shall otherwise (including payments pursuant to any keep-well, make-well or similar arrangement) become directly or indirectly liable, (h) all capital lease obligations of such Person to the extent required to be capitalized on the books of such Person in accordance with GAAP, (i) all obligations, contingent or otherwise, of such Person as an account party or issuer in respect of letters of credit or the like and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. "Indenture" means the Trust Indenture dated as of March 30, 2000 by and among the Borrower, the Initial Guarantor and the Trustee. "Independent Engineer" means Stone & Webster Management Consultants, Inc. "Independent Insurance Consultant" means Marsh USA, Inc. "Independent Market Consultant" means Pace Global Energy Services, Inc. "Initial Guarantor" means Louisiana Generating LLC, a Delaware limited liability company. "Intercompany Loan" means Indebtedness to the Borrower or any Guarantor by the Borrower or any Guarantor. "Intercompany Notes" means the notes evidencing indebtedness owed by the Guarantors to the Borrower, including the note of the Initial Guarantor dated March 30, 2000. "Interest Election Request" means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.05. "Interest Payment Date" means (a) with respect to any ABR Loan, each Quarterly Date and (b) with respect to any Eurodollar Loan, the last day of the Interest Period therefor. "Interest Period" means, for any Eurodollar Loan, the period commencing on the date of such Loan and ending on the numerically corresponding day in the calendar month that is -9- 14 one, two or three months thereafter, as specified in the applicable Borrowing Request or Interest Election Request; provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Loan initially shall be the date on which such Loan is made and thereafter shall be the effective date of the most recent conversion or continuation of such Loan. "Interest Rate Agreement" means any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge arrangement, to which the Borrower or any Guarantor is a party, entered into in the ordinary course of business in connection with Permitted Indebtedness and not for speculative purposes. "Investment" means, for any Person: (i) the acquisition (whether for cash, property of such Person, services or securities or otherwise) of capital stock, bonds, notes, debentures or other ownership interests or other securities of any other Person or any agreement to make any such acquisition (including, without limitation, any "short sale" or any sale of any securities at a time when such securities are not owned by the Person entering into such short sale), (ii) the making of any deposit with, or advance, loan or other extension of credit to, any other Person (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise, to resell such property to such Person, but excluding any such advance, loan or extension of credit arising in connection with the sale of inventory or supplies by such Person in the ordinary course of business), (iii) the entering into of any Guarantee of, or any other contingent obligation with respect to, Indebtedness or other liability of any other Person and (without duplication) any amount committed to be advanced, lent or extended to such Person or (iv) the entering into of any Hedging Agreement. "Lenders" means the Persons listed on Schedule I and any other Person that shall have become a party hereto pursuant to an Assignment and Acceptance, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. "LIBO Rate" means, for the Interest Period for any Eurodollar Borrowing, the rate appearing on Page 3750 of the Dow Jones Markets (Telerate) Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to Dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for the offering of Dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not available at such time for any reason, then the LIBO Rate for such Interest Period shall be the rate at which Dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the -10- 15 Administrative Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Loss Proceeds" means all insurance proceeds or other amounts received on account of any Event of Loss. "Margin Stock" means "margin stock" within the meaning of Regulations T, U and X of the Board. "Material Adverse Effect" means a material adverse effect on (a) the business, assets, operations, prospects or financial condition of the Borrower and the Guarantors taken as a whole, (b) the validity or priority of the Liens on the Collateral; (c) the ability of any Obligor to perform its material obligations under any Transaction Document to which it is a party, or (d) the ability of the Administrative Agent to enforce any of the payment obligations of any Obligor under this Agreement. "Maturity Date" means March 29, 2001. "Member" means each of NRG Central and NRG Generation, which are at the date of this Agreement the sole holders of an equity interest in the Borrower, and any future members or equity holders of the Borrower. "Member Pledge Agreements" means each of (i) the Pledge and Security Agreement dated as of March 30, 2000, between NRG Central and the Collateral Agent and (ii) the Pledge and Security Agreement dated as of March 30, 2000, between NRG Generation and the Collateral Agent, as each shall be modified and supplemented and in effect from time to time. "Moody's" means Moody's Investors Service, Inc. "Mortgage" means the Mortgage, dated as of March 30, 2000, between the Initial Guarantor and the Collateral Agent. "Net Tangible Assets" means, as of the date of any determination thereof, the total amount of all assets of the Borrower and the Guarantors (determined on a consolidated basis in -11- 16 accordance with GAAP), less the sum of (i) the consolidated current liabilities of the Borrower and the Guarantors (determined on a consolidated basis in accordance with GAAP) and (ii) assets properly classified as "intangible assets" in accordance with GAAP. "Non-Recourse Obligations" means Indebtedness or other obligations or liabilities (i) as to which neither the Borrower nor any of the Guarantors (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) (b) is directly or indirectly liable (as a guarantor or otherwise) other than pursuant to a pledge by the issuer of an equity interest in the obligor of the Indebtedness or (c) constitutes the lender and (ii) no default with respect to which (including any rights any Person may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any Indebtedness of the Borrower or any Guarantor to declare a default on such Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity. "NRG Central" means NRG Central U.S. LLC, a Delaware limited liability company. "NRG Energy" means NRG Energy, Inc., a Delaware corporation. "NRG Generation" means South Central Generation Holding LLC, a Delaware limited liability company. "NRG Operating" means NRG Operating Services, Inc., a Delaware corporation. "NRG Power Marketing" means NRG Power Marketing Inc., a Delaware corporation. "NRG Power Marketing Security Agreement" means the security agreement dated as of March 30, 2000, between NRG Power Marketing and the Collateral Agent, as the same shall be modified and supplemented and in effect from time to time. "Obligor" means the Borrower and each Guarantor. "Offering Circular" means the Preliminary Offering Circular dated as of March 14, 2000 together with the Offering Circular dated as of March 27, 2000, each prepared by the Borrower setting forth the information concerning the Borrower and the Bonds. "Officer's Certificate" means, in the case of the Borrower, a certificate of an Authorized Representative of the Borrower and signed by a managing director, president, a vice president, the treasurer, an assistant treasurer, the secretary or an assistant secretary of the Borrower. "Operating and Maintenance Expenses" means (a) all amounts disbursed by or on behalf of an Obligor for operation, maintenance, repair or improvement of the Facilities including, but not limited to, premiums on insurance policies, property and other Taxes, and -12- 17 payments under the relevant operating and maintenance agreements, leases, royalty and other land use agreements, and any other payments required under the Transaction Documents or for the administration or performance of the Transaction Documents and (b) all fees and other amounts due and owing to the Lenders and the Administrative Agent. "Operation and Management Services Agreement" means the Operation and Management Services Agreement dated as of March 24, 2000, between the Initial Guarantor and NRG Operating, and any successor or replacement agreement. "Permitted Indebtedness" means (a) Indebtedness incurred pursuant to the Indenture and the Bonds; (b) Indebtedness incurred pursuant to additional bonds issued in accordance with the Indenture; (c) Indebtedness provided that (i) an authorized officer of the Borrower certifies to the Administrative Agent in writing that no Default or Event of Default has occurred and is continuing or will occur after giving effect to the incurrence of such Indebtedness and the application of the net proceeds thereof; (ii) an authorized officer of the Borrower certifies to the Administrative Agent in writing that after giving effect to the incurrence of such Indebtedness, the minimum annual Projected Debt Service Coverage Ratio for each fiscal year (starting in the fiscal year in which the Indebtedness is incurred) through the final maturity date for the Bonds with the longest maturity, will not be less than 1.5 to 1; and (iii) the Administrative Agent receives written confirmation from each rating agency then rating the Bonds that the incurrence of such Indebtedness will not result in a lowering or withdrawal by a rating agency of the then current ratings of the Bonds; (d) Indebtedness related to Permitted Liens; (e) Indebtedness represented by interest rate protection agreements with respect to other Permitted Indebtedness; (f) Indebtedness under this Agreement plus, upon the acquisition of an Additional Guarantor or any additional Facility by a Guarantor or the Borrower, 5% of the Indebtedness incurred by the Borrower in connection with such acquisition; provided that the outstanding principal amount of such Indebtedness shall be reduced to zero for five (5) days each year; (g) Indebtedness of the Borrower owed to the Initial Guarantor or any Additional Guarantor; (h) Indebtedness of any Guarantor represented by Hedging Agreements; (i) Indebtedness of any Guarantor in respect of letters of credit, surety bonds or performance bonds issued in the ordinary course of business; (j) trade indebtedness or other similar Indebtedness incurred by any Guarantor in the ordinary course of business (but not in any case for borrowed money); (k) other Indebtedness in an aggregate principal amount not to exceed $15,000,000 at any one time; (l) Indebtedness related to any Guarantor's obligations to establish certain funds under its power purchase agreements with any electricity membership cooperative; and (m) Subordinated Indebtedness. "Permitted Investments" means investments in securities or other instruments that are: (i) direct obligations of the United States, or any agency thereof; (ii) obligations fully guaranteed by the United States or any agency thereof; (iii) certificates of deposit issued by commercial banks under the laws of the United States or any political subdivision thereof or under the laws of Canada, Japan, Switzerland or any country that is a member of the European Economic Union having a combined capital and surplus of at least $250,000,000 and having long-term unsecured debt securities rated "A" or better by S&P and "A2" or better by Moody's (but at the time of investment not more than $25,000,000 may be invested in such certificates of -13- 18 deposit from any one bank); (iv) repurchase obligations for underlying securities of the types described in clauses (i) and (ii) above, entered into with any commercial bank meeting the qualifications specified in clause (iii) above or any other financial institution having long-term unsecured debt securities rated "A" or better by S&P and "A2" or better by Moody's in connection with which such underlying securities are held in trust or by a third-party custodian; (v) open market commercial paper of any corporation incorporated or doing business under the laws of the United States or of any political subdivision thereof having a rating of at least "A-1" from S&P and "P-1" from Moody's (but at the time of investment not more than $25,000,000 may be invested in such commercial paper from any one company); (vi) investments in money market funds having a rating assigned by each of the Rating Agencies equal to the highest rating assigned thereby to money market funds or money market mutual funds sponsored by any securities broker dealer of recognized national standing (or an Affiliate thereof), having an investment policy that requires substantially all the invested assets of such fund to be invested in investments described in any one or more of the foregoing clauses and having a rating of "A" or better by S&P and "A2" or better by Moody's (including money market funds or money market mutual funds for which Chase in its individual capacity or any of its affiliates is investment manager or adviser) or (vii) a deposit of any bank (including the Administrative Agent or the Trustee), trust company or financial institution authorized to engage in the banking business having a combined capital and surplus of at least $500,000,000, whose long-term, unsecured debt is rated "A" or higher by S&P and "A2" or higher by Moody's. "Permitted Liens" means: (a) Liens in favor of the Borrower or any Guarantor; (b) Liens imposed by law for taxes, assessments or governmental charges that are not yet delinquent and remain payable without penalty or that are being contested in good faith by appropriate proceedings; (c) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 45 days or are being contested in good faith by appropriate proceedings; (d) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations or other statutory obligations of the Borrower or any Guarantor; (e) cash deposits or rights of set-off to secure the performance of bids, tenders, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds, government contracts and other obligations of a like nature (other than for payment obligations of borrowed money), in each case in the ordinary course of business; (f) judgment liens in respect of judgments that do not give rise to an Event of Default under Section 8.01(j); -14- 19 (g) encumbrances identified on Schedule II hereto, and other easements, zoning restrictions, rights-of-way and similar charges or encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Guarantor; (h) Liens securing Hedging Agreements which Hedging Agreements relate to Indebtedness that is secured by Liens otherwise permitted under this Agreement; (i) Liens that are incidental to the business of the Borrower or the Guarantors, are not for borrowing money and are not material, taken as a whole, to the business of the Borrower and the Guarantors; (j) Liens created or granted pursuant to the Collateral Documents; (k) Liens arising by action of law; and (l) Liens with respect to other Permitted Indebtedness (other than Subordinated Indebtedness), provided that the Indebtedness pursuant to this Agreement is secured on an equal and ratable basis with the obligation so secured until such obligation is no longer secured and provided further that the creditor with respect to such obligation has been designated a Secured Party pursuant to a Designation Letter. "Person" means any individual, sole proprietorship, corporation, company, partnership, joint venture, limited liability company, trust, unincorporated association, institution, Governmental Authority or any other entity. "Power Sales Agreement" means each transition agreement and each other contract or agreement, other than the Power Marketing Agreement, now existing or entered into in the future by the Borrower or any of the Guarantors for the sale of electrical generating capacity, electrical energy, ancillary services or any combination thereof. "Power Marketing Agreement" means the Power Sales and Agency Agreement dated as of March 24, 2000, between NRG Power Marketing and the Initial Guarantor. "Projected Debt Service Coverage Ratio" means, at any time of determination thereof, a projection of the Debt Service Coverage Ratio over the period specified, prepared by the Borrower in good faith based upon assumptions consistent in all material respects with the Transaction Documents, historical operating results, if any, and the Borrower's good faith projections of future Revenues and Operating and Maintenance Expenses of the Borrower and the Guarantors in light of the then existing or reasonably expected regulatory and market environments in the markets in which the Facilities are or will be operated and upon the assumption that no early redemption or prepayment of the Bonds of any series will be made prior to the stated maturity of such series of Bonds. Whenever this Agreement provides for the determination of a Projected Debt Service Coverage Ratio, the Projected Debt Service Coverage Ratio shall be set forth in an Officer's Certificate of the Borrower filed with the Administrative -15- 20 Agent stating that, based upon reasonable investigation and review, the Projected Debt Service Coverage Ratio is based on the criteria set forth in the preceding sentence. "PUHCA" means the Public Utility Holding Company Act of 1935, as amended and in effect from time to time. "Purchase Agreement" means the agreement to purchase Bonds by and among the Borrower, Chase Securities, Inc. and Lehman Brothers, Inc. "Quarterly Dates" means the last Business Day of March, June, September and December in each year, the first of which shall be the first such day after the date hereof. "Rating Agencies" means S&P and Moody's, or another nationally recognized credit rating agency of similar standing if either of the foregoing corporations is not in the business of rating the subject of such rating. "Ratings Downgrade" means a lowering or withdrawal by a Rating Agency of the then current ratings of the Bonds. "Register" has the meaning set forth in Section 10.04. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Required Lenders" means, at any time, subject to Section 10.02(b), Lenders having outstanding Loans and unused Commitments representing more than 50% of the sum of the total outstanding Loans and unused Commitments at such time. "Restricted Payments" means (i) membership distributions by or distributions in respect of any equity interest in the Borrower or any Guarantor (in cash, securities, property or obligations) on, or (ii) any payments or distributions on account of, payments of interest on or the setting apart of money for a sinking or other analogous fund for, or the purchase, redemption, retirement or other acquisition of, (a) Subordinated Indebtedness or (b) any portion of any membership interest or equity interest in the Borrower or such Guarantor or of any warrants, options or other rights to acquire any such membership interest or equity interest (or to make any payments to any Person, such as "phantom stock" payments, where the amount thereof is calculated with reference to fair market or equity value of the Borrower or any Guarantor), provided that (x) distributions or other payments by an Obligor to another Obligor, and (y) distributions of proceeds from the sale of Assets Specifically Held for Resale, will not constitute Restricted Payments. "Revenues" means, with respect to the Borrower or any Guarantor, for any period, the sum of: (i) all revenues of the Borrower or any Guarantor in respect of its operations under any contract or agreement or otherwise including amounts received pursuant to Hedging Agreements (other than Interest Rate Agreements). -16- 21 "Revolver Amount" means $40,000,000. "Revolving Loan" means a Loan made pursuant to clause (e) of Section 2.01 and subject to the conditions precedent in Section 5.02. "S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill Companies, Inc or any successor thereto. "Senior Debt" means the Borrower's Indebtedness under this Agreement or any other Indebtedness (including the Bonds) of the Borrower that ranks pari passu with the Borrower's Indebtedness under this Agreement. "Statutory Reserve Rate" means, for the Interest Period for any Eurodollar Borrowing, a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the arithmetic mean, taken over each day in such Interest Period, of the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Subordinated Indebtedness" means any Indebtedness of the Borrower that is (a) payable solely and exclusively from the funds that would otherwise have been available to make Restricted Payments from the Borrower or any Guarantor, (b) fully subordinated in all rights and remedies to Senior Debt on terms substantially similar to the subordination provisions set forth in Exhibit B and (c) unsecured. "Subsidiary" means, with respect to any Person, (i) any corporation 50% or more of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person, directly or indirectly through Subsidiaries, and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person, directly or indirectly through Subsidiaries, has a 50% or greater equity interest at the time. "Taxes" means, with respect any Person, any tax (whether income, gross receipts, documentary, sales, stamp, registration, issue, capital, property, excise or otherwise), duty, levy, impost, fee, charge or withholding directly or indirectly imposed, assessed, levied or collected by or for the account of any Governmental Authority. -17- 22 "Title Event" means the existence of any defect of title or Lien or encumbrance on the Facilities which entitles the Collateral Agent, the Borrower or any Guarantor to make a claim under the title insurance policy in effect with respect to any Facilities. "Transaction Documents" means the Financing Documents, the Power Sales Agreements, the Power Marketing Agreement, the Corporate Services Agreements and the Operation and Management Services Agreement. "Transactions" means the execution, delivery and performance by each Obligor of this Agreement and the other Transaction Documents to which such Obligor is or is intended to be a party or by which it or its properties are bound. "Trustee" means Chase, acting solely in its capacity as trustee for the holder of the Bonds and its successors and assigns, and any corporation resulting from or surviving any consolidation or merger to which it or its successors and assigns may be a party, or any successor to all or substantially all of its corporate trust business, provided that any such successor or assign or surviving corporation shall be eligible for appointment as trustee pursuant to the Indenture, until a successor Trustee must have become such pursuant to the applicable provisions of the Indenture, and thereafter means such successor Trustee. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans constituting such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "Unrestricted Subsidiary" means (i) any Subsidiary of the Borrower that is designated by the Borrower's Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness or other liabilities or obligations other than Non-Recourse Obligations; (b) is not party to any agreement, contract, arrangement or understanding with the Borrower or any Guarantor unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Borrower or such Guarantor than those that might be obtained at the time from Persons who are not Affiliates of the Borrower; and (c) is a Person with respect to which neither the Borrower nor any of the Guarantors has any direct or indirect obligation (x) to subscribe for additional equity interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results. Any such designation by the Borrower's Board of Directors shall be evidenced to the Administrative Agent by filing with the Administrative Agent a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement, and for all other purposes such Subsidiary will be deemed to be a Guarantor and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Guarantor as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 6.08 hereof, the Borrower shall be in default of such Section). The Board of Directors of the Borrower may at any time designate any Unrestricted Subsidiary to be a Guarantor; provided that such designation shall be deemed to be an incurrence of Indebtedness -18- 23 by a Guarantor of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 6.08 hereof, and (ii) no Default or Event of Default would occur or be in existence following such designation. SECTION 1.02. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.03. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. SECTION 1.04. Working Capital Facility Agent. The parties hereby acknowledge and agree that the revolving credit facility created pursuant to this Agreement shall be the sole "Working Capital Facility," as such term is defined in the Indenture, and that the Administrative Agent shall be the sole "Working Capital Facility Agent" as therein defined. ARTICLE II. THE CREDITS. SECTION 2.01. The Commitments. Subject to the terms and conditions set forth herein, each Lender agrees to make Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount not exceeding the lesser of (i) its -19- 24 Commitment and (ii) its ratable share (in accordance with its respective Commitment) of the Revolver Amount as at the date such Loan is made. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow the Loans. SECTION 2.02. Loans and Borrowings. (a) Obligations of Lenders. Each Loan shall be made as part of a Borrowing consisting of Loans of the same Type made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Type of Loans. Subject to Section 2.11, each Borrowing shall be constituted entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) Minimum Amounts; Limitation on Number of Borrowings. At the commencement of the Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount of $1,000,000 or a larger multiple of $500,000. At the time that each ABR Borrowing is made, such Borrowing shall (except in the case of a Borrowing that utilizes the full amount of the relevant Commitment) be in an aggregate amount equal to $500,000 or a larger multiple of $100,000. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of six Eurodollar Borrowings outstanding. (d) Limitations on Lengths of Interest Periods. Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert to or continue as a Eurodollar Borrowing, any Borrowing if the Interest Period requested therefor would end after the Maturity Date. SECTION 2.03. Requests for Borrowings. To request a Borrowing, the Borrower shall deliver to the Administrative Agent a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such Borrowing Request shall be irrevocable. Each such Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; -20- 25 (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the Interest Period therefor, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.04. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Funding of Borrowings. (a) Funding by Lenders. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower permitted under the Indenture and designated by the Borrower in the applicable Borrowing Request. (b) Presumption by the Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the case of the Borrower, the interest rate that applies to the applicable Borrowing. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. -21- 26 SECTION 2.05. Interest Elections. (a) Elections by the Borrower for Borrowings. Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have the Interest Period specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a Borrowing of a different Type or to continue such Borrowing as a Borrowing of the same Type and, in the case of a Eurodollar Borrowing, may elect the Interest Period therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans constituting such Borrowing, and the Loans constituting each such portion shall be considered a separate Borrowing. (b) Notice of Elections. To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Information in Interest Election Requests. Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) of this paragraph shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period therefor after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. -22- 27 (d) Notice by the Administrative Agent to Lenders. Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) Failure to Elect; Events of Default. If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period therefor, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period therefor. SECTION 2.06. Termination and Reduction of the Commitments. (a) Scheduled Termination. Unless previously terminated, the Commitments shall terminate at 5:00 p.m., New York City time, on the last day of the Availability Period. (b) Voluntary Termination or Reduction. The Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that (except in the case of any such termination of the full amount of the Commitments) each reduction of the Commitments pursuant to this Section shall be in an amount that is $5,000,000 or a larger multiple of $1,000,000. (c) Notice of Voluntary Termination or Reduction. The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable. (d) Effect of Termination or Reduction. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments. SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) Repayment. The Borrower hereby unconditionally promises to pay the Loans to the Administrative Agent for the account of the Lenders the outstanding principal amount of the Loans on the Maturity Date. (b) Manner of Payment. Prior to any repayment or prepayment of any Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be paid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not -23- 28 later than 11:00 a.m., New York City time, two Business Days before, in the case of a Loan that is a Eurodollar Loan, two Business Days before and in the case of a Loan that is an ABR Loan, the same day as, the scheduled date of such repayment; provided that each repayment of Borrowings shall be applied to repay any outstanding ABR Borrowings before any other Borrowings. If the Borrower fails to make a timely selection of the Borrowing or Borrowings to be repaid or prepaid, such payment shall be applied, first, to pay any outstanding ABR Borrowings and, second, to other Borrowings in the order of the remaining duration of their respective Interest Periods (the Borrowing with the shortest remaining Interest Period to be repaid first). Each payment of a Borrowing shall be applied ratably to the Loans included in such Borrowing. (c) Maintenance of Loan Accounts by Lenders. Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (d) Maintenance of Loan Accounts by the Administrative Agent. The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and each Interest Period therefor, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (e) Effect of Entries. The entries made in the accounts maintained pursuant to paragraph (c) or (d) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (f) Promissory Notes. Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 10.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.08. Prepayment of Loans. (a) Optional Prepayments. The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, subject to the Borrower's right to reborrow such amounts as provided in this Agreement. (b) Mandatory Prepayments. The Borrower shall prepay the Loans, and the Commitments shall be automatically reduced, as follows: -24- 29 (i) If (x) an Event of Loss occurs with respect to any Facilities and (y) the Borrower or any Guarantor (or the Collateral Agent on their behalf) receives Loss Proceeds in connection with such Event of Loss in excess of $10,000,000 and (z) the Facilities are not or cannot be repaired, rebuilt or replaced in accordance with an Approved Restoration Plan, then (A) the Loss Proceeds in excess of $10,000,000 shall be used to prepay the Loans in an amount equal to the amount allocated to each Lender as its pro rata share of Loss Proceeds pursuant to Section 5.6(c) of the Collateral Agency and Intercreditor Agreement and (B) each Lender's Commitment shall be reduced by the amount so received. (ii) If (x) an Event of Loss occurs with respect to any Facilities and (y) the Facilities are repaired, rebuilt or replaced in accordance with an Approved Restoration Plan and (z) the Borrower or a Guarantor (or the Collateral Agent on their behalf) receives Loss Proceeds in excess of $5,000,000 in excess of the cost of such repair, rebuilding or replacement in connection with such Event of Loss, then (A) the Loss Proceeds in excess of $5,000,000 shall be used to prepay the Loans in an amount equal to the amount allocated to each Lender as its pro rata share of Loss Proceeds pursuant to Section 5.6(d) of the Collateral Agency and Intercreditor Agreement and (B) each Lender's Commitment shall be reduced by the amount so received. (iii) If a Title Event occurs with respect to any Facilities and the Borrower or a Guarantor (or the Collateral Agent on their behalf) receives proceeds in connection with such Title Event in excess of $10,000,000, then (A) the proceeds in excess of $10,000,000 shall be used to prepay the Loans in an amount equal to the amount allocated to each Lender as its pro rata share of Loss Proceeds pursuant to Section 5.6(a) of the Collateral Agency and Intercreditor Agreement and (B) each Lender's Commitment shall be reduced by the amount so received. (c) Notices, Etc. The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, two Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date, the principal amount to be prepaid, in the case of a reduction of the Commitments and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment shall be in an amount that would be permitted in the case of a Borrowing of the same Type as provided in Section 2.02, except as necessary to apply fully the required amount of a mandatory prepayment. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.10 and shall be made in the manner specified in Section 2.07(b). SECTION 2.09. Fees. (a) Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at a rate per annum equal -25- 30 to the amount set forth on Schedule V hereto corresponding to the then senior secured ratings of the Borrower on the average daily unused amount of the Commitment of such Lender for the period from and including April 30, 2000 to but not including the earlier of the date such Commitment terminates and the last day of the Availability Period. Accrued commitment fees shall be payable in arrears on each Quarterly Date and on the earlier of the date the relevant Commitment terminates and the last day of the Availability Period, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) Agents' Fees. The Borrower agrees to pay the Administrative Agent the fees payable to the Administrative Agent in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (c) Payment of Fees. All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances. SECTION 2.10. Interest. (a) ABR Loans. The Loans constituting each ABR Borrowing shall bear interest at a rate per annum equal to the Alternate Base Rate plus the Applicable Rate. (b) Eurodollar Loans. The Loans constituting each Eurodollar Borrowing shall bear interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period for such Borrowing plus the Applicable Rate. (c) Default Interest. Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration, by mandatory prepayment or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 5% plus the rate otherwise applicable to such Loan as provided above or (ii) in the case of any other amount, 5% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (d) Payment of Interest. Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Borrowing prior to the end of the Interest Period therefor, accrued interest on such Borrowing shall be payable on the effective date of such conversion. (e) Computation. All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on clause (a) of the definition "Alternate Base Rate" shall be -26- 31 computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.11. Alternate Rate of Interest. If prior to the commencement of the Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.12. Increased Costs. (a) Increased Costs Generally. If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) Capital Requirements. If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of -27- 32 this Agreement or the Loans made by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) Certificates from Lenders. A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 30 days after receipt thereof. (d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than six months prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided, further, that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six-month period referred to above shall be extended to include the period of retroactive effect thereof; provided, however, that, the Borrower shall have no obligation with respect to demands made after the Maturity Date. SECTION 2.13. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period therefor (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of an Interest Period therefor, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment of any Eurodollar Loan other than on the last day of an Interest Period therefor as a result of a request by the Borrower pursuant to Section 2.16, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, the loss to any Lender attributable to any such event shall be deemed to include an amount determined by such Lender to be equal to the excess, if any, of (i) the amount of interest that such Lender would pay for a deposit equal to the principal amount of such Loan for the period from the date of such payment, conversion, failure or assignment to the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert or continue, the duration of the Interest Period that would have resulted from such borrowing, conversion or continuation) if the interest rate payable on such deposit were equal to the Adjusted LIBO Rate for such Interest Period, over (ii) the amount of interest that such Lender would earn on such principal amount for such period if such Lender were to invest such principal amount for such period at the interest rate that would be bid by such Lender (or an affiliate of such Lender) for Dollar deposits from other banks in the eurodollar market at the commencement of such period. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower -28- 33 and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.14. Taxes. (a) Payments Free of Taxes. Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Financing Document shall be made free and clear of and without deduction for any Taxes; provided that if the Borrower shall be required to deduct any Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) Payment of Other Taxes by the Borrower. In addition, the Borrower shall pay any other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Taxes (including Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (d) Evidence of Payments. As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Foreign Lenders. Any Foreign Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate. SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) Payments by the Obligors. Each Obligor shall make each payment required to be made by it hereunder (whether of principal, interest or fees, or under Section 2.12, 2.13 or -29- 34 2.14, or otherwise) or under any other Financing Document (except to the extent otherwise provided therein) prior to 1:00 p.m., New York City time, on the date when due, in immediately available funds, without set-off or counterclaim. Any amounts received after such time on any date may, at the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices at 1251 Avenue of the Americas, New York, New York 10020, except as otherwise expressly provided in the relevant Financing Document, and except that payments pursuant to Sections 2.12, 2.13, 2.14 and 10.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension; provided, that nothing herein shall extend any payment beyond the Maturity Date. All payments hereunder or under any other Financing Document (except to the extent otherwise provided therein) shall be made in Dollars. (b) Application of Insufficient Payments. If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts then due hereunder, such funds shall be applied (i) first, to reimburse or pay all reasonable out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder, (ii) second, to pay interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (iii) third, to pay principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) Pro Rata Treatment. Except to the extent otherwise provided herein: (i) each Borrowing shall be made from the relevant Lenders, each payment of fees under Section 2.09 in respect of Commitments shall be made for the account of the relevant Lenders, and each termination or reduction of the amount of the Commitments under Section 2.06 shall be applied to the respective Commitments of the relevant Lenders, pro rata according to the amounts of their respective Commitments; (ii) each Borrowing shall be allocated pro rata among the relevant Lenders according to the amounts of their respective Commitments (in the case of the making of Loans) or their respective Loans (in the case of conversions and continuations of Loans); (iii) each payment or prepayment of principal of Loans by the Borrower shall be made for the account of the relevant Lenders pro rata in accordance with the respective unpaid principal amounts of the Loans held by them; and (iv) each payment of interest on Loans by the Borrower shall be made for the account of the relevant Lenders pro rata in accordance with the amounts of interest on such Loans then due and payable to the respective Lenders. (d) Sharing of Payments by Lenders. If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon then due than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash -30- 35 at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by any Obligor pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Obligor consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Obligor rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Obligor in the amount of such participation. (e) Presumptions of Payment. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the Federal Funds Effective Rate. (f) Certain Deductions by the Administrative Agent. If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) or 2.15(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.16. Mitigation Obligations; Replacement of Lenders. (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the sole judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or 2.14, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. -31- 36 The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) Replacement of Lenders. If any Lender requests compensation under Section 2.12, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, or if any Lender defaults in its obligation to fund Loans hereunder, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 10.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder (other than, in the case of the replacement of any Lender that defaults in its obligation to fund Loans hereunder, amounts payable to such Lender pursuant to Section 2.13 to the extent such amounts are payable solely as a result of such replacement), from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. ARTICLE III. GUARANTEE. SECTION 3.01. The Guarantees. The Guarantors (which in no event shall include any Unrestricted Subsidiary) hereby jointly and severally guarantee to each Lender and the Administrative Agent and their respective successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the Loans made by the Lenders to the Borrower and all other amounts from time to time owing to the Lenders or the Administrative Agent by the Borrower under this Agreement and by any Obligor under any of the other Financing Documents strictly in accordance with the terms thereof (such obligations being herein collectively called the "Guaranteed Obligations"). The Guarantors hereby further jointly and severally agree that if the Borrower shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. -32- 37 SECTION 3.02. Obligations Unconditional. The obligations of the Guarantors under Section 3.01 are absolute and unconditional, joint and several, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of the Borrower under this Agreement or any other agreement or instrument referred to herein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations, and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section that the obligations of the Guarantors hereunder shall be absolute and unconditional, joint and several, under any and all circumstances. Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder, which shall remain absolute and unconditional as described above: (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or any other agreement or instrument referred to herein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be modified, supplemented or amended in any respect, or any right under this Agreement or any other agreement or instrument referred to herein shall be waived or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; or (iv) any lien or security interest granted to, or in favor of, the Administrative Agent or any Lender or Lenders as security for any of the Guaranteed Obligations shall fail to be perfected. The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Administrative Agent or any Lender exhaust any right, power or remedy or proceed against the Borrower under this Agreement or any other agreement or instrument referred to herein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations. SECTION 3.03. Reinstatement. The obligations of the Guarantors under this Article shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of the Borrower in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any Lender of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, and the Guarantors jointly and severally agree that they will indemnify the Administrative Agent and each Lender on demand for all reasonable costs and expenses (including reasonable fees of counsel) incurred by the Administrative Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment -33- 38 constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. SECTION 3.04. Subrogation. The Guarantors hereby jointly and severally agree that, until the payment and satisfaction in full of all Guaranteed Obligations and the expiration and termination of the Commitments of the Lenders under this Agreement, they shall not exercise any right or remedy arising by reason of any performance by them of their guarantees in Section 3.01, whether by subrogation or otherwise, against the Borrower or any other guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. SECTION 3.05. Remedies. The Guarantors jointly and severally agree that, as between the Guarantors and the Lenders, the obligations of the Borrower under this Agreement may be declared to be forthwith due and payable as provided in Article VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in Article VIII), for purposes of Section 3.01 notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against the Borrower, and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by the Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 3.01. SECTION 3.06. Instrument for the Payment of Money. Each Guarantor hereby acknowledges that the guarantees in this Article constitute an instrument for the payment of money, and consents and agrees that any Lender or the Administrative Agent, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring motion - action under New York CPLR Section 3213. SECTION 3.07. Continuing Guarantees. The guarantees in this Article are continuing guarantees and shall apply to all Guaranteed Obligations whenever arising. SECTION 3.08. Rights of Contribution. The Guarantors hereby agree, as between themselves, that if any Guarantor shall become an Excess Funding Guarantor (as defined below) by reason of the payment by such Guarantor of any Guaranteed Obligations, each other Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the next sentence), pay to such Excess Funding Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below and determined, for this purpose, without reference to the properties, debts and liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of such Guaranteed Obligations. The payment obligation of a Guarantor to any Excess Funding Guarantor under this Section shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Guarantor under the other provisions of this Article, and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations. For purposes of this Section, (i) "Excess Funding Guarantor" means, in respect of any Guaranteed Obligations, a Guarantor that has paid an amount in excess of its Pro Rata Share -34- 39 of such Guaranteed Obligations, (ii) "Excess Payment" means, in respect of any Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share" means, for any Guarantor, the amount calculated by multiplying (A) all amounts due and payable in respect of the Guaranteed Obligations by (B) the ratio of (x) the amount by which the aggregate present fair saleable value of all assets of such Guarantor (excluding any shares of stock of any other Guarantor) exceeds the amount of all the debts and liabilities of such Guarantor (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder and any obligations of any other Guarantor that have been Guaranteed by such Guarantor) to (y) the amount by which the aggregate fair saleable value of all assets of all of the Guarantors exceeds the amount of all the debts and liabilities (including contingent, subordinated, unmatured and unliquidated liabilities, but excluding the obligations of the Borrower and the Guarantors hereunder and under the other Transaction Documents) of all of the Guarantors, determined (A) with respect to any Guarantor that is a party hereto on the Effective Date, as of the Effective Date, and (B) with respect to any other Guarantor, as of the date such Guarantor becomes a Guarantor hereunder. SECTION 3.09. General Limitation on Guarantee Obligations. In any action or proceeding involving any state corporate law, or any state or Federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 3.01 would otherwise, taking into account the provisions of Section 3.08, be held or determined to be void, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 3.01, then, notwithstanding any other provision hereof to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Lender, the Administrative Agent or any other Person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. SECTION 3.10. Effectiveness. The respective obligations of each Additional Guarantor under this Article III shall not be effective unless and until an Authorized Representative of the Borrower shall have delivered a certificate (each, a "Guarantee Effectiveness Certificate") to the Administrative Agent to the effect that (i) all Governmental Approvals under Section 204 of the Federal Power Act as may be necessary for such Guarantor to incur and perform its obligations under this Article III have been obtained and remain in effect and that all applicable waiting periods have expired without any action being taken by any competent authority which restricts, prevents or imposes materially adverse conditions upon the incurrence or performance of such obligations and (ii) after giving effect to the addition of such Additional Guarantor, the Rating Agencies shall have confirmed their respective ratings of the Bonds in effect immediately prior to the addition of such Additional Guarantor. The Borrower shall cause a Guarantee Effectiveness Certificate in respect of each Additional Guarantor to be delivered to the Administrative Agent within four Business Days after receipt by such Guarantor of such Governmental Approvals, the expiration of such applicable waiting periods and receipt of such confirmation. -35- 40 ARTICLE IV. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants as of the Effective Date to the Lenders that: SECTION 4.01. Organization; Powers. The Borrower and each of the Guarantors have been duly organized and are validly existing as limited liability companies and NRG Power Marketing has been duly organized and is validly existing as a corporation and each of the Borrower, the Guarantors and NRG Power Marketing is in good standing under the laws of its respective jurisdiction of organization, is duly qualified to do business and is in good standing in each jurisdiction in which its respective ownership or lease of property or the conduct of its respective business requires such qualification, and has all power and authority necessary to own or hold its respective properties and to conduct the business in which it is engaged, except where the failure to so qualify or have such power or authority could not, singularly or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 4.02 Authorization; Enforceability. (a) Each of the Borrower, NRG Power Marketing and each Guarantor has full right, power and authority to execute and deliver the Financing Documents to which it is a party and to perform its obligations hereunder and thereunder; and all limited liability company or other action required to be taken for the due and proper authorization, execution and delivery of each of the Transaction Documents to which the Borrower, NRG Power Marketing and each Guarantor is a party and the consummation of the transactions contemplated thereby have been duly and validly taken. (b) This Agreement has been duly authorized, executed and delivered by the Borrower and each Guarantor and constitutes a valid and legally binding agreement of the Borrower and each Guarantor. SECTION 4.03. No Conflicts; Governmental Approvals. (a) The execution, delivery and performance by the Borrower and each Guarantor of each of the Transaction Documents to which it is a party, the issuance, authentication, sale and delivery of the Bonds and compliance by the Borrower with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or (except for the Collateral Documents) result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Borrower or any Guarantor pursuant to, any material indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Borrower or any Guarantor is a party or by which the Borrower or any Guarantor is bound or to which any of the property or assets of the Borrower or any Guarantor is subject, except such conflicts, breaches, violations, defaults, liens charges or encumbrances as could not reasonably be expected to have a Material Adverse Effect, nor will such actions result in any violation of the provisions of the charter or by-laws of the Borrower or any Guarantor or any statute or any judgment, order, decree, rule or regulation of any court or arbitrator or -36- 41 governmental agency or body having jurisdiction over the Borrower or any Guarantor or any of their properties or assets, except such violation as could not reasonably be expected to have a Material Adverse Effect. (b) No consent, approval, authorization or order of, or filing or registration with, any court or arbitrator or governmental agency or body under any such statute, judgment, order, decree, rule or regulation is required for the execution, delivery and performance by the Borrower or any Guarantor of each of the Transaction Documents and compliance by the Borrower and each Guarantor with the terms thereof and the consummation of the transactions contemplated by the Transaction Documents, except for such consents, approvals, authorizations, filings, registrations or qualifications which shall have been obtained or made prior to the Effective Date. (c) The Borrower, NRG Power Marketing and each Guarantor possess all material licenses, certificates, authorizations and permits issued by, and have made all filings with, the appropriate federal, state or foreign regulatory agencies or bodies which are necessary for the execution, delivery and performance of its respective obligations under this Agreement and the other Financing Documents, except where the failure to possess or make the same could not reasonably be expected to have a Material Adverse Effect, and neither the Borrower nor any Guarantor has received notification of any revocation or modification of any such license, certificate, authorization or permit or has any reason to believe that any such license, certificate, authorization or permit will not be renewed in the ordinary course, except where such revocation, modification or non-renewal could not reasonably be expected to have a Material Adverse Effect. SECTION 4.04. Financial Condition. PricewaterhouseCoopers LLP are independent certified public accountants with respect to the Borrower and the Guarantors within the meaning of Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA") and its interpretations and rulings thereunder. The financial statements furnished to the Lenders have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods covered thereby, except as may be set forth in such financial statements, and fairly present the financial position of the entities purported to be covered thereby at the respective dates or respective periods indicated. SECTION 4.05. Actions, Suits and Proceedings. There are no legal or governmental proceedings pending to which the Borrower or any Guarantor is a party or of which any property or assets of the Borrower or any Guarantor is the subject which could reasonably be expected likely to have a Material Adverse Effect; and to the best knowledge of the Borrower, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. SECTION 4.06. Compliance with Laws and Agreements. Neither the Borrower, nor NRG Power Marketing nor any Guarantor is (i) in violation of its organizational documents, (ii) in default in any respect, and no event has occurred -37- 42 which, with notice, lapse of time, the making of any determination or any combination thereof, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Borrower or any Guarantor is a party or by which the Borrower or any Guarantor is bound or to which any of their respective properties or assets is subject or (iii) in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject, except in the case of clause (i), (ii) or (iii) as could not reasonably be expected to have a Material Adverse Effect. SECTION 4.07. Taxes. The Borrower and each Guarantor have filed all federal, state, local and foreign income and franchise tax returns required to be filed through the date hereof and have paid all taxes due thereon, and no tax deficiency has been determined adversely to the Borrower or any Guarantor which has had (nor does the Borrower or any Guarantor have any knowledge of any tax deficiency which, if determined adversely to the Borrower or any Guarantor, could reasonably be expected to have) a Material Adverse Effect, except where such tax is being contested in good faith and where adequate reserves are maintained in accordance with generally accepted accounting principles. SECTION 4.08. Investment Company Status. Neither the Borrower nor any of the Guarantors is required to be registered or regulated as an "investment company" or a company "controlled by" an investment company within the meaning of the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the rules and regulations thereunder. SECTION 4.09. Utility Regulation. (a) Neither the Borrower nor any of the Guarantors, nor any of the members of the Borrower or any operator of any Facility owned by the Borrower or the Guarantors is a "public utility company", an "electric utility company" or a "holding company" within the meaning of PUHCA, nor subject to regulation under PUHCA except pursuant to Section 9(a)(2) or Section 32 thereof. (b) Each Guarantor that owns or operates facilities used for the generation, transmission or distribution or electric energy for sale is an "exempt wholesale generator" under Section 32(a) of PUHCA and none of the subsidiaries, nor any of the Administrative Agent, the Collateral Agent or the Lenders is or will be, solely as a result of the participation by such parties individually or as a group in the ownership of the Borrower or the Borrower's and its subsidiaries' use or operation of each Facility and sale of power generated by any such Facility, subject to regulation as a "public-utility company," an "electric utility company," a "holding company" or a "subsidiary company" or "affiliate" of any of the foregoing, under PUHCA. (c) So long as each Guarantor referred to in Section 4.09(b) owns and operates its Facilities as an "exempt wholesale generator" under Section 32(a) of PUHCA, none of the Administrative Agent, the Collateral Agent or the Lenders will solely by reason of the exercise of remedies under the Collateral Documents be subject to regulation as a "public-utility -38- 43 company," an "electric utility company," or a "holding company," or a "subsidiary company" or "affiliate" of any of the foregoing, under PUHCA. SECTION 4.10. Accounting. The Borrower and each of the Guarantors maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. SECTION 4.11. Insurance. The Borrower and each Guarantor have insurance covering their respective properties, operations, personnel and businesses, which insurance is substantially in amounts and against such insurable risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations and against risks and substantially in amounts customarily insured against by other enterprises with similar capital structures and owning and operating facilities of like size and type as that of the Facilities in accordance with prudent independent power industry practice. Neither the Borrower nor any Guarantor has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance. SECTION 4.12. Properties. (a) The Borrower and each Guarantor own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses, except where the failure to own or possess could not reasonably be expected to have a Material Adverse Effect; and the conduct of their respective businesses will not conflict in any material respect with, and the Borrower and the Guarantors have not received any notice of any claim of conflict with, any such rights of others, which could reasonably be expected to have a Material Adverse Effect. (b) The Borrower and each Guarantor have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property which are material to the business of the Borrower and the Guarantors, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except such as (i) do not materially interfere with the use made and proposed to be made of such property by the Borrower and the Guarantors, (ii) could not reasonably be expected to have a Material Adverse Effect or (iii) are created or permitted by the Financing Documents. -39- 44 SECTION 4.13. Labor; ERISA. (a) No labor disturbance by or dispute with the employees of the Borrower or any of its Subsidiaries exists or, to the best knowledge of the Borrower, is contemplated or threatened. (b) No "prohibited transaction" (as defined in Section 406 of ERISA, or Section 4975 of the Code) or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan of the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect; each such employee benefit plan is in compliance in all material respects with applicable law, including ERISA and the Code; the Borrower and each of its Subsidiaries have not incurred and do not expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any pension plan for which the Borrower or any of its Subsidiaries would have any liability; and each such pension plan that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could reasonably be expected to cause the loss of such qualification. SECTION 4.14. Environmental Matters. There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission or other release of any kind of toxic or other wastes or other hazardous substances by, due to or caused by the Borrower or any of its Subsidiaries (or, to the best knowledge of the Borrower, any other entity (including any predecessor) for whose acts or omissions the Borrower or any of its Subsidiaries is or could reasonably be expected to be liable) upon any of the property now or previously owned or leased by the Borrower or any of its Subsidiaries, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit, in each case, now in effect or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability of the Borrower or any of its Subsidiaries, except for any violation or liability which could not reasonably be expected to have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Effect; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Borrower has knowledge, except for any such disposal, discharge, emission or other release of any kind which could not reasonably be expected to have a Material Adverse Effect. SECTION 4.15. No Material Adverse Change. Since February 15, 2000, (i) there has been no material adverse change or any development involving a prospective material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of the Borrower and its Subsidiaries, whether or not arising in the ordinary course of business, (ii) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs, management or business prospects of NRG Power Marketing or NRG Operating that has had or could reasonably be expected to have -40- 45 a Material Adverse Effect, (iii) neither the Borrower nor any Guarantor has incurred any material liability or obligation, direct or contingent, other than in the ordinary course of business, (iv) except for the transactions contemplated by the Transaction Documents, neither the Borrower nor any Guarantor has entered into any material transaction other than in the ordinary course of business and (v) there has not been any change in the ownership or long-term debt of the Borrower or the Guarantors, or any dividend or distribution of any kind declared, paid or made by the Borrower or the Guarantors on any class of its membership interests. SECTION 4.16. Certificates. Any certificate signed by any officer of the Borrower or any Guarantor and delivered to the Lenders in connection with the performance of obligations under the Financing Documents shall be deemed a representation and warranty by the Borrower, as to matters covered thereby, to the Lenders. SECTION 4.17. Use of Credit. Neither the Borrower nor any Guarantor is engaged principally, or as one of its important activities, in the business of extending credit for the purpose, whether immediate, incidental or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of any Loan hereunder will be used to buy or carry any Margin Stock. SECTION 4.18. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of the Obligors to the Lender in connection with the negotiation of this Agreement, the other Financing Documents and the Bond Documents or delivered hereunder or thereunder (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. ARTICLE V. CONDITIONS PRECEDENT. SECTION 5.01. Effective Date. The respective obligations of the Lenders hereunder are subject to the accuracy, on and as of the date hereof and the Effective Date, of the representations and warranties of the Borrower contained herein, to the accuracy of the statements of the Borrower and its officers made in any certificates delivered pursuant hereto, to the performance by the Borrower of its obligations hereunder, and to each of the following additional terms and conditions: (a) Executed Counterparts. The Administrative Agent shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page to this Agreement) that such party has signed a counterpart of this Agreement. -41- 46 (b) Intercreditor Agreement. The Administrative Agent shall have received a counterpart of a Designation Letter, dated as of the date hereof, duly executed by the Collateral Agent, acknowledging the designation of the Administrative Agent as the "Working Capital Facility Agent" under the Collateral Agency and Intercreditor Agreement. (c) Transaction Documents. The Administrative Agent shall have received certified copies of the Transaction Documents then in effect, in form and substance satisfactory to the Lenders. (d) Offering Circular. (i) The Offering Circular (and any amendments or supplements thereto) shall have been printed and copies thereof distributed to the Lenders prior to the Effective Date; and (ii) none of the Lenders shall have discovered and disclosed to the Borrower on or prior to the Effective Date that the Offering Circular or any amendment or supplement thereto contains an untrue statement of a fact which, in the reasonable opinion of counsel for the Lenders, is material or omits to state any fact which, in the reasonable opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (e) Corporate Proceedings. All corporate proceedings and other legal matters incident to the authorization, form and validity of each of the Transaction Documents and the Offering Circular, and all other legal matters relating to the Transaction Documents and the transactions contemplated thereby, shall be satisfactory in all material respects to the Lenders, and the Borrower and the Guarantors shall have furnished to the Lenders all documents and information that they or their counsel may reasonably request to enable them to pass upon such matters. (f) Opinion of Counsel to the Borrower. Gibson, Dunn & Crutcher LLP shall have furnished to the Lenders their written opinion, as counsel to the Borrower, addressed to the Lenders, and dated the Effective Date, in form and substance reasonably satisfactory to the Lenders and covering such other matters relating to the Borrower, this Agreement or the Transactions as the Lenders shall reasonably request. (g) Opinion of Local Counsel to the Borrower. The Lenders shall have received from Jones, Walker, Waechter, Poitevent, Carrere and Denegre, special Louisiana counsel for the Borrower, such opinion or opinions, addressed to the Lenders, dated the Effective Date, with respect to such matters as the Lenders may reasonably require, and the Borrower and the Guarantors shall have furnished to such counsel such documents and information as they reasonably request for the purpose of enabling them to pass upon such matters. -42- 47 (h) Officer's Certificate. The Borrower shall have furnished to the Lenders a certificate, dated the Effective Date, of an officer of the Borrower stating that (A) such officer has carefully examined the Offering Circular, (B) in such officer's opinion, the Offering Circular, as of its date, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and since the date of the Offering Circular, no event has occurred which should have been set forth in a supplement or amendment to the Offering Circular so that the Offering Circular (as so amended or supplemented) would not include any untrue statement of a material fact and would not omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading and (C) as of the Effective Date, the representations and warranties of the Borrower in this Agreement are true and correct in all material respects, the Borrower has complied in all material respects with all agreements and satisfied in all material respects all conditions on its part to be performed or satisfied hereunder on or prior to the Effective Date, and subsequent to the date of the most recent financial statements contained in the Offering Circular, there has been no Material Adverse Change, or any change, or any development including a prospective change, in or affecting the condition (financial or otherwise), results of operations, business or prospects of the Borrower and the Guarantors taken as a whole, except as set forth in the Offering Circular. (i) Closing of the Bond Offering. The $800,000,000 Bond offering by the Borrower shall have been completed. (j) Closing of the Acquisition of the Cajun Facilities. The acquisition of the Cajun Facilities by the Initial Guarantor shall have been completed. (k) Independent Engineer's Report. The Independent Engineer shall have delivered its final report to the Lenders in form and substance reasonably satisfactory in all respects to the Administrative Agent favorably reviewing (among other matters) the technical feasibility of all engineering, design, capacity and operating specifications and arrangements and capital expenditure and operating cost estimates relating to the Facilities and environmental matters relating to the Facilities and provided a letter, dated as of the closing of the Bond offering, confirming its report and the conclusions therein as of such date. (l) Independent Market Consultant's Report. The Independent Market Consultant shall have delivered its final report to the Lenders in form and substance reasonably satisfactory in all respects to the Lenders and provided a letter, dated as of the closing of the Bond offering, confirming its report and the conclusions therein as of such date. (m) Independent Insurance Consultant's Report. The Independent Insurance Consultant shall have delivered its final report to the Lenders in form and substance reasonably satisfactory in all respects to the Lenders and provided a letter, dated as of the -43- 48 closing of the Bond offering, confirming its report and the conclusions therein as of such date. (n) Federal Energy Regulatory Commission Approval. All Governmental Approvals under Section 204 of the Federal Power Act as may be necessary for the Borrower to incur and perform its obligations under this Agreement shall have been obtained and remain in effect and all applicable waiting periods shall have expired without any action being taken by any competent authority which restricts, prevents or imposes materially adverse conditions upon the incurrence or performance of such obligations. (o) Fees and Taxes. (i) Evidence that all filing, recordation, subscription and inscription fees and all recording and other similar fees, and all recording, stamp and other taxes and other expenses related to such filings, registrations and recordings necessary for the consummation of the transactions contemplated by this Agreement and the other Transaction Documents have been paid in full (to the extent the obligation to make such payment then exists) by or on behalf of the Borrower and (ii) the Administrative Agent shall have received all fees and other amounts due and payable hereunder, including, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder. SECTION 5.02. Conditions Precedent for each Loan. The obligation of each Lender to make a Loan on or after the Effective Date is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. The representations and warranties of the Borrower set forth in this Agreement, and of each Obligor in each of the Financing Documents to which such Obligor is a party, shall be true and correct on and as of the date of such Borrowing by reference to circumstances then pertaining. (b) No Defaults. At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing. (c) Available Revolver Amount. Immediately after giving effect to such Borrowing, the aggregate outstanding principal amount of the Loans of all Lenders will be equal to or less than the Revolver Amount. (d) Borrowing Request. The Administrative Agent shall have received a Borrowing Request in accordance with Section 2.03. Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in clauses (a), (b) and (c) above. -44- 49 ARTICLE VI. COVENANTS OF THE BORROWER. Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees and expenses payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent: (a) within 105 days after the end of each fiscal year of the Borrower, (i) the audited consolidated balance sheet and related statements of operations, members' equity and cash flows of the Borrower and its Subsidiaries as of the end of and for such year and (ii) the audited consolidated balance sheet and related statements of operations, members' equity and cash flows of the Borrower and the Guarantors as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by PricewaterhouseCoopers LLP or other independent public accountants of recognized national standing (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, (i) the unaudited consolidated balance sheet and related statements of operations, members' equity and cash flows of the Borrower and its Subsidiaries as of the end of and for such fiscal quarter and the then-elapsed portion of the fiscal year and (ii) the unaudited consolidated balance sheet and related statements of operations, members' equity and cash flows of the Borrower and the Guarantors (excluding the financial condition and results of operations of the Borrower and the Unrestricted Subsidiaries), setting forth in each case in comparative form the figures for (or, in the case of the balance sheet, as of the end of) the corresponding period or periods of the previous fiscal year, all certified by an Authorized Representative of the Borrower as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under clause (a) or (b) of this Section, an Officer's Certificate (i) certifying as to whether to the best knowledge of the signer thereof a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) stating whether any change in GAAP or in the application thereof has occurred since the date of the most recent prior audited financial statements delivered pursuant to Section 6.01(a) or delivered to Lenders on or prior to the Effective Date, as applicable, and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; -45- 50 (d) concurrently with any delivery of financial statements under clause (a) of this Section, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of Defaults under clause (b)(B)(y) of the definition of "Permitted Indebtedness" or clause (b) or (c) of Section 6.17 (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any of the Guarantors with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said commission, or with any national securities exchange, or distributed by the Borrower to its members generally, as the case may be; (f) promptly after receiving notice of the same, copies of any information with respect to any material litigation or material governmental or environmental proceedings against the Borrower or the Guarantors; and (g) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any of the Guarantors, or compliance with the terms of this Agreement and the other Transaction Documents, as the Administrative Agents or Required Lenders may reasonably request. SECTION 6.02. Existence; Conduct of Business. The Borrower will, and will cause each of the Guarantors to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence as a limited liability company and all things reasonably necessary to preserve, renew and keep in full force and effect the rights, licenses, permits, privileges and franchises material to the conduct of its business as then conducted; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.14; provided, further that the Borrower or any Guarantor may (i) change its status as a limited liability company with the consent of the Required Lenders, such consent not to be unreasonably withheld, and (ii) the Borrower or any Guarantor may, on not less than 30 days' written notice to the Administrative Agent, amend its certificate of formation or other organizational document to effect a name change. SECTION 6.03. Maintenance of Tax Status. The Borrower will not, and will cause each of the Guarantors not to, voluntarily take any action to cause the Borrower or any Guarantors to be subject to taxation as a separate entity for federal income tax purposes. SECTION 6.04. Compliance with Laws and Contractual Obligations. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority (including Environmental Laws and ERISA matters), and all contractual obligations applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. -46- 51 SECTION 6.05. Maintenance of Properties; Insurance. (a) The Borrower will, and will cause each of the Guarantors to, (i) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted; provided, however, that nothing in this Section shall prevent the Borrower or Guarantor from disposing of any asset (subject to compliance with Section 6.12 or 6.15) or from discontinuing the operation or maintenance of any of such material properties if such discontinuance is, as determined by the Borrower in good faith, desirable in the conduct of its business or the business of any Guarantor and could not reasonably be expected to have a Material Adverse Effect on the Borrower and the Guarantors taken as a whole and (ii) maintain, with financially sound and reputable insurance companies, insurance with respect to each Facility in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations. The Borrower will maintain and will cause the Guarantors to maintain insurance for risks customarily insured against by other enterprises with similar capital structures and owning and operating facilities of like size and type as that of the Facilities in accordance with prudent independent power industry practice. (b) The Borrower will (i) provide funds to each of the Guarantors at such times and in such amounts so as to enable each of the Guarantors to pay all Operating and Maintenance Expenses incurred by each such Guarantor on or before the date such Operating and Maintenance Expenses become due and payable and (ii) cause each of the Guarantors to comply with Section 7.07. SECTION 6.06. Payment of Taxes and Claims. The Borrower will, and will cause each of the Guarantors to, pay its obligations, including Tax liabilities, before the same shall become delinquent or in default unless the same is then the subject of a Good Faith Contest or except where nonpayment could not reasonably be expected to have a Material Adverse Effect. SECTION 6.07. Books and Records; Inspection Rights. The Borrower will, and will cause each of the Guarantors to, keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of the Guarantors to, permit the Administrative Agent or its representatives, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. SECTION 6.08. Indebtedness. The Borrower will not: (a) create, incur, assume or permit to exist any Indebtedness, except Permitted Indebtedness; (b) permit any Guarantor to create, incur, assume or permit to exist any Indebtedness, except its guarantee of the Bonds or other Permitted Indebtedness (other than Subordinated Indebtedness) and Intercompany Loans; or (c) permit any Unrestricted Subsidiary to create, incur, assume or permit to exist any Indebtedness, except Non-Recourse Obligations. -47- 52 SECTION 6.09. Liens. The Borrower will not, nor will it permit any of the Guarantors to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except Permitted Liens. SECTION 6.10. Certain Obligations Respecting Subsidiaries. (a) Guarantors. In the event that the Borrower shall form or acquire any new subsidiary that shall constitute a Subsidiary hereunder, it shall designate such new Subsidiary as a "Guarantor" or an "Unrestricted Subsidiary" and will cause each new Subsidiary designated as a Guarantor: (i) to become an "Obligor" under a Guarantor Security Agreement; (ii) to take such action (including delivering such membership interests or other ownership interests and executing and delivering such Uniform Commercial Code financing statements) as shall be necessary to create and perfect valid and enforceable first priority Liens on substantially all of the personal property of such Guarantor on which a Lien is required to be created pursuant to the Guarantor Security Agreement as collateral security for the obligations of such Guarantor hereunder; and (iii) to take such action, from time to time as shall be necessary to ensure that any such Guarantor remains at all times a "Guarantor" hereunder except as otherwise permitted hereunder (including Sections 6.12 and 6.14). (b) Ownership of Subsidiaries. The Borrower will, and will cause each of its Subsidiaries to, take such action from time to time as shall be necessary to ensure that the ownership of the Borrower in the voting equity interests of each of its Subsidiaries (other than Unrestricted Subsidiaries) shall at all times exceed 50% of all such voting equity interests. In the event that any additional membership interests shall be issued by any Subsidiary (other than an Unrestricted Subsidiary) to the Borrower, the Borrower agrees forthwith to deliver to the Collateral Agent pursuant to the Borrower Security Agreement the certificates evidencing such membership interests, accompanied by undated stock powers executed in blank and to take such other action as the Administrative Agent or the Lenders shall request to perfect the security interest created therein pursuant to the Borrower Security Agreement. SECTION 6.11. Restrictive Agreements. The Borrower will not, and will not permit any of the Guarantors to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Guarantor to create, incur or permit to exist any Lien upon any of its property or assets that is either (i) created under the Financing Documents or (ii) in favor of the Borrower, or (b) the ability of any Guarantor to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Guarantor or to Guarantee Indebtedness of the Borrower or any other Guarantor except such prohibition, restriction or condition existing under or by reason of: (1) applicable law, (2) this Agreement or any Transaction Document, (3) with respect to real property, customary non- -48- 53 assignment provisions of any contract or any lease governing a leasehold interest of any Guarantor, (4) any agreements existing at the time of acquisition of any Person or the properties or assets of the Person so acquired, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired, (5) agreements listed on Schedule III hereof (6) Liens incurred in accordance with Section 6.09 or 7.05 or (7) refinancing of Indebtedness with respect to clauses (4) or (5). SECTION 6.12. Prohibition on Sale of Assets. The Borrower will not, and will not permit any Guarantor to, sell or otherwise dispose of any assets other than (i) transfers of assets among the Borrower and the Guarantors; (ii) sales and dispositions in the ordinary course of business not in excess of $15,000,000 in the aggregate for the Borrower and the Guarantors in any fiscal year; (iii) any sales or dispositions of surplus, obsolete or worn-out equipment; (iv) any sales or dispositions required for compliance with applicable law or necessary Governmental Approvals; (v) sales or dispositions of non-controlling ownership interests in Guarantors in accordance with Section 6.10(b) so long as the guarantee set forth herein with regard to such Guarantor stays in effect; (vi) sales or dispositions of ownership interests in Unrestricted Subsidiaries; (vii) any sales or dispositions of Assets Specifically Held for Resale or any sales or dispositions of assets permitted under Section 6.12 or 7.11; and (viii) any other sale or other disposition so long as (A) after giving effect to such events, the Rating Agencies shall have confirmed their respective ratings of the Bonds in effect immediately prior to such sale or other disposition and (B) such sale or disposition shall not exceed 10% of the Net Tangible Assets of the Borrower and the Guarantors, taken as a whole. SECTION 6.13. Modifications of Certain Documents. Without the prior consent of the Required Lenders, the Borrower will not agree or consent to nor allow any Guarantor to agree or consent to any termination, modification, supplement, replacement or waiver of any Transaction Document, unless such termination, modification, supplement, replacement or waiver could not, individually or collectively with all other such terminations, modifications, supplements, replacements and waivers, reasonably be expected to have a Material Adverse Effect. SECTION 6.14. Prohibition on Fundamental Changes. (a) Mergers, Consolidations, Disposal of Assets, Etc. Except as permitted under Section 6.12 (other than clause (vii) thereof) or Section 7.11 (other than clause (v) thereof), the Borrower will not, nor will it permit any of the Guarantors to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets, or all or substantially all of the membership or other equity interests of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if as a result thereof no Default shall have occurred and be continuing, (i) any Subsidiary may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Guarantor may merge into any Guarantor in a transaction in which the surviving entity is a Guarantor and the Borrower's economic interest in each merging -49- 54 Guarantor's assets shall not have been diminished as a result of such merger, (iii) any Guarantor may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Guarantor (provided that the Borrower's economic interest in such assets is not diminished as a result thereof), and (iv) any Guarantor may liquidate or dissolve if the assets of such Guarantor are transferred to another Guarantor (provided that the Borrower's economic interest in such assets is not diminished as a result thereof and that the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders). (b) Lines of Business. The Borrower will not, nor will it permit any of the Guarantors to, engage to any material extent in any business other than, (i) in the case of the Borrower, the ownership of the Guarantors and the Unrestricted Subsidiaries and the ownership and operation of non-nuclear electric generating facilities and other district energy assets and (ii) in the case of the Guarantors (including any Additional Guarantors), the ownership and operation of their respective Facilities. SECTION 6.15. Restricted Payments. The Borrower will not make, or agree to pay or make, directly or indirectly, any Restricted Payment, unless, at the time of and after giving effect to such Restricted Payment (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence of such Restricted Payment; (b) the debt service reserve account under the Indenture is fully funded with cash and/or debt service reserve instruments as permitted under the Indenture; (c) if 50% or more of the Borrower's projected revenues for the next four fiscal quarters will be derived from power supply agreements which have a remaining term of at least two years, the Debt Service Coverage Ratio for the preceding four consecutive quarters (or such shorter period covering the quarters ended subsequent to the initial Borrowing, taken as a consecutive period) was not less than 1.40 to 1.0 and the Projected Debt Service Coverage Ratio for the next succeeding four fiscal quarters (taken as a whole) is not less than 1.40 to 1.0; (d) if 10% or more but less than 50% of the Borrower's projected revenues for the next four fiscal quarters will be derived from power supply agreements which have a remaining term of at least two years, the Debt Service Coverage Ratio for the preceding four consecutive quarters (or such shorter period covering the quarters ended subsequent to the initial Borrowing, taken as a consecutive period) was not less than 1.55 to 1.0 and the Projected Debt Service Coverage Ratio for the next succeeding four fiscal quarters (taken as a whole) is not less than 1.55 to 1.0; and (e) if less than 10% of the Borrower's projected revenues for the next four fiscal quarters will be derived from power supply agreements which have a remaining term of at least two years, the Debt Service Coverage Ratio for the preceding four consecutive quarters (or such shorter period covering the quarters ended subsequent to the initial Borrowing, taken as a consecutive period) was not less than 1.70 to 1.0 and the Projected Debt Service Coverage Ratio for the next succeeding four fiscal quarters (taken as a whole) is not less than 1.70 to 1.0. Restricted Payments by any Guarantor of the Borrower that is not a wholly-owned Subsidiary of the Borrower made otherwise than to the Borrower shall be subject to the restrictions set forth in clauses (a), (b) (c), (d) and (e) of the preceding sentence. Restricted Payments to the Borrower by any wholly-owned Subsidiary of the Borrower shall not be subject to any restrictions. -50- 55 SECTION 6.16. Transactions with Affiliates. The Borrower will not, nor will it permit any of the Guarantors to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrower and the Guarantors not involving any other Affiliate, (c) any Restricted Payment otherwise permitted by the terms and conditions of this Agreement, and (d) transactions that are contemplated by any Transaction Document or any extensions, renewals or replacements thereof that will not have a Material Adverse Effect. Notwithstanding the foregoing, the restrictions set forth in this covenant shall not apply to (i) reasonable and customary directors' fees, indemnification and similar arrangements, consulting fees, employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of the Borrower or any Subsidiary entered into in the ordinary course of business, (ii) loans and advances to officers, directors and employees of the Borrower or any Subsidiary for reasonable travel, entertainment, moving and other relocation expenses, in each case made in the ordinary course of business, (iii) the incurrence of intercompany Indebtedness which constitutes Permitted Indebtedness, and (iv) transactions pursuant to agreements in effect on the date hereof. SECTION 6.17. Investments. The Borrower will not, nor will it permit any of the Guarantors to, make or permit to remain outstanding any Investments except: (a) Investments in Unrestricted Subsidiaries with funds that (i) could otherwise be distributed in accordance with this Agreement or (ii) otherwise with the proceeds of additional equity contributions to the Borrower made explicitly for this purpose; (b) operating deposit accounts with banks; (c) cash or Permitted Investments; (d) Investments by the Borrower or the Guarantors in the Borrower or the Guarantors (including Investments by the Borrower in Intercompany Loans); (e) Investments in another Person, if as a result of such Investment (A) such other Person becomes a Guarantor or (B) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to the Borrower or a Guarantor; (f) Investments representing capital stock or obligations issued to, the Borrower or any Guarantor in settlement of claims against any other Person by reason of a composition or readjustment of debt or a reorganization of any debtor of the Borrower or any Guarantor; -51- 56 (g) Investments in additional Bonds issued in the amounts and for the purposes permitted by, and upon satisfaction of the conditions set forth in, Section 2.3 of the Indenture; (h) Investments acquired by the Borrower or any of the Guarantors in connection with any asset sale permitted under Section 6.12, 6.14(a), 7.06(a) or 7.11 to the extent such Investments are non-cash proceeds as permitted under Section 6.12, 6.14(a), 7.06(a) or 7.11; (i) any Investment to the extent that the consideration therefor is capital stock (other than redeemable capital stock) of the Borrower; (j) Investments consisting of security deposits with utilities and other Persons made in the ordinary course of business; (k) Hedging Agreements entered into in the ordinary course of business and not for speculative purposes; (l) amounts constituting Restricted Payments which the Borrower would be permitted to make under Section 6.15 and the Guarantors would be permitted to make under Section 7.7; and (m) additional Investments up to but not exceeding $10,000,000 in the aggregate. For purposes of clause (m) of this Section, the aggregate amount of an Investment at any time shall be deemed to be equal to (A) the aggregate amount of cash, together with the aggregate fair market value of property, including any securities, loaned, advanced, contributed, transferred or otherwise invested that gives rise to such Investment minus (B) the aggregate amount of dividends, distributions or other payments received in cash in respect of such Investment; the amount of an Investment shall not in any event be reduced by reason of any write-off of such Investment nor increased by any increase in the amount of earnings retained in the Person in which such Investment is made that have not been paid as dividends, distributed or otherwise paid out. SECTION 6.18. EWG Status. The Borrower will take, or cause to be taken, all action required to maintain the status of each Guarantor that owns or operates facilities used for the generation, transmission or distribution of electric energy for sale as an "exempt wholesale generator" under Section 32(a) of PUHCA. SECTION 6.19. Use of Proceeds. The Borrower will use the proceeds of Loans incurred by it (i) to finance a one-time distribution to NRG Energy in repayment of the Working Capital Equity (as defined in the Indenture), (ii) for ordinary course working capital on the Effective Date for the Borrower, and (iii) to refinance the Borrower's existing working capital debt and to make Intercompany Loans to the Guarantors for ordinary course working capital for the Guarantors. -52- 57 ARTICLE VII. COVENANTS OF THE GUARANTORS. Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees and expenses payable hereunder shall have been paid in full, each Guarantor covenants and agrees with the Lenders that: SECTION 7.01. Existence; Conduct of Business. Each Guarantor agrees that it will do or cause to be done all things necessary to preserve, renew and keep in full force and effect such Guarantor's legal existence as a limited liability company and all things reasonably necessary to preserve, renew and keep in full force and effect such Guarantor's rights, licenses, permits, privileges and franchises material to the conduct of such Guarantor's business as then conducted; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 7.06; provided, further that any Guarantor may (i) change its status as a limited liability company with the consent of the Required Lenders, such consent not to be unreasonably withheld, and (ii) on not less than 30 days' written notice to the Administrative Agent, amend its certificate of formation or other organizational document to effect a name change. SECTION 7.02. Compliance with Laws and Contractual Obligations. Each Guarantor agrees that it will comply with all Laws (including Environmental Laws and ERISA matters) and all contractual obligations, in each case, as applicable to such Guarantor or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 7.03. Maintenance of Properties; Insurance. Each Guarantor agrees that it will (i) keep and maintain all property material to the conduct of such Guarantor's business in good working order and condition, ordinary wear and tear excepted; provided, however, that nothing in this Section shall prevent any Guarantor from disposing of any asset (subject to compliance with Section 7.06 or Section 7.11) or from discontinuing the operation or maintenance of any of such material properties if the Guarantor reasonably determines in good faith that such discontinuance is desirable in the conduct of its business and could not reasonably be expected to have a Material Adverse Effect, and (ii) maintain, with financially sound and reputable insurance companies, insurance with respect to each Facility in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations in accordance with prudent independent power industry practice. Each Guarantor agrees that it will maintain insurance for risks customarily insured against by other enterprises with similar capital structures and owning and operating facilities of like size and type as that of the Facilities in accordance with prudent independent power industry practice. SECTION 7.04. Indebtedness. Each Guarantor agrees that it will not create, incur, assume or permit to exist any Indebtedness, except Intercompany Loans, the Guarantees of the Bonds and the Loans made by Lenders to the Borrower, guarantees of other Permitted Indebtedness (other than Subordinated Indebtedness). -53- 58 SECTION 7.05. Liens. Each Guarantor agrees that it will not create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by such Guarantor, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except Permitted Liens. SECTION 7.06. Prohibition on Fundamental Changes. (a) Mergers, Consolidations, Disposal of Assets, Etc. Except as permitted by Section 6.12 (other than clause (vii) thereof) or Section 7.11 (other than clause (v) thereof), each Guarantor agrees that it will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with such Guarantor, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that (i) each Guarantor may merge into a Subsidiary in a transaction in which such Guarantor is the surviving corporation, (ii) any Guarantor may merge into any other Guarantor in a transaction in which the surviving entity is a Guarantor, (iii) each Guarantor may sell, transfer, lease or otherwise dispose of such Guarantor's assets to the Borrower or to any other Guarantor and (iv) any Guarantor may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Guarantor and is not materially disadvantageous to the Lenders, provided that no Default shall have occurred and be continuing as of result of any of the events described in clauses (i), (ii), (iii) or (iv) above. (b) Lines of Business. Each Guarantor agrees that it will not engage to any material extent in any business other than the ownership and operation of such Guarantor's respective Facilities. SECTION 7.07. Restricted Payments. Each Guarantor agrees that it will not make, or agree to pay or make, directly or indirectly, any Restricted Payment, unless such payment is only (a) to the Borrower at any time or (b) to any future minority owners of the Guarantors only if at the time of such Restricted Payment the Borrower would itself be permitted to make the payment to such other minority owner as if such minority owner held a minority interest in the Borrower instead of such Guarantor. SECTION 7.08. Transactions with Affiliates. Each Guarantor agrees that it will not sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of such Guarantor's Affiliates, except (a) transactions in the ordinary course of business at prices and on terms and conditions not less favorable to the Guarantor or its Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among such Guarantor and the Borrower or any of the other Guarantors not involving any other Affiliate, (c) any Restricted Payment permitted by Section 6.15 or 7.07 and (d) transactions that are contemplated by any Transaction Document or any extensions, renewals or replacements thereof, if any such transaction could not reasonably be expected to result in a Material Adverse Effect. -54- 59 Notwithstanding the foregoing, the restrictions set forth in this covenant shall not apply to (i) reasonable and customary directors' fees, indemnification and similar arrangements, consulting fees, employee salaries, bonuses or employment agreements, compensation or employee benefit arrangements and incentive arrangements with any officer, director or employee of the Borrower or any Subsidiary entered into in the ordinary course of business, (ii) loans and advances to officers, directors and employees of the Borrower or any Subsidiary for reasonable travel, entertainment, moving and other relocation expenses, in each case made in the ordinary course of business, (iii) the incurrence of intercompany Indebtedness which constitutes Permitted Indebtedness and (iv) transactions pursuant to agreements in effect on the date hereof. SECTION 7.09. Investments. Each Guarantor agrees that it will not make or permit to remain outstanding any Investments except: (a) Investments in Unrestricted Subsidiaries with funds that (i) could otherwise be distributed in accordance with this Agreement or (ii) otherwise with the proceeds of additional equity contributions to such Guarantor made explicitly for this purpose; (b) operating deposit accounts with banks; (c) cash or Permitted Investments; (d) Investments by such Guarantor in the Borrower or other Guarantors; (e) Investments in another Person, if as a result of such Investment (A) such other Person becomes a Guarantor or (B) such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all of its assets to the Borrower or a Guarantor; (f) Investments representing capital stock or obligations issued to, the Borrower or any Guarantor in settlement of claims against any other Person by reason of a composition or readjustment of debt or a reorganization of any debtor of the Borrower or any Guarantor; (g) Investments in additional Bonds issued in the amounts and for the purposes permitted by, and upon satisfaction of the conditions set forth in, Section 2.3 of the Indenture; (h) Investments acquired by any Guarantor in connection with any asset sale permitted under Section 6.12, 6.14, 7.06(a) or 7.11 to the extent such Investments are non-cash proceeds as permitted under Section 6.12, 6.14(a), 7.06(a) or 7.11; (i) any Investment to the extent that the consideration therefor is capital stock (other than redeemable capital stock) of the Borrower; -55- 60 (j) Investments consisting of security deposits with utilities and other like Persons made in the ordinary course of business; (k) Hedging Agreements entered into in the ordinary course of business and not for speculative purposes; (l) amounts constituting Restricted Payments which the Guarantor would otherwise be permitted to make to minority owners under Section 7.07; and (m) additional Investments up to but not exceeding $10,000,000 in the aggregate with respect to such Guarantor, the other Guarantors and the Borrower. For purposes of clause (m) of this Section, the aggregate amount of an Investment at any time shall be deemed to be equal to (A) the aggregate amount of cash, together with the aggregate fair market value of property, including any securities, loaned, advanced, contributed, transferred or otherwise invested that gives rise to such Investment minus (B) the aggregate amount of dividends, distributions or other payments received in cash in respect of such Investment; the amount of an Investment shall not in any event be reduced by reason of any write-off of such Investment nor increased by any increase in the amount of earnings retained in the Person in which such Investment is made that have not been paid as dividends, distributed or otherwise paid out. SECTION 7.10. Operation of Facilities. Each Guarantor agrees that it will operate its respective Facilities, or cause its respective Facilities to be operated, in accordance with prudent independent power industry practice. SECTION 7.11. Prohibition on Sale of Assets. Each Guarantor agrees not to sell or otherwise dispose of any assets other than (i) transfers of assets between the Borrower and such Guarantor; (ii) sales and dispositions in the ordinary course of business not in excess of $15,000,000 in the aggregate for such Guarantor, any other Guarantor and the Borrower in any fiscal year; (iii) any sales or dispositions of surplus, obsolete or worn-out equipment; (iv) any sales or dispositions required for compliance with applicable law or necessary Governmental Approvals; (v) any sales or dispositions of Assets Specifically Held for Resale or any sales or dispositions of assets permitted under Section 6.14 or 7.11; or (vi) any other sale or other disposition so long as (A) after giving effect to such events, the Rating Agencies shall have confirmed their respective ratings of the Bonds in effect immediately prior to such sale or other disposition and (B) such sale or disposition shall not exceed 10% of net tangible assets of the Borrower and the Guarantors, taken as a whole. SECTION 7.12. Modification of Certain Documents. Without the prior consent of the Required Lenders, no Guarantor will agree or consent to any termination, modification, supplement, replacement or waiver of any Transaction Document, unless such termination, modification, supplement, replacement or waiver could not, individually or collectively with all other such terminations, modifications, supplements, replacements and waivers, reasonably be expected to have a Material Adverse Effect. -56- 61 ARTICLE VIII. EVENTS OF DEFAULT. SECTION 8.01. Events of Default. The term "Event of Default", whenever used herein, shall mean any of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or come about or be affected by operation of law, or be pursuant to or in compliance with any applicable law), and any such event shall continue to be an Event of Default if and for so long as it shall not have been remedied: (a) the Borrower defaults in the payment of any principal of any Loan when and as the same becomes due and payable, whether at due date or date fixed for prepayment or by acceleration or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or under any other Financing Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three or more Business Days; (c) any representation or warranty made or deemed made by or on behalf of the Borrower or the Guarantors in or in connection with this Agreement or any other Financing Document or any amendment or modification hereof or thereof, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any other Financing Document or any amendment or modification hereof or thereof, shall prove to have been incorrect in any material respect when made or deemed made; (d) (i) default in the observance or performance of any term, covenant or agreement contained in Section 6.02 (with respect to the Borrower's existence), 6.08, 6.09, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.18, 6.19, 7.01 (with respect to the Guarantor's existence), 7.04, 7.05, 7.06, 7.07 and 7.11 and the continuance of such default for more than 2 Business Days after the earliest to occur of (A) actual knowledge of an executive officer of the Borrower of such default or (B) notice from the Administrative Agent or the Lenders of such default; and (ii) default in the performance or observance in any material respect of any other term, covenant, or obligation of the Borrower or the Guarantors under this Agreement, not otherwise expressly defined as an Event of Default, and the continuance of such default for more than 30 days after the earliest to occur of (A) actual knowledge of an executive officer of the Borrower of such default or (B) notice from the Administrative Agent or the Lenders of such default; (e) default or defaults under one or more agreements, instruments, mortgages, bonds, debentures or other evidences of Indebtedness under which the Borrower or any Guarantor then has outstanding Indebtedness in excess of $15,000,000, individually or in the aggregate, and such default or defaults result in such Indebtedness becoming due prior to its scheduled maturity or will enable or will permit the holder or holders of such Indebtedness or any trustee or agent on its or their behalf to cause such Indebtedness to become due, and to require the prepayment, repurchase, redemption of defeasance -57- 62 thereof, prior to its scheduled maturity; provided that such default or defaults shall continue for 15 days or more; (f) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Guarantor or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Guarantor or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for a period of 60 or more days or an order or decree approving or ordering any of the foregoing shall be entered; (g) the Borrower or any Guarantor shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Section, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for itself or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (h) any event described in clauses (f) or (g) above occurs with respect to NRG Energy, NRG Power Marketing or NRG Operating, in each case to the extent such Person is a party to any Transaction Document, and remains uncured for the grace periods provided in such clauses; (i) the Borrower or any Guarantor shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (j) one or more final and non-appealable judgments for the payment of money in an aggregate amount in excess of $25,000,000, exclusive of amounts covered by insurance or indemnity, shall be rendered against the Borrower or any of the Guarantors or any combination thereof and the same shall remain undischarged or unpaid for a period of 60 consecutive days during which execution shall not be effectively stayed; (k) a Change of Control shall occur; (l) the Borrower shall be terminated, dissolved or liquidated (as a matter of law or otherwise); (m) the Liens created by the Collateral Documents shall at any time not constitute a valid and perfected Lien on the collateral intended to be covered thereby (to the extent perfection by filing, registration, recordation or possession is required herein or therein) -58- 63 in favor of the Administrative Agent, free and clear of all other Liens (other than Liens permitted under this Agreement or under the respective Collateral Documents), or, except for expiration in accordance with its terms, any of the Collateral Documents shall for whatever reason be terminated or cease to be in full force and effect, or the enforceability thereof shall be contested by any Obligor or Member; (n) either (i) this Agreement or any other Financing Document or Bond Document is declared in a final non-appealable judgment to be unenforceable against the Borrower or any Guarantor or the Borrower or any Guarantor shall have expressly repudiated its obligations thereunder; or (ii) any other Transaction Document is declared in a final non-appealable judgment to be unenforceable against any party thereto, or any such party shall have expressly repudiated its obligations thereunder and ceased to perform such obligations, or defaulted in the performance or observance of any of its material obligations thereunder and such default has continued unremedied for a period of five days or more or any such party is the subject of any proceeding under the Federal Bankruptcy Code; or (o) default by the Borrower, any Guarantor or any counterparty under or invalidity of any Power Sales Agreement, the Operation and Management Services Agreement or either Corporate Services Agreement, to the extent such default under or invalidity of any such agreement (x) continues for 30 consecutive days and (y) could reasonably be expected to have a Material Adverse Effect; or (p) failure to renew or replace the Operation and Management Services Agreement (or to make a substantially similar arrangement with respect to the operation and maintenance of a Facility) upon (i) termination by a Guarantor or NRG Operating, after having given 180 days' notice of its intent to terminate, within 5 days of such termination, (ii) termination by any Guarantor, within 5 days of such termination, or (iii) termination by NRG Operating, within 30 days of such termination.. SECTION 8.02 Acceleration; Remedies. In every such event (other than an event with respect to any Obligor described in paragraph (f), (g) or (i) of Section 8.01), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Obligors accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Obligor; and in case of any event with respect to any Obligor described in paragraph (f), (g) or (i) of Section 8.01, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Obligors accrued hereunder, shall automatically become due and payable, without -59- 64 presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Obligor. ARTICLE IX. THE ADMINISTRATIVE AGENT. SECTION 9.01 Appointment. Each of the Lenders hereby irrevocably appoints BTM as its agent hereunder and under the other Financing Documents and authorizes BTM to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto (including the execution of the Collateral Agency and Intercreditor Agreement). SECTION 9.02 Administrative Agent's Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. SECTION 9.03 Duties; Limitation of Liability. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Financing Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Financing Documents that the Administrative Agent is required to exercise in writing by the Required Lenders, and (c) except as expressly set forth herein and in the other Financing Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Financing Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Financing Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article V or elsewhere herein or therein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. -60- 65 SECTION 9.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for an Obligor, Member or NRG Energy), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. SECTION 9.05 Sub-Agents. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. SECTION 9.06 Resignation. The Administrative Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent's resignation shall nonetheless become effective and (1) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and (2) the Required Lenders shall perform the duties of the Administrative Agent (and all payments and communications provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly) until such time as the Required Lenders appoint a successor agent as provided for above in this paragraph. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring (or retired) Administrative Agent and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder (if not already discharged therefrom as provided above in this paragraph). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 10.03 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. SECTION 9.07 Independent Credit Decisions. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, -61- 66 independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Financing Document or any related agreement or any document furnished hereunder or thereunder. SECTION 9.08 Consent by Administrative Agent. Except as otherwise provided in Section 10.02(b) with respect to this Agreement, the Administrative Agent may, with the prior consent of the Required Lenders (but not otherwise), consent to any modification, supplement or waiver under any of the Financing Documents to which it is a party. ARTICLE X. MISCELLANEOUS. SECTION 10.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to the Borrower or any Guarantor, to it at c/o NRG Energy, Inc., 1221 Nicollet Mall, Suite 700, Minneapolis, MN 55403, Attention of Adam Carte (Telecopy No. (612) 373-8804; Telephone No. (612) 373-5359); (b) if to the Administrative Agent, to The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, Project Finance and Emerging Markets Group, 1251 Avenue of the Americas, 10th Floor, New York, New York 10020-1104, Attention: Messrs. Makoto Kobayashi and Nicholas Griffiths, Phone: (212) 782-4053, Fax: (212) 782-6442, with a copy to BTM Information Services, Inc., c/o The Bank of Tokyo-Mitsubishi, Ltd., NY Branch, 1251 Avenue of the Americas, 12th Floor, New York, New York 10020-1104, Attention: Mr. Rolando Uy, Loan Operations Dept., Phone: (201) 413-8570, Fax: (201) 521-2304 or (201) 521-2305.; or (c) if to a Lender, to its address set forth on Schedule I hereto. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto (or, in the case of any such change by a Lender, by notice to the Borrower and the Administrative Agent). All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 10.02. Waivers; Amendments. (a) No Deemed Waivers; Remedies Cumulative. No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or -62- 67 further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Obligor therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Amendments. Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase any Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or reduce the rate or amount of interest thereon, or reduce any fees payable hereunder, without the written consent of the Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of the Lender affected thereby, (iv) alter the manner in which payments or prepayments of principal, interest or other amounts hereunder shall be applied as among the Lenders or Types or Classes of Loans, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of the term "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, and (vi) release any Guarantor from any of its guarantee obligations under Article III without the written consent of each Lender; and provided, further, that (x) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent and (y) any modification or supplement of Article III shall require the consent of each Guarantor. (c) Collateral. Without the written consent of each Lender, the Lenders will not authorize the Collateral Agent to release any collateral or otherwise terminate any Lien under any Collateral Documents providing collateral security, agree to additional obligations being secured by such collateral security, alter the relative priorities of the obligations entitled to the benefits of the Liens created under the Collateral Documents, except that no such consent shall be required, and the Collateral Agent will be authorized, to release any Lien covering property that is the subject of a disposition of property permitted hereunder or a disposition to which the Required Lenders have consented; SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates, including any reasonable fees, -63- 68 charges and disbursements of counsel for the Administrative Agent in connection with any syndication of the credit facilities provided for herein, the preparation and administration of this Agreement and the other Financing Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the reasonable fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Financing Documents, including its rights under this Section, or in connection with the Loans made hereunder, including in connection with any workout, restructuring or negotiations in respect thereof and (iii) and all costs, expenses, taxes, assessments and other charges incurred in connection with any filing, registration, recording or perfection of any security interest contemplated by any Collateral Document or any other document referred to therein. (b) Indemnification by the Borrower. The Borrower shall indemnify the Administrative Agent and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee") against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement or any agreement or instrument contemplated hereby, (ii) the performance by the parties hereto of their respective obligations hereunder or the consummation of the Transactions or any other transactions contemplated hereby, including but not limited to any Default or Event of Default, (iii) any Loan or the use of the proceeds therefrom, (iv) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee. (c) Reimbursement by Lenders. To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent in its capacity as such. (d) Waiver of Consequential Damages, Etc. To the extent permitted by applicable law, no party hereto shall assert, and each party hereto hereby waives, any claim against any other party or any Indemnitee, on any theory of liability, for special, indirect, -64- 69 consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) Payments. All amounts due under this Section shall be payable not later than 20 days after written demand therefor. SECTION 10.04. Successors and Assigns. (a) Assignments Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Obligor may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by any Obligor without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Assignments by Lenders. Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender or an Affiliate of a Lender (other than in the case of an assignment to such an Affiliate that would impose costs on the Borrower pursuant to Section 2.12 or 2.14 in excess of those costs incurred prior to such assignment), each of the Borrower and the Administrative Agent must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender or an Affiliate of a Lender or an assignment of the entire remaining amount of the assigning Lender's Commitment(s), the amount of the Commitment(s) of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500, and (v) the assignee, if it shall not already be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; provided, further, that any consent of the Borrower otherwise required under this paragraph shall not be required if an Event of Default under Section 8.01(f), (g) or (i) has occurred and is continuing. Upon acceptance and recording pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering -65- 70 all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.12, 2.13, 2.14 and 10.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) Maintenance of Register by the Administrative Agent. The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in New York City a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Collateral Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Collateral Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice. (d) Effectiveness of Assignments. Upon their receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (e) Participations. Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement and the other Financing Documents (including all or a portion of its Commitments and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement and the other Financing Documents shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Financing Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Financing Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Financing Document; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 10.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 -66- 71 and 2.14 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. (f) Limitations on Rights of Participants. A Participant shall not be entitled to receive any greater payment under Section 2.12 or 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14(e) as though it were a Lender. (g) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any such pledge or assignment to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such assignee for such Lender as a party hereto. (h) No Assignments to the Obligors or Affiliates. Anything in this Section to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan held by it hereunder to NRG Energy or any of its Affiliates or the Borrower or any of its Affiliates or Subsidiaries without the prior consent of each Lender. SECTION 10.05. Survival. All covenants, agreements, representations and warranties made by the Borrower herein and in the certificates or other instruments delivered in connection with or pursuant to this Agreement shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of this Agreement and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Administrative Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.12 (except to the extent provided in clause (d) thereof), 2.13, 2.14, 3.03 and 10.03 and Article IX shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and any separate letter agreements with respect to fees payable to the Administrative Agent and the Lenders constitute the entire contract between and among the parties relating to the subject matter hereof and supersede any and all previous agreements and -67- 72 understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 5.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page to this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 10.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 10.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of any Obligor against any of and all the obligations of any Obligor now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 10.09. Governing Law; Jurisdiction; Etc. (a) Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of New York without reference to its principles of conflicts of laws (other than Section 5-1401 of the New York General Obligations Law). (b) Submission to Jurisdiction. Each Obligor hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Obligor or its properties in the courts of any jurisdiction. -68- 73 (c) Waiver of Venue. Each Obligor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Service of Process. Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 10.01. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 10.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 10.12. Treatment of Certain Information; Confidentiality. (a) Treatment of Certain Information. The Borrower acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Borrower or one or more of its Subsidiaries (in connection with this Agreement or otherwise) by any Lender or by one or more subsidiaries or affiliates of such Lender and the Borrower hereby authorizes each Lender to share any information delivered to such Lender by the Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement, to any such subsidiary or affiliate, it being understood that any such subsidiary or affiliate receiving such information shall be bound by the provisions of paragraph (b) of this Section as if it were a Lender hereunder. Such authorization shall survive the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. (b) Confidentiality. The Administrative Agent and each of the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its and its Affiliates' directors, officers, employees and agents, including -69- 74 accountants, legal counsel and other advisors on a need-to-know basis (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (ii) to the extent requested by regulatory authority having jurisdiction over such Person, (iii) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or under any other Financing Document or any suit, action or proceeding relating to this Agreement or any other Financing Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisions substantially the same as those of this paragraph, to any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement, (vii) with the prior written consent of the Borrower in its sole discretion or (viii) to the extent such Information (A) becomes publicly available other than as a result of a breach of this paragraph or (B) becomes available to the Administrative Agent or any Lender on a nonconfidential basis from a source other than an Obligor. For the purposes of this paragraph, "Information" means all information received from any Obligor relating to any Obligor or its business, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by an Obligor. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has taken reasonable precautions to keep such Information confidential in accordance with its customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices. Unless prohibited by law or court order, each Lender, the Administrative Agent shall, prior to disclosure thereof, notify the Borrower of any request for disclosure of any Information pursuant to subclause (ii) or (iii) of the first sentence of this clause (b). [REMAINDER OF PAGE INTENTIONALLY BLANK] -70- 75 EXECUTION IN WITNESS WHEREOF, the parties hereto have caused this Working Capital Agreement to be duly executed by their respective authorized officers as of the day and year first above written. NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Mataczynski __________________________________ Name: Craig A. Mataczynski Title: President LOUISIANA GENERATING LLC By: /s/ Craig A. Mataczynski __________________________________ Name: Craig A. Mataczynski Title: Vice President THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, individually and as Administrative Agent By: /s/ [illegible] ___________________________________ Name: [illegible] Title: [illegible] -71- 76 Schedule I to Loan Agreement SCHEDULE I Commitments NAME AND ADDRESS OF LENDER AMOUNT ($) - -------------------------------------------------------- ---------------------- THE BANK OF TOKYO-MITSUBISHI, LTD., 40,000,000 NEW YORK BRANCH 1251 Avenue of the Americas New York, New York 10020-1104 Addresses for Notices: Credit Contacts (Financial Information): - --------------------------------------- The Bank of Tokyo-Mitsubishi, Ltd., New York Branch Project Finance and Emerging Markets Group 1251 Avenue of the Americas, 10th Floor New York, New York 10020-1104 Attention: Mr. Makoto Kobayashi Phone: (212) 782-4053 Fax: (212) 782-6442 Copy to: Mr. Nicholas Griffiths Phone: (212) 782-5861 Fax: (212) 782-6442 Operations Contacts (Borrowings, Paydowns, Interest, Fees, etc.): - ---------------------------------------------------------------- BTM Information Services, Inc. c/o The Bank of Tokyo-Mitsubishi, Ltd., New York Branch 1251 Avenue of the Americas, 12th Floor New York, New York 10020-1104 Attention: Mr. Rolando Uy, Loan Operations Dept. Phone: (201) 413-8570 Fax: (201) 521-2304 or (201) 521-2305 77 Schedule II to Loan Agreement SCHEDULE II [Encumbrances] 78 Schedule III to Loan Agreement SCHEDULE III [Restrictive Agreements] 79 Schedule IV to Loan Agreement SCHEDULE IV [Assets Specifically Held for Resale] 80 Schedule V to Loan Agreement SCHEDULE V [Fees and Rates]
- ------------------------------------------------------------------------------ APPLICABLE RATE FOR APPLICABLE RATE RATING(*) COMMITMENT FEE EURODOLLAR LOANS FOR ABR LOANS S&P/MOODY'S - ------------------------------------------------------------------------------ >BBB-/Baa3 0.125 % 0.750 % 0.000 % BBB-/Baa3 0.150 % 0.900 % 0.000 % * In the event of a split rating, the lower rating level shall apply. 81 EXHIBIT A Assignment and Acceptance [Form of Assignment and Acceptance] ASSIGNMENT AND ACCEPTANCE Reference is made to the Working Capital Agreement dated as of April 30, 2000 (as amended and in effect on the date hereof, the "Working Capital Agreement"), among NRG South Central Generating LLC, the Guarantors party thereto, the Lenders named therein, and The Bank of Tokyo-Mitsubishi, Ltd., New York Branch, as Administrative Agent for the Lenders. Terms defined in the Working Capital Agreement are used herein with the same meanings. The Assignor named below hereby sells and assigns, without recourse, to the Assignee named below, and the Assignee hereby purchases and assumes, without recourse, from the Assignor, effective as of the Assignment Date set forth below, the interests set forth below (the "Assigned Interest") in the Assignor's rights and obligations under the Working Capital Agreement, including the interests set forth below in the Commitment of the Assignor on the Assignment Date and Loans owing to the Assignor which are outstanding on the Assignment Date, together with unpaid interest accrued on the assigned Loans to the Assignment Date, and the amount, if any, set forth below of the fees accrued to the Assignment Date for the account of the Assignor. The Assignee hereby acknowledges receipt of a copy of the Working Capital Agreement. From and after the Assignment Date (i) the Assignee shall be a party to and be bound by the provisions of the Working Capital Agreement and, to the extent of the interests assigned by this Assignment and Acceptance, have the rights and obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of the interests assigned by this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Working Capital Agreement. This Assignment and Acceptance is being delivered to the Administrative Agent together with (i) if the Assignee is a Foreign Lender, any documentation required to be delivered by the Assignee pursuant to Section 2.14(e) of the Working Capital Agreement, duly completed and executed by the Assignee, and (ii) if the Assignee is not already a Lender under the Working Capital Agreement, an Administrative Questionnaire in the form supplied by the Administrative Agent, duly completed by the Assignee. The [Assignee/Assignor] shall pay the fee payable to the Administrative Agent pursuant to Section 10.04(b) of the Working Capital Agreement. This Assignment and Acceptance shall be governed by and construed in accordance with the laws of the State of New York without reference to its principles of conflicts of laws (other than Section 5-1401 of the New York General Obligations Law). 82 Date of Assignment: Legal Name of Assignor: Legal Name of Assignee: Assignee's Address for Notices: Effective Date of Assignment: [ ] ("Assignment Date").(1) ---------- Percentage Assigned of Commitments/Loan (set forth, to at least 8 decimals, as a percentage of the Loan and the aggregate Commitments Principal Amount Assigned of all Lenders thereunder) ------------------------- ------------------------- Commitments: - ----------- Loans: - ----- Fees: - ---- The terms set forth above and below are hereby agreed to: - ---------------------- (1) Must be at least five Business Days after execution hereof by all required parties. -78- 83 [NAME OF ASSIGNOR], as Assignor By:____________________________________ Name: Title: [NAME OF ASSIGNEE], as Assignee By:____________________________________ Name: Title: -79- 84 The undersigned hereby consent to the within assignment:(2) NRG SOUTH CENTRAL GENERATING LLC By:_____________________________________ Name: Title: THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH, as Administrative Agent By:_____________________________________ Name: Title: (2) Consents to be included to the extent required by Section 10.04(b) of the Working Capital Agreement. -80- 85 EXHIBIT B [Form of Subordination Provisions] Section 1. NRG South Central Generating LLC, a limited liability company organized under the laws of Delaware (the "Issuer"), hereby covenants and agrees, and [NAME OF SUBORDINATED LENDER ] (the "Subordinated Lender"), likewise agrees, that, to the extent and in the manner set forth in this Agreement, [describe subordinated indebtedness] (the "Subordinated Indebtedness"), and the payment from whatever source of the principal of, and interest and premium (if any) on, the Subordinated Indebtedness, are hereby expressly made subordinate and subject in right of payment to the prior payment in full in cash of all Senior Indebtedness (as hereinafter defined). All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed thereto, whether directly or by reference to another agreement or document, in the Indenture dated as of March 30, 2000 (as amended, supplemented or modified and in effect from time to time, the "Indenture") among the Issuer, the Subsidiary Guarantor and The Chase Manhattan Bank, as trustee (in such capacity, together with its successors and assigns, the "Bond Trustee") for the Holders. For purposes hereof, "Senior Indebtedness" shall mean all indebtedness, liabilities and other obligations of the Issuer (including, but not limited to, all such obligations in respect of principal, premiums, interest, fees, reimbursement obligations, penalties, indemnities, legal expenses, costs and other expenses, whether due after acceleration or otherwise) to the Secured Parties (of whatsoever nature and howsoever evidenced) under or pursuant to the Finance Documents, in each case, direct or indirect, primary or secondary, fixed or contingent, now or hereafter arising out of or relating to any such agreement or document. The term "Senior Indebtedness" shall include any interest accruing after the date of any filing by the Issuer of any petition in bankruptcy or the commencing of any bankruptcy, insolvency or similar proceedings with respect to the Issuer, whether or not such interest is allowable as a claim in any such proceeding. Section 2. Each of the Secured Parties and the Subordinated Lender further agree that: (a) (i) Unless and until the Senior Indebtedness shall have been paid or otherwise satisfied in full, the Subordinated Lender shall not ask, demand, sue for, take or receive from the Issuer, directly or indirectly, in cash or other property or by set-off or in any other manner (including, without limitation, from or by way of the Collateral or any guaranty of payment or performance), payment of all or any of the Subordinated Indebtedness, except as permitted under the Indenture and shall be paid solely from cash available for application to Restricted Payments. For the purposes of these provisions, the Senior Indebtedness shall not be deemed to have been paid or satisfied in full until the Senior Indebtedness shall have been indefeasibly so paid in cash to the Secured Parties (after the passage of any relevant preference periods). 86 (ii) Upon any distribution of all or any of the assets of the Issuer to creditors of the Issuer upon the dissolution, winding up, liquidation, arrangement, reorganization or composition of the Issuer, whether in any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings or upon an assignment for the benefit of creditors or any other marshalling of the assets and liabilities of the Issuer or otherwise, any payment or distribution of any kind (whether in cash, property or securities) which otherwise would be payable or deliverable upon or with respect to the Subordinated Indebtedness but for the provisions of this Agreement, including, without limitation, any such payment or distribution that may be payable or deliverable by reason of the payment of any other indebtedness of the Issuer being subordinated to the payment of the Subordinated Indebtedness shall be paid or delivered directly to the Collateral Agent for application (in the case of cash) to or as Collateral (in the case of non-cash property or securities) for the payment or prepayment of the Senior Indebtedness until the Senior Indebtedness has been paid or otherwise satisfied in full in cash. (iii) Each of the Secured Parties may demand specific performance of these terms of subordination, whether or not the Issuer shall have complied with any of the provisions hereof applicable to them at any time when the Subordinated Lender shall have failed to comply with any of such provisions applicable to it. The Subordinated Lender hereby irrevocably waives any defense based on the adequacy of a remedy at law, which might be asserted as a bar to such remedy of specific performance. (iv) So long as any of the Senior Indebtedness shall remain unpaid or otherwise unsatisfied, the Subordinated Lender shall not commence or join with any creditor other than the Collateral Agent in commencing any proceeding referred to in subsection (ii) above for the payment of any amounts which otherwise would be payable or deliverable upon or with respect to the Subordinated Indebtedness. (v) Subject to the indefeasible payment or satisfaction in full in cash of all of the Senior Indebtedness, the Subordinated Lender shall be subrogated to the rights of the Secured Parties to receive payments or distributions of assets of the Issuer made on the Senior Indebtedness until the Subordinated Indebtedness has been satisfied in full. (vi) In the event that, notwithstanding the foregoing provisions of this Section 2, the Subordinated Lender shall have received, before all Senior Indebtedness is paid in full in cash or payment thereof is otherwise provided for, any such payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, including any such payment or distribution arising out of the exercise by the Subordinated Lender of a right of set-off or counterclaim and any such payment or distribution received by reason of any other indebtedness of the Issuer being subordinated to the Subordinated Indebtedness, then, and in such event, such payment or distribution shall be held in trust for the benefit of the Secured Parties, and shall be immediately paid over to the Collateral Agent, to the extent necessary to make payment in full in cash of all Senior Indebtedness remaining unpaid, after giving effect to any concurrent payment or distribution to the Secured Parties. -82- 87 The foregoing provisions regarding subordination are for the benefit of the Secured Parties and shall be enforceable by them directly against the Subordinated Lender, and no Secured Party shall be prejudiced in its right to enforce subordination of any of the Subordinated Indebtedness by any act or failure to act by the Issuer or anyone in custody of its assets or property. Notwithstanding anything to the contrary contained in the foregoing provisions, the Subordinated Lender may receive and retain payments in respect of the Subordinated Indebtedness from the Issuer to the extent that such payments are permitted by the Indenture. (b) So long as any Senior Indebtedness remains outstanding, the following provisions shall apply: (i) If an Event of Default shall have occurred and be continuing, the Collateral Agent, on behalf of the Secured Parties, shall be permitted to take any and all actions to exercise any and all rights, remedies and options which it may have under the other Security Documents. (ii) The Subordinated Lender shall not, without the prior written consent of the Secured Parties, (x) exercise any rights or enforce any remedies or assert any claim with respect to the Collateral, (y) seek to foreclose any Lien or sell the Collateral, or (z) take any action, directly or indirectly, or institute any proceedings, directly or indirectly, with respect to any of the foregoing. (iii) The Subordinated Lender hereby waives: (x) notice of the existence, creation or non-payment of all or any of the Senior Indebtedness and (y) to the fullest extent permitted by law, any right it may have to require the Collateral Agent to marshal assets. (c) The Secured Parties may, at any time and from time to time, without any consent of or notice to the Subordinated Lender and without impairing or releasing the obligations of the Subordinated Lender: (I) amend, modify, extend, renew, waive or consent to in any manner, any provision of any agreement under which any of the Senior Indebtedness is outstanding in accordance with the terms thereof; (ii) sell, exchange, release, not perfect and otherwise deal with any property at any time pledged, assigned or mortgaged to secure the Senior Indebtedness in accordance with the Security Documents; (iii) release anyone liable in any manner under or in respect of the Senior Indebtedness; (iv) exercise or refrain from exercising any rights against the Issuer and others; and (v) apply any sums from time to time received to payment or satisfaction of the Senior Indebtedness. (d) After the payment in full of all amounts due in respect of the Senior Indebtedness, the holder or holders of the Subordinated Indebtedness shall be subrogated to the rights of the holders of the Senior Indebtedness to receive payments or distributions of cash, property or securities of the Issuer applicable to the Senior Indebtedness until the principal of, premium, if any, interest on and all other amounts due or to become due with respect to the Subordinated Indebtedness shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the holder or holders of the Subordinated Indebtedness would be entitled but -83- 88 for the provisions hereof, and no payment over pursuant to these provisions to the holders of the Senior Indebtedness by any holder of the Subordinated Indebtedness shall, as among the Issuer, its creditors other than holders of the Senior Indebtedness and the holder or holders of the Subordinated Indebtedness, be deemed to be a payment by the Issuer to or on account of the Senior Indebtedness. No payment or distributions to the holders of the Senior Indebtedness which such holder or holders of the Subordinated Indebtedness shall be entitled to receive pursuant to such subrogation shall, as among the Issuer, its creditors other than holders of the Senior Indebtedness and the holder or holders of the Subordinated Indebtedness be deemed to be a payment by the Issuer or on account of the Subordinated Indebtedness. Nothing contained in this instrument is intended to or shall impair as among the Issuer, its creditors other than the holders of the Senior Indebtedness, and the holders of the Subordinated Indebtedness, the obligation of the Issuer, which is absolute and unconditional, to pay to the holders of the Subordinated Indebtedness as and when the same shall become due and payable in accordance with its terms, or to affect the relative rights of the holders of the Subordinated Indebtedness and creditors of the Issuer other than the holders of the Senior Indebtedness. Section 3. The Subordinated Lender agrees not to take any action in respect of or to enforce any right of subrogation arising as a result of the Subordinated Lender paying over amounts to the holders of the Senior Indebtedness as provided herein, prior to payment in full in cash of the Senior Indebtedness. Section 4. The Subordinated Lender agrees that, if it shall fail to file claims or proofs of claim with respect to the Subordinated Indebtedness at least thirty (30) days prior to the expiration of the period in which such claims or proofs of claim shall be required to be filed, the holders of the Senior Indebtedness are authorized to file such claims or proofs of claim on behalf of the Subordinated Lender as its attorney-in-fact. -84- EX-10.2 28 y57012ex10-2.txt SECURED REVOLVING NOTE 1 Exhibit 10.2 NRG SOUTH CENTRAL GENERATING LLC SECURED REVOLVING CREDIT NOTE US$40,000,000.00 April 30, 2000 New York, New York FOR VALUE RECEIVED, NRG SOUTH CENTRAL GENERATING LLC, a limited liability company organized under the laws of the State of Delaware, with offices care of NRG Energy, Inc., 1221 Nicollet Mall, Suite 700, Minneapolis, MN 55403 (the "Borrower"), hereby promises to pay to the order of THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH (the "Bank"), at 1251 Avenue of the Americas, New York, New York 10020, or to such other location or account as the Bank shall specify to the Borrower from time to time, in Federal or other immediately available funds in lawful money of the United States of America the principal amount of the lesser of (a) FORTY MILLION U.S. DOLLARS (US$40,000,000.00) or (b) the aggregate unpaid principal amount of the Loans made by the Bank to the Borrower pursuant to the Working Capital Agreement, dated as of the date hereof, among the Borrower, Louisiana Generating LLC and the Bank (as amended, modified or supplemented from time to time, the "Working Capital Agreement"), on March 29, 2001, unless otherwise accelerated pursuant to the terms of the Working Capital Agreement. The Borrower further agrees to pay interest on the unpaid principal amount of the Loans made hereunder and under the Working Capital Agreement from time to time until payment of the Loans in full at the rate and on the dates set forth in the Working Capital Agreement. This Note is one of the Notes referred to in the Working Capital Agreement and is entitled to the benefits and is subject to the terms of the Working Capital Agreement, to which reference is hereby made for a more complete statement of the terms and conditions under which the Loans evidenced hereby were made and are to be repaid. This Note is also entitled to the benefits of the Collateral described in and provided for in the Collateral Documents. Unless otherwise defined herein, defined terms used herein shall have the meanings ascribed thereto in the Working Capital Agreement. Upon the occurrence of an Event of Default, the unpaid balance of the principal amount of this Note, together with all accrued but unpaid interest thereon, may become, or may be declared to be, due and payable in the manner, upon the conditions and with the effect provided in the Credit Agreement. The Borrower may at its option prepay or may be required to prepay all or any part of the principal of this Note before maturity upon the terms provided in the Working Capital Agreement. The Borrower hereby consents to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waives diligence, presentment, protest, demand and notice of every kind and, to the fullest extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. 2 THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS PRINCIPLES OF CONFLICT OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). IN WITNESS WHEREOF, the undersigned has executed and delivered this Note as of the date first set forth above. NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Mataczynski __________________________________ Name: Craig A. Mataczynski ____________________________ Title: President ____________________________ -2- EX-10.3 29 y57012ex10-3.txt POWER SALES AND AGENCY AGREEMENT 1 Exhibit 10.3 POWER SALES AND AGENCY AGREEMENT THIS POWER SALES AND AGENCY AGREEMENT (this "Agreement") is entered into as of this 24th day of March, 2000 by and between NRG Power Marketing Inc., a Delaware corporation ("Power Marketing") and Louisiana Generating LLC, a Delaware limited liability company (the "Owner") (each individually a "Party," or collectively the "Parties"). RECITALS WHEREAS, Owner is a party to a Fifth Amended and Restated Asset Purchase and Reorganization Agreement (the "Asset Sale Agreement") dated September 21, 1999, with Ralph R. Mabey, as Chapter 11 Trustee of Cajun Electric Power Cooperative, Inc. ("Cajun"), pursuant to which Owner is to acquire two electric generation facilities (commonly referred to as "Big Cajun I" and "Big Cajun II"), with a total generating capacity of approximately 1700 MWs, located in New Roads, Louisiana, along with certain other specified assets; and WHEREAS, upon the closing of the Cajun acquisition pursuant to the Asset Sale Agreement, Owner will (i) enter into certain forms of power supply agreements with the eleven former Cajun electricity membership cooperatives, and (ii) assume Cajun's power supply obligations under two long-term power sales agreements with Southwestern Electric Power Company, one agreement with South Mississippi Electric Power Association, and one agreement with Municipal Energy Agency of Mississippi (hereinafter, all agreements in this recital are referred to as the "Power Supply Contracts"); and WHEREAS, Owner wishes to retain the services of Power Marketing as its agent, to (i) manage, market and sell its Excess Station Power (including any Deficit Station Power necessary to meet the obligations of Owner under the Power Supply Contracts), (ii) manage, procure and provide, as the case may be, the requirements of Owner for Fuel, and (iii) market, sell and purchase, as the case may be, the Emission Credits generated by or necessary for the conduct of the business of Owner; and WHEREAS, Power Marketing desires to (i) manage, market and sell all of Owner's Excess Station Power (including any Deficit Station Power necessary to meet the obligations of Owner under the Power Supply Contracts), (ii) manage, procure and provide Owner's requirements for Fuel, and (iii) market, sell and 1 2 purchase, as the case may be, the Emission Credits generated in or necessary for the conduct of Owner's business. NOW THEREFORE, in consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto hereby agree as follows: ARTICLE I DEFINITIONS Whenever used in this Agreement with initial capitalization, the following terms shall have the meanings specified or referred to in this Article I. "Affiliate" means, with respect to any person or entity, (i) each entity that such person or entity Controls, (ii) each person or entity that Controls such person or entity, and (iii) each entity that is under common Control with such person or entity. "Agreement" shall have the meaning provided in the introductory paragraph hereof. "All-in Fuel Cost" means, for any period, the actual cost incurred, on a first-in-first-out basis, by Power Marketing for Fuel supplied by Power Marketing to the Owner during such period, including the spot or contract price paid therefor by Power Marketing, all costs of transportation and delivery of such Fuel, and all taxes paid or payable by Power Marketing in association therewith. "Ancillary Services" means any or all of the following: (i) 10 minute spinning reserve, (ii) 10 minute non-spinning reserve, (iii) operating reserves, (iv) automatic generation control, (v) voltage support, and (vi) black start services. "Big Cajun I" means Big Cajun I, Units 1 and 2, both of which are 110 MW natural gas-fired electric generating facilities located in New Roads, Louisiana. "Big Cajun II" means Big Cajun II, Units 1 and 2, which are 575 MW coal-fired electric generating units, and Big Cajun II, Unit 3, which is a 575 MW coal-fired electric generating unit of which Owner owns a 58% undivided interest. Big Cajun II is located in New Roads, Louisiana. "Business Day" means any day other than a Saturday, a Sunday, or a holiday on which national banking associations in Minnesota or New York are not open for 2 3 business. A Business Day shall begin at 8:00 a.m. and end at 5:00 p.m. Eastern Standard (or Daylight) time. "Capacity" means the aggregate installed generating capability of all of the Units located at the Station, measured in megawatts ("MW") or kilowatts ("KW"). "Coal Supply Agreement" means that certain Coal Supply Agreement between Triton Coal Company and Owner dated August 1, 1997. "Control" means the possession, directly or indirectly, through one or more intermediaries, of (i) in the case of a corporation, a majority of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, a majority of the beneficial interest therein; and (iv) in the case of any other entity, a majority of the economic or beneficial interest therein. "Deficit Station Power" means any Power that is required to fulfill Owner's contractual supply obligations under the Power Supply Contracts, at any point, that cannot otherwise be generated or supplied by generation assets owned, leased or controlled by Owner. "Delivery Point" means the point at which the Station is connected to Entergy Corporation, Central Louisiana Electric Company ("CLECO"), or Southwestern Electric Power Company ("SWEPCO") transmission systems as indicated in the respective Interconnection Agreement or such other delivery point as Power Marketing shall designate. "Dispatch" means setting the level of Power output of the Station. "Emissions Credits" means credits, in units established by applicable regulatory authorities, resulting from the reduction of air pollutants (including NOx and SO(2)) from an emitting source or facility, that have been certified by the applicable regulatory authority. "Energy" means electric energy, measured in megawatt hours ("MWh") or kilowatt hours ("KWh"), generated and deliverable by Owner. "Excess Station Power" means the difference between (i) the sum of Station Power plus all Power Purchases, and (ii) the Power sold pursuant to the Power Supply Contracts. 3 4 "Force Majeure" means an event which (i) is not within the reasonable control of the Party claiming Force Majeure (the "Claiming Party"), (ii) was not caused by the acts, omissions or delays of the Claiming Party or any person over whom the Claiming Party has control, (iii) is not an act, event or condition the risks or consequences of which the Claiming Party has expressly agreed to assume pursuant to this Agreement, and (iv) by the prompt exercise of due diligence, the Claiming Party is unable to overcome or avoid or cause to be avoided. Subject to the foregoing, Force Majeure includes, but is not restricted to acts of God, fire, civil disturbance, labor dispute, labor or material shortage, sabotage, or action or restraint by court order of any public or governmental authority (so long as the Claiming Party has not applied for or assisted in the application for, and has opposed where and to the extent reasonable, such government action). "Fuel" means the natural gas required to operate Big Cajun I. "Governmental Entity" means the government of the United States, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Interconnection Agreement" means any or all of the following: (i) an Electric System Interconnection Agreement effective as of January 1, 1991 by and between CLECO and Cajun; (ii) an Electric System Interconnection Agreement dated as of January 1, 1998 by and between SWEPCO and Cajun; (iii) an As-Available Energy Transmission Service Agreement dated as of May 31, 1989 by and between SWEPCO and Cajun; (iv) a Network Integration Transmission Service Agreement dated as of January 1, 1998 (as revised March 25, 1999) by and between Entergy Services, Inc. ("ESI") and Cajun; (v) a Network Operating Agreement, dated as of January 1, 1998 by and between ESI and Cajun; (vi) a Non-Firm Point-to-Point Transmission Service Agreement dated as of January 1, 1998 by and between ESI and Cajun; (vii) a Firm Point-to-Point Transmission Service Agreement dated as of January 1, 1998 by and between ESI and Cajun; and (viii) any replacement or new Agreements negotiated by Owner relating to the transmission of electricity from a Station. "Interest Rate" means, for any date, the interest equal to the "Prime Rate" as may be published on the first Business Day of the applicable calendar month in The Wall Street Journal under "Money Rates." 4 5 "Net Power Revenue" means, for any period, the gross receipts during such period from sales by Power Marketing of Excess Station Power, reduced by (i) the cost of any Power Purchases, (ii) the amount of any transmission or other costs incurred by Power Marketing during such period in delivering Excess Station Power to the point of sale, (iii) the amount of any state or federal Taxes paid or required to be paid by Power Marketing with respect to the sale of Excess Station Power or otherwise with respect to the performance of its obligations hereunder, and (iv) the amount of any other costs paid by Power Marketing during such period in connection with the sale of Excess Station Power, including an arms-length, commercially reasonable allocation of overhead and administrative expense. "Net Power Cost" means, for any period, the cost during such period of purchases by Power Marketing of Deficit Station Power, increased by (i) the amount of any transmission or other costs incurred by Power Marketing during such period in delivering Deficit Station Power to the point of sale, (ii) the amount of any state or federal Taxes paid or required to be paid by Power Marketing with respect to the purchase of Deficit Station Power or otherwise with respect to the performance of its obligations hereunder, and (iii) the amount of any other costs paid by Power Marketing during such period in connection with the purchase of Deficit Station Power, including an arms-length, commercially reasonable allocation of overhead and administrative expense. "Power" means Capacity, Energy or Ancillary Services or any combination thereof, as the case may be. "Power Purchases" means any Power purchased by Power Marketing on behalf of Owner. "Power Supply Contracts" shall have the meaning provided in the second recital hereof. "Prudent Independent Power Industry Practice" means any of the practices, methods and acts engaged in or approved by a significant portion of the independent power industry during the relevant time period, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Independent Power Industry Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be practices, methods or acts generally accepted in the region and consistently adhered to by Owner. Prudent Independent Power Industry Practices 5 6 shall include, but not be limited to North American Electric Reliability Council ("NERC") Criteria & Guidelines, Southwest Power Coordinating Council ("SPCC") Criteria & Guidelines, as they may be amended from time to time, including the rules, guidelines and criteria of any successor organization to the foregoing entities. "Station" means the generating facilities acquired by Owner. "Station Power" means the aggregate total Power generated by the Station from time to time. "Taxes" means any tax, charge, impost, tariff, duty or fee of any kind charged, imposed or levied, directly or indirectly, by any Governmental Entity, including any value-added tax, sales tax, stamp duty, gross receipts tax, property tax, registration fee or license, but excluding any tax on income. "Transportation Contract" means that certain Coal Transportation Agreement between The Burlington Northern and Santa Fe Railway Company, American Commercial Marine Service and Owner dated January 22, 1997. "Unit" means each of the operating electricity generating units located at the Station. ARTICLE II TRANSACTIONS AND SERVICES 2.1 Power Transactions. (a) Right to Excess Station Power. Power Marketing shall have the exclusive right, as agent for Owner, to sell or trade all of the Excess Station Power. (b) Right to Transact Power Purchases. Power Marketing shall have the exclusive right, as agent for Owner, to buy or trade all Power Purchases. (c) Delivery of Excess Station Power. Owner shall use all commercially reasonable efforts, in accordance with Prudent Independent Power Industry Practice, to deliver any Excess Station Power sold by Power Marketing to the contractually designated Delivery Point, in accordance with instruction received from Power Marketing. (d) Purchase or Sale of Ancillary Services. Power Marketing shall have the exclusive right, as agent for Owner, to purchase, sell, or trade all Ancillary Services. 6 7 Power Marketing, in its sole discretion, may fulfill any Ancillary Service obligation either through (i) the use of Big Cajun I or Big Cajun II or any other generating facility that will be owned by NRG South Central Generating LLC ("NRG South Central") or an Additional Guarantor, or (ii) acquisition from a third party provider. (e) Dispatch. Power Marketing shall have the exclusive right and the obligation to effect the Dispatch of the Station. Power Marketing shall effect such Dispatch, as agent for Owner, through bilateral contracts and the Power Supply Contracts, and such Dispatch shall be subject to the physical limitations of the Station as Owner may advise Power Marketing from time to time. (f) Other Power Sales Agreements. Power Marketing shall assist Owner in performing all of its obligations under the Power Supply Contacts and any other power sale agreements to which it may be a party. (g) Metering. For the purposes of determining quantities of Power delivered, metering shall be determined based upon the Delivery Points of the relevant Interconnection Agreements. (h) Auxiliary Power. Power Marketing shall be responsible for negotiating agreements for the provision of Power to the Station for auxiliary load and Station start-up as required to support the Dispatch schedule. 2.2 Fuel Requirements. (a) Big Cajun I. Power Marketing shall procure for Owner all Fuel at such time and in such amounts as are necessary to satisfy all Fuel requirements of Big Cajun I. Owner shall notify Power Marketing on a regular basis, sufficiently in advance of the need therefore, of the anticipated Fuel requirements. All Fuel shall be contracted for by Power Marketing as agent for Owner. (b) Big Cajun II. Power Marketing shall provide oversight and advice to Owner on an "as requested" basis regarding the Coal Supply Agreement and the Transportation Contract. In addition, at the request of Owner, Power Marketing will assist in the procurement of new or additional coal supply or transportation arrangements, should circumstances necessitate such assistance. 2.3 Emissions Credits. (a) Big Cajun I. Owner shall make available and transfer to Power Marketing, as its exclusive agent, all Emissions Credits owned, earned or acquired 7 8 by Owner that are in excess of the amount of Emission Credits required to operate Big Cajun I at its scheduled capacity. Power Marketing shall procure for Owner all Emissions Credits, in excess of those generated by Owner, that are required by Owner to operate Big Cajun I at its scheduled capacity. (b) Big Cajun II. Pursuant to the terms of Owner's Coal Supply Agreement for Big Cajun II, the coal supplier is obligated to procure SO(2) allowances for the first 5 years of the contract (the "Initial Term") to the extent Owner's SO(2) emissions from Big Cajun II exceed 43,804 tons per calendar year. If, however, SO(2) emissions are less than 43,804 tons in any calendar year during the Initial Term, then Owner must convey to the coal supplier two-thirds the number of allowances less than 43,804 ton allotment. During the Initial Term, Power Marketing shall assume all responsibilities of Owner under the Coal Supply Agreement regarding SO(2) emission for the benefit of Owner. To the extent available, Power Marketing shall use commercially reasonable efforts to maximize the value of any excess SO(2) allowances available to Owner under the Coal Supply Agreement. The responsibilities of Power Marketing regarding SO(2) emission allowances upon completion of the Initial Term shall be agreed upon by Power Marketing and Owner on or before three (3) months prior to completion of the Initial Term. With respect to Emissions Credits (other than SO(2)), the obligations of Power Marketing regarding Big Cajun II shall be the same as the obligations set forth in Section 2.3(a) applicable to Big Cajun I. 2.4 Load Management; Risk Management and Hedging. (a) Load Management. Power Marketing shall assist Owner in fulfilling Owner's load management obligations set forth in the Power Supply Contracts. Power Marketing shall assume primary responsibility for these obligations. Owner shall notify Power Marketing of any pending material changes in Owner's load in a timely manner. (b) Risk Management and Hedging. Power Marketing shall implement appropriate risk management practices and develop a hedging strategy for the benefit of Owner, subject to the provisions of Section 7.1 of this Agreement. ARTICLE III PAYMENTS 3.1 Payments for Excess Station Power. Power Marketing shall pay to Owner for the amount of the Excess Station Power provided by Owner to Power Marketing the 8 9 Net Power Revenue from the sales by Power Marketing of such power. By no later than the twenty-fifth (25th) day of each calendar month, Power Marketing shall deliver an estimated statement, together with the estimated payment required pursuant to such statement, to Owner setting forth, separately with respect to Capacity, Energy and Ancillary Services, the estimated Excess Station Power provided by Owner pursuant to Dispatch effected by Power Marketing during the preceding calendar month and the total amount due to Owner from Power Marketing with respect thereto, together with any applicable supporting documentation. As soon as possible with respect to each calendar month, and in any case no later than ten (10) Business Days after final reconciliation of such calendar month, Power Marketing shall deliver a true-up statement to Owner with respect to such calendar month, which statement shall set forth, separately with respect to Capacity, Energy and Ancillary Services, the actual Excess Station Power provided by Owner pursuant to Dispatch effected by Power Marketing. If such true-up statement reveals a shortfall in payment by Power Marketing with respect to such payment, then such true-up statement shall be accompanied by payment for such shortfall, together with interest at the Interest Rate from the date originally due (i.e., the twenty-fifth (25th) day of the month following the calendar month in which such Power was provided or generated by Owner) until paid in full. If such true-up statement reveals an overpayment by Power Marketing with respect to such payment, then Owner shall refund such overpayment to Power Marketing no later than ten (10) Business Days following the delivery of such true-up statement, together with interest at the Interest Rate from the date such overpayment was originally made until repaid in full. 3.2 Payments for Deficit Station Power. Owner shall pay to Power Marketing for the amount of the Deficit Station Power provided by Power Marketing to Owner the Net Power Cost from the purchase by Power Marketing of such power. By no later than the twenty-fifth (25th) day of each calendar month, Power Marketing shall deliver an estimated statement, together with the estimated payment required pursuant to such statement, to Owner setting forth, separately with respect to Capacity, Energy and Ancillary Services, the estimated Deficit Station Power procured by Power Marketing during the preceding calendar month and the total amount due to Power Marketing from Owner with respect thereto, together with any applicable supporting documentation. As soon as possible with respect to each calendar month, and in any case no later than ten (10) Business Days after final reconciliation of such calendar month, Power Marketing shall deliver a true-up statement to Owner with respect to such calendar month, which statement shall set forth, separately with respect to Capacity, Energy and Ancillary Services, the actual Deficit Station Power provided by Power Marketing. If such true-up statement reveals a shortfall in payment by Owner with respect to such payment, then such true-up statement shall be accompanied by payment for such shortfall, together with interest at the Interest Rate 9 10 from the date originally due (i.e., the twenty-fifth (25th) day of the month following the calendar month in which such Power was provided to Owner) until paid in full. If such true-up statement reveals an overpayment by Owner with respect to such payment, then Power Marketing shall refund such overpayment to Power Marketing no later than ten (10) Business Days following the delivery of such true-up statement, together with interest at the Interest Rate from the date such overpayment was originally made until repaid in full. 3.3 Payments for Fuel. Power Marketing will use commercially reasonable efforts to have all Fuel invoiced directly to Owner for payment. In the event Owner is not invoiced directly by the Fuel supplier, Owner shall pay to Power Marketing the All-in Fuel Cost for the Fuel procured by Power Marketing. Power Marketing shall deliver to Owner on or before the fifteenth (15th) day of each month a statement of the All-in Fuel Cost for Fuel supplied in the previous month that was not invoiced directly to Owner, together with all applicable supporting documentation. Owner shall pay to Power Marketing the amount of each such statement on or before the last day of the month in which such statement is delivered. 3.4 Payments for Emissions Credits. Power Marketing shall deliver to Owner on or before the fifteenth (15th) day of each month a statement with respect to any Emissions Credits sold or purchased by Power Marketing in the previous month, together with any applicable supporting documentation. Power Marketing shall remit to Owner with any such statement with respect to Emissions Credits sold by Power Marketing for Owner the full amount then due. Owner shall pay to Power Marketing the amount of each such statement with respect to any Emissions Credits purchased by Power Marketing for the benefit of Owner on or before the last day of the month in which such statement is delivered. 3.5 Fuel and Emission Credit Compensation. In consideration for the services rendered by Power Marketing pursuant to Sections 2.2 and 2.3, Owner shall pay to Power Marketing an amount equal to the number of manhours expended by appropriate personnel of Power Marketing for services rendered (rounded to the nearest quarter of an hour), multiplied by the hourly rates set forth on Exhibit A (which rates each shall escalate on the first day of each calendar year during the term hereof by an amount which is 3% of the rate applicable during the prior calendar year). Power Marketing shall prepare and submit to Owner on a monthly basis invoices covering the fees to which Power Marketing is entitled under this Section 3.5. 3.6 Load and Risk Management Services Compensation. In consideration for the services rendered by Power Marketing pursuant to Section 2.4, Owner shall pay to 10 11 Power Marketing an amount equal to the number of manhours expended by appropriate personnel of Power Marketing for services rendered (rounded to the nearest quarter of an hour), multiplied by the hourly rates set forth on Exhibit A (which rates each shall escalate on the first day of each calendar year during the term hereof by an amount which is 3% of the rate applicable during the prior calendar year). Power Marketing shall prepare and submit to Owner on a monthly basis invoices covering the fees to which Power Marketing is entitled under this Section 3.6. 3.7 Overdue Payments; Defaults. If any Party shall fail to make any payment (including any estimated payment) when due, such overdue payment shall accrue interest at the Interest Rate plus 2% from the due date to the date of payment. In addition, if Power Marketing is the defaulting Party with respect to payments for Excess Station Power and continues to default with respect to any payment for thirty (30) days after notice of such default by Owner, then Owner may (i) terminate this Agreement, or (ii) take any other such actions as are available to it an law or equity with respect to such default. During the exercise of any remedy, Power Marketing shall continue to be obligated to pay Owner for all Excess Station Power not otherwise sold by Owner. In addition, Power Marketing shall remain obligated to pay Owner for all Excess Station Power generated by Owner pursuant to Dispatch effected by Power Marketing. Owner may exercise any one or more of such remedies, and no such exercise shall limit Owner's rights to exercise any other remedy. 3.8 Billing Dispute. If either Party, in good faith, disputes a statement, the disputing Party shall immediately notify the other Party of the basis for the dispute; provided, however, that no adjustment for any invoice or payment will be made unless objection to the accuracy thereof was made prior to the lapse of one (1) year from the date such amount was paid. The disputing Party shall pay the undisputed portion of such statement no later than the due date. If any amount withheld under dispute is ultimately determined to be due to the other Party, it shall be paid within five (5) Business Days of such determination along with interest accrued at the Interest Rate from the date originally due until the date paid. Inadvertent overpayments shall be returned by Party overpaid upon request or deducted by such Party from subsequent payments, with interest accrued at the Interest Rate from the date originally paid until the date paid or deducted. ARTICLE IV PERFORMANCE EXCUSED 11 12 4.1 Force Majeure. If either Party is rendered unable by an event of Force Majeure to carry out, in whole or part, its obligations under this Agreement, then, for only the pendency of such Force Majeure, the Party affected by the event shall be temporarily relieved of its obligations hereunder to deliver Power insofar as they are affected by Force Majeure but for no longer period; provided, however, that such Party shall not be relieved of its obligation to make payments then due or becoming due with respect to performance which occurred prior to the event. The Party affected by an event of Force Majeure shall provide the other Party with written notice setting forth the full details thereof within two (2) Business Days after the occurrence of such event and shall take all reasonable measures to mitigate or minimize the effects of such event of Force Majeure. 4.2 Scheduled Outages. Owner shall notify Power Marketing of any scheduled outage of any Unit. During the period of such scheduled outage and any additional time reasonably required to complete the work for which such outage was scheduled, Owner shall be relieved of its obligations hereunder to deliver Power from such Unit. ARTICLE V TITLE, RISK OF LOSS AND INDEMNIFICATION 5.1 Title and Risk of Loss. Title to and risk of loss related to Excess Station Power sold by Power Marketing hereunder shall remain with Owner until delivery to the Delivery Point. Owner warrants that it will deliver to Power Marketing the Excess Station Power free and clear of all liens, claims and encumbrances arising prior to the Delivery Point. Title to and risk of loss related to Deficit Station Power procured by Power Marketing shall transfer from seller to Owner at the Delivery Point. 5.2 Indemnity. Each Party shall indemnify, defend and hold harmless the other party from any Claims arising from any act or incident occurring during the period when control and title to Power is vested, as between the Parties as provided in Section 5.1, in the indemnifying Party. "Claims" means all claims or actions, threatened or filed and, whether groundless, false or fraudulent, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement. 5.3 Duty to Mitigate. Each Party agrees that it has a duty to mitigate damages and covenants that it will use commercially reasonable efforts to minimize any damages it 12 13 may incur as a result of the other Party's performance or non-performance of this Agreement. ARTICLE VI REPRESENTATIONS, WARRANTIES AND COVENANTS 6.1 Representations and Warranties. Each Party hereby represents and warrants to the other Party that the following statements are true and correct as of the date hereof and shall be true and correct at all times that such Party is a Party hereto: (a) It is duly formed, validly existing, and in good standing under the laws of the jurisdiction of its incorporation or formation; to the extent required by applicable law, it is duly qualified and in good standing in the jurisdiction of its principal place of business, if different from its jurisdiction of incorporation or formation; and it has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder and thereunder, and all necessary actions by the officers, managers, members or other applicable persons necessary for the due authorization, execution, delivery, and performance of this Agreement by it have been duly taken. (b) It has duly executed and delivered this Agreement and the other documents contemplated herein, and each constitutes a legal, valid and binding obligation of such Party enforceable against it in accordance with the terms of such document (except as may be limited by bankruptcy, insolvency or similar laws of general application and by the effect of general principles of equity, regardless of whether considered at law or in equity). (c) Its authorization, execution, delivery, and performance of this Agreement does not and will not (i) conflict with, or result in a breach, default or violation of, (A) its organizational documents, (B) any contract or agreement to which it is a party or is otherwise subject, or (C) any law, order, judgment, decree, writ, injunction or arbitral award to which it or any of its properties is subject; or (ii) require any consent, approval or authorization from, filing or registration with, or notice to, any governmental authority (including any approvals required by the Federal Energy Regulatory Commission) or other person, unless such requirement has already been satisfied. (d) It has obtained all governmental approvals (including all approvals, authorizations or waivers from the Federal Energy Regulatory Commission) necessary to perform its obligations hereunder. 13 14 (e) It is not a party to any litigation the outcome of which could reasonably be expected to adversely affect its ability to perform its obligations hereunder or to have a material adverse effect on its properties, business or financial condition. 6.2 Covenants. The Parties hereby covenant and agree as follows: (a) Each Party will timely acquire and maintain all permits, licenses, waivers and approvals (including approval to operate as an exempt wholesale generator) required by any state or federal regulatory authority in order for it to perform its obligations hereunder. (b) Each Party will at all times abide by all laws, rules and regulations of any state or federal governmental authority applicable to the conduct of such Party or the performance of its obligations hereunder. (c) Power Marketing will not sell Power to any of its Affiliates except in conformity with the laws, rules and regulations of any Governmental Entity applicable to such transactions. ARTICLE VII MISCELLANEOUS 7.1 Owner Risk Oversight. Owner shall have the right to influence the strategy of Power Marketing with respect to (i) the purchase and sale of Energy, Capacity, and Ancillary Services, and (ii) the overall level of risk to be undertaken by Power Marketing on behalf of Owner. At the request of Owner, Power Marketing shall make available for review all relevant records and documentation supporting transactions entered into by Power Marketing on behalf of Owner. 7.2 Term of Agreement. The Term of this Agreement will begin on the date of this Agreement and will end on December 31, 2030. 7.3 Governing Law and Jurisdiction. This Agreement and the rights and duties of the Parties hereunder shall be governed by and construed, enforced and performed in accordance with the laws of the State of New York without regard to any conflict of law rules thereof (other than Section 5-1401 of the New York General Obligations Law). Any lawsuits arising under this Agreement shall be instituted in the federal or state courts of New York located in New York County, and each party hereby irrevocably submits to the in personam jurisdiction of such courts. EACH PARTY 14 15 HEREIN WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT. 7.4 Assignment. Neither Party shall assign this Agreement or its rights hereunder without the prior written consent of the other Party, provided, however, either Party may, without the consent of the other Party (and without relieving itself from liability hereunder), (i) transfer, sell, pledge, encumber or assign this Agreement or the accounts, revenues or proceeds hereof in connection with any financing or other financial arrangements by or for the benefit of Owner or NRG South Central, (ii) transfer or assign this Agreement to an Affiliate of such Party if such Affiliate's creditworthiness and technical ability to perform hereunder is not materially different than that of such Party, (iii) transfer or assign this Agreement to any person or entity succeeding to all or substantially all of the assets of such Party, or (iv) in the case of Owner, transfer or assign this Agreement to any person or entity acquiring the Station; provided, however, that in each such case, any such assignee (other than an assignee in a transaction referred to in clause (i) above) shall agree in writing to be bound by the terms and conditions hereof and such assignee's creditworthiness and technical ability to perform hereunder shall not be materially different than that of such Party. 7.5 Notices. If to Power Marketing: NOTICES AND CORRESPONDENCE: NRG Power Marketing Inc. 1221 Nicollet Mall Minneapolis, MN 55403 Attn: Audrey Zibelman Phone: (612) 373-5300 Fax: (612) 373-5430 INVOICES: NRG Power Marketing Inc. 1221 Nicollet Mall Minneapolis, MN 55403 Attn: Christine Harrell Phone: (612) 373-5300 15 16 Fax: (612) 373-5430 PAYMENTS BY WIRE: Bank: LaSalle National Bank Address: Chicago, IL ABA: 071 000 505 Account: NRG Power Marketing LLC Acct. No.: If to Owner: NOTICES & CORRESPONDENCE: Louisiana Generating LLC P.O. Box 15540 Baton Rouge, LA 70895 Attn: Alan Williams Phone: (225) 291-3060 Fax: (225) 296-1746 INVOICES: Louisiana Generating LLC P.O. Box 15540 Baton Rouge, LA 70895 Attn: Michael Manning Phone: (225) 291-3060 Fax: (225) 296-1746 PAYMENTS BY WIRE: Bank: Address: ABA: Account: Acct. No.: 7.6 General. No amendment or modification to this Agreement shall be enforceable unless reduced to writing and executed by both Parties. This Agreement shall not impact any rights enforceable by any third party (other than a permitted 16 17 successor or assignee bound to this Agreement). No waiver by a Party of any default by the other Party shall be construed as a waiver of any other default. Any provision declared or rendered unlawful by any applicable court of law or regulatory agency or deemed unlawful because of a change in law will not otherwise affect the remaining lawful obligations that arise under this Agreement. The headings used herein are for convenience and reference purposes only. All indemnity and audit rights hereunder shall survive the termination of this Agreement for six (6) years. For any period over which interest shall accrue, interest shall accrue on the first day of such period, but shall not accrue on the last day thereof. 7.7 Confidential Information. During the Term of this Agreement and for three (3) years thereafter, neither Party shall divulge, furnish or make accessible to anyone or use in any way any confidential or secret information of the other Party which it has acquired or become acquainted with in the performance of its obligations under this Agreement. Each Party acknowledges that the above-described information constitutes a unique and valuable asset of the Party seeking such confidential treatment, and that any disclosure or other use of such knowledge other than for the sole benefit of such other Party would be wrongful and would cause it irreparable harm. Both during and after the term of this Agreement, each Party will refrain from any acts or omissions that would reduce the value of such knowledge or information to such other Party. The foregoing obligations of confidentiality, however, shall not apply to any knowledge or information which (i) is now published or which subsequently becomes generally publicly known in the form in which it was obtained from the Party seeking such confidential treatment, other than as a direct or indirect result of the breach of this Agreement, (ii) is disclosed to any regulatory authority having jurisdiction over the disclosing party, (iii) is disclosed as required by law or pursuant to legal process, or (iv) is disclosed to a lending institution (or any agent or trustee thereof) in connection with any financing for the benefit of Owner or NRG South Central subject to the terms of a confidentiality agreement having provisions substantially similar to this Agreement. 7.8 Renegotiation of Commercial Terms. The Parties acknowledge that the commercial terms of this Agreement reflect the Affiliate relationship that exists between Owner and Power Marketing. In the event that any portion of Owner, its parent, NRG South Central, or NRG South Central's members (NRG Central U.S. LLC or South Central Generation Holding LLC) is sold, transferred or conveyed to a non-Affiliate, Owner and Power Marketing agree to renegotiate the commercial terms of this Agreement to reflect an arms-length commercial arrangement. 17 18 IN WITNESS WHEREOF, the parties have executed this Power Sales and Agency Agreement in multiple counterparts to be construed as one as of the date first set forth above. NRG POWER MARKETING INC. By: /s/ Craig A. Mataczynski ------------------------------------ Name: Craig A. Mataczynski Title: President LOUISIANA GENERATING LLC By: /s/ Craig A. Mataczynski ------------------------------------ Name: Craig A. Mataczynski Title: Vice President 18 19 ANNEX A NRG Power Marking Inc. 2000 Standard Labor Rates for Intracompany Transactions
- -------------------------------------------------------------------------------- Category Fully Loaded Standard Rate - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Executive 210.00 - -------------------------------------------------------------------------------- Regional Manager 136.00 - -------------------------------------------------------------------------------- Sr. Attorney 129.00 - -------------------------------------------------------------------------------- Attorney 100.00 - -------------------------------------------------------------------------------- Exec. Dir. Energy Mktg. 113.00 - -------------------------------------------------------------------------------- Trader/Contract Administrator 86.00 - -------------------------------------------------------------------------------- Hourly Scheduler 46.00 - -------------------------------------------------------------------------------- Sr. Accountant 52.00 - -------------------------------------------------------------------------------- Executive Dir. Finance/Tax 100.00 - -------------------------------------------------------------------------------- Sr. Financial Analyst 58.00 - -------------------------------------------------------------------------------- Financial Analyst 52.00 - -------------------------------------------------------------------------------- Sr. Accountant 52.00 - -------------------------------------------------------------------------------- Accountant 46.00 - -------------------------------------------------------------------------------- Administrative Support 35.00 - --------------------------------------------------------------------------------
19 EX-10.4 30 y57012ex10-4.txt OPERATION AND MANAGEMENT SERVICES AGREEMENT 1 Exhibit 10.4 OPERATION AND MANAGEMENT SERVICES AGREEMENT This OPERATION AND MANAGEMENT SERVICES AGREEMENT (this "Agreement") dated as of March 24, 2000, is executed by Louisiana Generating LLC, a Delaware limited liability company ("Owner"), and NRG Operating Services, Inc., a Delaware corporation ("Supplier"; Owner and Supplier each, individually, a "Party" and, collectively, the "Parties"). RECITALS WHEREAS, Owner is a party to a Fifth Amended and Restated Asset Purchase and Reorganization Agreement (the "Asset Sale Agreement"), dated September 21, 1999, with Ralph R. Mabey, as Chapter 11 Trustee of Cajun Electric Power Cooperative, Inc. ("Cajun") pursuant to which Owner is to acquire two electric generation facilities (commonly referred to as "Big Cajun I" and "Big Cajun II"), with a total generating capacity of approximately 1700 MWs, located in New Roads, Louisiana (the "Facilities")and certain other assets; and WHEREAS, Owner will operate and maintain the Facilities through the employment of some or all of the Cajun employees currently working at the Facilities; and WHEREAS, Owner wishes to engage Supplier to assist in Owner's operation and maintenance of the Facilities and to monitor compliance by Owner under the terms of that certain Joint Ownership Participation and Operating Agreement, dated November 14, 1980, between Cajun and Entergy Corporation related to Big Cajun II, Unit 3, as amended (the "Joint Ownership Agreement"); and WHEREAS, Supplier is willing to undertake such service in accordance with the terms and conditions of this Agreement. NOW THEREFORE, in consideration of the mutual covenants set out herein, the sufficiency of which is acknowledged by both Parties, the Parties hereto hereby agree as follows: 1 2 I. DEFINITIONS "Additional Agreement" means any contract, instrument of agreement, or any amendment, modification or supplement thereto, entered into or expressly assumed by Owner, which Owner has delivered to Supplier during the term hereof and which may affect the operation or maintenance of the Facilities or Supplier's ability to perform the Services or meet its other obligations set forth in this Agreement. "Affiliate" means, with reference to a specified Person, any other Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such Person. A Person is controlled by another Person if the second Person holds a sufficient number of securities in the first Person to elect a majority of the directors of the first Person. "Approvals and Permits" means all approvals, permits, licenses, certificates, inspections and authorizations required by any Governmental Authority, arising out of, incident to, or related to the operation and maintenance of the Facilities. "Asset Sale Agreement" has the meaning assigned thereto in the first recital hereto. "Closing Date" has the meaning ascribed thereto in Section 1.1 of the Asset Sale Agreement. "Facilities" has the meaning ascribed thereto in the first recital hereto. "Governmental Authority" means any federal, state, or local agency or any court having jurisdiction over any aspect of the Facilities. "Hazardous Materials" means any chemicals, materials, substances or items in any form, whether solid, liquid, gaseous, semisolid, or any combination thereof, whether waste materials, raw materials, chemicals, finished products, byproducts, or any other materials or articles, which are listed as hazardous, toxic or dangerous under any federal or Louisiana environmental law, including petroleum products, asbestos, urea formaldehyde foam insulation, and lead-containing paints or coatings. 2 3 "Indemnified Party" means the Owner Indemnitee with respect to Section 8.1, and the Supplier Indemnitee with respect to Section 8.2. as the case may be. "Indemnifying Party" means the Supplier with respect to Section 8.1, and the Owner, with respect to Section 8.2, as the case may be. "Lender" means any Person providing financing to the Facilities or any agent or trustee representing such Person. "Owner" has the meaning ascribed thereto in the introductory paragraph hereto. "Person" means any corporation, trust, partnership, cooperative, limited liability company, entity or natural person. "Services" means the services described in Exhibit A hereto. "Supplier" has the meaning ascribed thereto in the introductory paragraph hereto. "Supplier's O&M Manager" means the individual(s) designated by Supplier, and approved by Owner, responsible for managing Supplier's obligations under this Agreement. II. ENGAGEMENT OF SUPPLIER 2.1 Engagement. Subject to all of the terms and conditions of this Agreement, Owner hereby engages Supplier to provide the Services, and Supplier hereby accepts such engagement to perform the Services. Supplier shall provide all Services to Owner on an "as requested" basis in support of the day-to-day operation and maintenance of the Facilities. Owner shall use a letter, work order, purchase order or other official document to authorize the performance of Services by Supplier. Such document shall state, as a minimum, the scope of Services to be performed, schedule requirements, budget and a reference to this Agreement. Supplier shall acknowledge requested Services in writing. 2.2 Independent Contractor. Nothing herein contained shall be deemed to create a partnership between Supplier (or its Affiliates) and Owner nor to 3 4 constitute Supplier (or its Affiliates) a member in Owner. To the contrary, Supplier (or its Affiliates) shall act as an independent contractor in the performance of its duties hereunder. In this regard, Supplier (or its Affiliates) shall be responsible for all employment related costs of its employees including, but not limited to, collection and remittance of all employment taxes and payment of all employee benefit costs. 2.3 Employment of Personnel. Except as caused by Supplier's own actions, no employee of Owner located at the Facilities shall be deemed an employee of Supplier by virtue of such individual's presence at the Facilities. Personnel involved in the performance of the Services and who are employed by Supplier or its Affiliate(s) shall remain employees of Supplier or its Affiliate(s), as applicable, and shall not, for any purpose, be deemed employees of Owner or its Affiliate(s). III. TERM The term of this Agreement shall commence as of the Closing Date, and shall continue until terminated in writing by Owner or pursuant to Article IX hereof. Termination shall be effective seven (7) days after receipt of notice of termination by Supplier. IV. SUPPLIER SERVICES 4.1 Representations and Warranties. Supplier represents and warrants as follows: (a) Supplier has the capability, experience, and means necessary to perform the Services contemplated by this Agreement. Supplier shall perform the Services using its best skill and attention. Services will be performed using personnel, equipment, and material qualified and suitable to do the work requested. (b) Supplier shall provide properly trained and informed personnel. Supplier shall be solely responsible for the acts and omissions of its employees, subcontractors and agents and for any other person performing the Services under this Agreement at the direct or indirect request of Supplier. 4 5 (c) Supplier will perform the Services in a diligent and workmanlike manner in compliance with accepted professional practices. Supplier shall comply with all applicable federal, state, and local laws, rules, regulations, and ordinances and with Owner's standards and specifications. Supplier has in effect and will maintain in effect all permits, licenses, and other authorizations necessary for its performance of the Services. (d) Supplier will observe Owner's rules as the same are made known to Supplier, including without limitation those rules involving health, safety, the environment, and security, when working at or around any of the Facilities. 4.2 Standard of Care. Supplier agrees to provide competent personnel to provide the Services (which personnel may be employees of Supplier and/or its Affiliates, including, without limitation, NRG Energy, Inc.). Supplier shall, and shall cause its Affiliates to, perform the Services with reasonable diligence and dispatch in a prudent, cost effective and efficient manner, in accordance with all applicable laws, Approvals and Permits, regulations, codes, industry standards and the Additional Agreements. Supplier shall not carry out any transaction or enter into any contract or agreement on behalf of Owner or itself with respect to any of the Services with any Affiliate of Supplier except on terms no less favorable to Owner than would be available in a bona fide arm's length transaction with a non-affiliated entity or person (it being hereby agreed that the hourly rates set forth on Exhibit B hereto for manhours expended by personnel of Supplier and its Affiliates are deemed to satisfy such standard). In addition, any such contract or agreement between Supplier and an Affiliate of Supplier under which the consideration payable by Supplier to its Affiliate exceeds $100,000 in any one year shall require the advance approval of Owner. 4.3 Supplier's Representative. Within a reasonable time after the Closing Date, Supplier shall identify a Supplier's representative in a written notice to Owner who shall represent and have the authority to bind Supplier in all matters regarding this Agreement, except as specifically limited in writing by Supplier, delivered to Owner. 5 6 V. RESPONSIBILITIES OF OWNER 5.1 Responsibilities of Owner. Owner shall be responsible for all matters relating to the Facilities other than the Services (which responsibilities the Parties acknowledge Owner may delegate to another party pursuant to an agreement with such party). Without limiting the foregoing, Owner shall negotiate all Additional Agreements and Owner shall make all financial decisions regarding the Facilities. 5.2 Owner's Representative. Within a reasonable time after the Closing Date, Owner shall identify an Owner's representative in a written notice to Supplier who shall represent and have the authority to bind Owner in all matters regarding this Agreement, except as specifically limited in writing by Owner, delivered to Supplier. 5.3 Approvals and Permits. Owner shall be responsible for obtaining and maintaining all Approvals and Permits necessary for the Facilities to be legally authorized to operate other than any such Approvals and Permits required to be obtained by Supplier (or its Affiliates) to perform the Services. 5.4 Copies of Additional Agreements. Owner shall give Supplier copies of all Additional Agreements and Permits and Approvals required for the performance of Supplier's responsibilities hereunder. VI. INSURANCE 6.1 Insurance Requirements of Supplier. Supplier shall procure and maintain in full force and effect at all times during the period commencing no later than the date on which Supplier has employees at the Facilities and ending with the termination of this Agreement, insurance policies with limits and coverage provisions in no event less than the limits and coverage provisions set forth below and with insurance carriers authorized to do business in Louisiana and rated A-8 or better by A.M. Best or otherwise acceptable to Owner. 6.1.1 General Liability Insurance: Liability insurance against claims for bodily injury and property damage. Such insurance shall provide coverage for products- completed operations, blanket contractual, explosion, collapse and underground coverage, broad form property damage, personal injury insurance, independent contractors and the hostile fire exception to the pollution liability exclusion with a 6 7 $1,000,000 minimum limit per occurrence ($2,000,000 aggregate) for combined bodily injury and property damage; provided that the policy general aggregate, if any, shall apply separately to the Facilities. A maximum deductible or self-insured retention of $500,000 per occurrence shall be allowed. 6.1.2 Automobile Liability Insurance: Automobile liability insurance against claims for personal injury (including bodily injury and death) or property damage arising out of the use of all owned, leased, not-owned and hired motor vehicles including loading and unloading with a $1,000,000 minimum limit per occurrence for combined bodily injury and property damage and containing appropriate no-fault insurance provisions where applicable. A maximum deductible or self-insured retention of $500,000 per occurrence shall be allowed. 6.1.3 Workers' Compensation Insurance: Workers' compensation insurance as required by applicable law. A maximum deductible or self-insured retention of $500,000 per occurrence shall be allowed. 6.1.4 Employer's Liability Insurance: Employer's liability insurance for all employees of the Supplier with a $1,000,000 minimum limit per accident. A maximum deductible or self-insured retention of $500,000 shall be allowed. 6.1.5 Umbrella Excess Liability Insurance: Umbrella excess liability insurance of not less than $5,000,000 per occurrence and in the aggregate. Such coverages shall be on a per occurrence policy form or the AEGIS, or equivalent, claims-first-made form and over and above coverage provided by the policies described in Sections 6.1.1, 6.1.2 and 6.1.4 above, whose limits shall apply toward the $5,000,000 limits set forth in this section. The umbrella and/or excess policies shall not contain endorsements which restrict coverages as set forth in Section 6.1.1, 6.1.2 and 6.1.4 above, and which are provided in the underlying policies. All policies of liability insurance to be maintained by Supplier (other than employer's liability insurance) shall be endorsed (a) to provide a severability of interests for cross liability clause: (b) to name Owner and its managers, officers, employees and agents as an additional insured; (c) to provide that the insurance shall be primary and not excess to or contributing with any insurance 7 8 or self-insurance maintained by Owner, and (d) to waive subrogation against Owner and Lenders. 6.2 Owner Insurance Obligation. Owner shall maintain all insurances required to be maintained by it under any Additional Agreements or Lender financing arrangements. All such insurance shall (a) be endorsed to waive subrogation against Supplier, and (b) not require Supplier to pay any premium thereunder. Owner may satisfy this requirement by directing Supplier to obtain such insurance on its behalf pursuant to Item 4 on Exhibit A. VII. FEES AND EXPENSES PAYABLE TO SUPPLIER 7.1 Supplier Compensation. In consideration for the Services rendered and costs incurred by Supplier in performing the Services, Owner shall pay to Supplier: (i) an amount equal to the number of manhours expended by the Supplier's O&M Manager and other appropriate personnel of Supplier and/or its Affiliates for activities under this Agreement (rounded to the nearest quarter of an hour) related to current operations of the Facilities multiplied by the hourly rates set forth on Exhibit B (which rates each shall escalate on the first day of each calendar year during the term hereof by an amount which is 3% of the rate applicable during the prior calendar year); (ii) all reasonable amounts expended by Supplier for third party consultants and other costs incurred in the performance of the Services, supported by adequate documentation of such expenditures; (iii) transportation, travel, hotel and living expenses, including the use of Supplier employees' personal cars at Supplier's current standard rates; (iv) all reasonable moving, relocation, travel and living expenses incurred in connection with the assignment of Supplier's personnel to a location other than Supplier's permanent offices and from such location at the conclusion of the assignment; (v) miscellaneous expenses, including but not limited to, telegrams, telex, facsimile, telephone services, postage and similar miscellaneous items incurred in connection with the Services, all at Supplier's current standard rates; (vi) any fees, costs, damages, or disbursements incurred in connection with any labor, patent, or commercial litigation or any third party claim, suit or cause of action, arising out of or in connection with the performance of the Services by Supplier (except disputes between Supplier and Owner), or claims, suits or causes of action pursued on behalf of Owner by Supplier; and (vii) any sales, use or similar taxes or fees imposed by any federal, state, or municipal law, regulation or agency. 8 9 7.2 Invoices. Supplier shall prepare and submit to Owner on a monthly basis invoices covering the costs and fees to which Supplier is entitled under this Article VII. Such invoices shall be accompanied by expense statements, vouchers, or other supporting information as Owner may reasonably require. Owner shall pay all undisputed amounts due Supplier no later than thirty (30) days after receipt of the invoice. Any payment not made within thirty (30) days after receipt of Supplier's invoice will bear interest from the date on which payment was due at the rate of one percent (1%) per month. To the extent that Owner disputes any charges included in an invoice submitted by Supplier, Owner shall be entitled to withhold such amounts pending the resolution of the dispute; provided that any amount due to Supplier after the resolution of such dispute shall include interest as provided above from the date such amount was originally due. VIII. INDEMNIFICATION 8.1 Indemnification Responsibilities of Supplier. Subject to the limitation on liability set forth in Section 8.5 below, Supplier shall indemnify and hold harmless Owner, its members, the Executive or Management Committee, and the Lenders (if any) and their respective agents, employees, directors, managers and officers (each individually and all collectively referred to in this Section 8.1 as "Owner Indemnitee") from and against any and all losses, claims, damages, expenses, and liabilities, joint or several, to which the Owner Indemnitee becomes subject under any federal or state law, or otherwise, relating to or arising out of the willful misconduct or gross negligence of Supplier or its Affiliates, or anyone directly or indirectly employed by any of them, or anyone for whose acts any of them may be liable (such claims, damages, losses, expenses and liabilities being each referred to in this Section 8.1 as a "Loss"). In the event that any Loss shall be caused in part by the negligence of an Owner Indemnitee (excluding liability without fault of an Owner Indemnitee), Supplier indemnity shall be limited by and in proportion to the comparative degrees of negligence of Supplier and such Owner Indemnitee. 8.2 Indemnification Responsibilities of Owner. Subject to the limitation on liability set forth in Section 8.5 below, Owner shall indemnify and hold harmless Supplier and its Affiliates (if any) and their respective agents, employees, directors, managers and officers (each individually and all collectively referred to in this Section 8.2 as "Supplier Indemnitee") from and against any and all losses, claims, damages, and liabilities, joint and several, to which such Supplier Indemnitee may become subject under any applicable 9 10 federal or state law, or otherwise, relating to or arising out of the engagement of Supplier pursuant to and the performance by Supplier or its Affiliates of the Services contemplated by this Agreement (such claims, damages, losses, expenses and liabilities being each referred to in this Section 8.2 as a "Loss"). In the event that any Loss shall be caused in part by the negligence of a Supplier Indemnitee (excluding liability without fault of a Supplier Indemnitee), Owner's indemnity shall be limited by and in proportion to the comparative degrees of negligence of Owner and such Supplier Indemnitee. 8.3 Indemnification Term. The duty to indemnify under this Article VIII will continue in full force and effect notwithstanding the expiration or termination of this Agreement with respect to any claim or action based on facts or conditions which occur prior to such termination or expiration. 8.4 Indemnification Procedures. If either Party (the "Indemnified Party") intends to seek indemnification under this Article VIII from the other Party (the "Indemnifying Party") with respect to any action or claim of a third party against the Indemnified Party, the Indemnified Party shall give the Indemnifying Party notice of such claim or action within thirty (30) days of the commencement of, or actual knowledge by the Indemnified Party of, such claim or action. Failure to provide such notice shall not relieve the Indemnifying Party of its obligations hereunder so long as the Indemnifying Party is not materially harmed by the Indemnified Party's failure to give timely notice of the claim or action. The Indemnifying Party shall, at its sole cost and expense, defend any such claim or action; provided, however, that the Indemnified Party shall, at its own cost and expense, have the right to participate in the defense of or settlement of any such claim or action. The Indemnified Party shall not compromise or settle any such claim or action without the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld. 8.5 Limitation of Indemnification Obligation. Notwithstanding anything contained herein, neither Party hereto nor its members, Affiliates, directors, officers, shareholders, employees, agents, representatives and Lenders will be liable to the other for any special, indirect or consequential damage of such other Party arising out of or in any way related to performance or non-performance of any obligation hereunder. Supplier's cumulative liability under this Agreement shall be limited to the amount of compensation paid to Supplier hereunder, plus any costs or expenses for which Supplier has been reimbursed by Owner pursuant to the terms hereof. 10 11 IX. EVENTS OF DEFAULT; REMEDIES 9.1 Owner Default. Each of the following events shall constitute a default by Owner hereunder (an "Owner Default") except to the extent excused by the fault, action or inaction of Supplier: 9.1.1 The failure by Owner to fulfill any of its material obligations hereunder following receipt of written notice thereof from Supplier, unless Owner shall have cured the same within thirty (30) days from the date of receipt of such notice, or within such longer period as may be reasonably required to cure such failure given the nature thereof, provided that the failure is curable, that Owner proceeds and continues with diligence to correct such failure, and that such longer period shall not exceed ninety (90) days from the receipt of such notice. 9.1.2 The failure of Owner to make any undisputed payment due Supplier herein within thirty (30) days of the date such payment is due. Upon the occurrence of an Owner Default, Supplier, in addition to any remedies at law or in equity, may terminate this Agreement by providing written notice to Owner. Termination shall be effective seven (7) days after receipt of notice by Owner. 9.2 Supplier Default. Each of the following events shall constitute default by Supplier hereunder (a "Supplier Default") except to the extent excused by the fault, action or inaction of Owner: 9.2.1 The failure by Supplier to fulfill any of its material obligations hereunder following receipt of written notice thereof from Owner, unless Supplier shall have cured the same within thirty (30) days from the date of receipt of such notice, or within such longer period as may be reasonably required to cure such failure given the nature thereof, provided that the failure is curable, that Supplier proceeds and continues with diligence to correct such failure, and that such longer period shall not exceed ninety (90) days from the receipt of such notice 11 12 9.2.2 The failure of Supplier to make any undisputed payment due Owner hereunder within thirty (30) days of the date such payment is due. Upon the occurrence of a Supplier Default, Owner, in addition to any other remedies at law or in equity, may terminate this Agreement by providing written notice to Supplier. Termination shall be effective seven (7) days after receipt of notice by Supplier. 9.3 Remedies. In the case of an Owner Default or Supplier Default, in addition to the right to terminate this Agreement as described above, the non-defaulting Party shall have the right to seek any and all remedies available hereunder, at law or in equity. Such remedies shall include the payment of damages (other than special, punitive, indirect, or consequential damages) by the defaulting Party. All rights and remedies of the Parties shall be cumulative, and may, to the extent permitted by law, be exercised concurrently or separately, and the exercise of one right or remedy shall not be deemed to be an election of such right or remedy or to preclude or waive the exercise of any other right or remedy. X. NOTICES 10.1 General Requirements. All notices and other communications required or permitted by this Agreement sent by mail shall become effective when delivered (including by messenger or courier) or when received by facsimile, telex, telegram or such other method of telecommunication as is capable of creating a writing. 10.2 Addresses of the Parties. All notices and other communications shall be forwarded to the Parties at the following addresses, or facsimile numbers, or at such substitute addresses or substitute facsimile numbers as a Party may designate by written notice to the other Party in the manner specified herein: If to Owner: Louisiana Generating LLC 1221 Nicollet Mall Suite 700 Minneapolis, MN 55403 Facsimile: 612-373-5392 Attention: Alan Williams 12 13 If to Supplier: NRG Operating Services, Inc. 1221 Nicollet Mall, Suite 700 Minneapolis, MN 55403 Facsimile: 612-373-5346 Attention: President With a copy to: NRG Energy Inc. 1221 Nicollet Mall, Suite 700 Minneapolis, MN 55403 Facsimile: 612-373-5392 Attention: Vice President & General Counsel XI. APPLICABLE LAW This agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York without regard to the conflict of law rules thereof (other than Section 5-1401 of the New York General Obligations Law). XII. SEVERABILITY In the event that any provision of this Agreement is held to be unenforceable or invalid by any court of competent jurisdiction, Supplier and Owner shall negotiate an equitable adjustment in the provisions of this Agreement with a view toward effecting the purposes of this Agreement, and the validity and enforceability of the remaining provisions shall not be affected thereby. XIII. AMENDMENTS AND WAIVERS This Agreement may not be amended or otherwise changed orally, and any waiver, amendment, modification or supplement hereof must be in writing and executed by both Parties. 13 14 XIV. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes the terms and conditions of any previous agreements or understandings. XV. EFFECTIVE WAIVERS Either Party's waiver of any breach or failure to enforce any of the terms, covenants, conditions or other provisions of this Agreement at any time shall not, in any way, affect, limit, modify or waive that Party's right thereafter to enforce or compel strict compliance with every term, covenant, condition or other provision, notwithstanding any course of dealing, course of performance, or custom of trade. XVI. ASSIGNMENT; SUCCESSORS AND PERMITTED ASSIGNS Except as hereinafter provided to the contrary, this Agreement shall not be assignable by either Party hereto without the express written consent of the other, which consent shall not be unreasonable withheld. Supplier hereby consents that Owner may assign its rights under this Agreement as security for the obligations of Owner to its Lenders (if any) and this Agreement shall continue in full force and effect in favor of the Lenders (if any), or their appointee or designee, as the successor to Owner. Liability of any Party hereunder shall survive an assignment. This Agreement shall be binding upon, and inure to the benefit of, the Parties hereto and their respective successors and permitted assigns. XVII. EXECUTION IN COUNTERPARTS This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which, when taken together, shall constitute one and the same Agreement. 14 15 XVIII. DISPUTE RESOLUTION Owner and Supplier agree to negotiate in good faith in an effort to resolve any dispute related to this Agreement that may arise between the parties. If the dispute cannot be resolved promptly by negotiation at a senior management level, then either party may give the other party written notice that the dispute should be submitted to mediation. Promptly thereafter, a mutually acceptable mediator shall be chosen by the parties, who shall share the cost of mediation services equally. If the dispute has not been resolved by mediation within ninety (90) days after the date of written notice requesting mediation, then either party may initiate litigation and pursue any and all remedies at law or at equity that such party is entitled to. XIX. RENEGOTIATION OF COMMERCIAL TERMS The parties acknowledge that the commercial terms of this Agreement reflect the Affiliate relationship that exists between Owner and Supplier. In the event that any portion of Owner, its parent, NRG South Central Generating LLC ("NRG South Central"), or NRG South Central's members (NRG Central U.S. LLC or South Central Generation Holding LLC) is sold, transferred or conveyed to a non-Affiliate, Owner and Supplier agree to renegotiate the commercial terms of this Agreement to reflect an arms-length commercial arrangement. 15 16 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement effective as of the date and year first set forth above. LOUISIANA GENERATING LLC By: /s/ Craig A. Mataczynski ------------------------ Craig A. Mataczynski Vice President NRG OPERATING SERVICES, INC. By: /s/ Craig A. Mataczynski ------------------------ Craig A. Mataczynski President 17 EXHIBIT A DESCRIPTION OF SERVICES The Services supplied by Supplier under this Agreement shall include, but not be limited to, the following: 1. Performing O&M budget tracking, analysis and recommendations, and effecting any approved adjustments. 2. Administering the Additional Agreements. 3. Providing annual, quarterly, and monthly budget analysis with recommendations for improvements. 4. If and as directed by Owner, providing property and excess liability insurance for Owner, in the amounts and in the manner directed by Owner. 5. Measuring training program performance for Owner operations and maintenance personnel in an economical fashion. 6. Reviewing safety rules, including industrial hygiene practices for the Facilities, to ensure they are consistent with all applicable laws, Approvals and Permits, and prudent engineering and operating practices. 7. Reviewing operating practices and rules to ensure compliance with all applicable environmental laws and permits. 8. Ensuring that key component technical risk assessment is performed and making recommendations to Owner concerning the operational reliability, availability and maintainability of the Facilities after completion of said assessment. 9. Reviewing and making recommendations to Owner regarding the supply and stock of strategic spare parts. 10. Providing technical support as requested. 11. Providing special support services as requested. 12. Ensuring Owner compliance with prudent independent power industry practice standards. 13. Monitoring compliance by Owner with the terms and conditions of the Joint Ownership Agreement. 17 18 EXHIBIT B HOURLY RATES FOR SERVICES - -------------------------------------------------------------------- 2000 - -------------------------------------------------------------------- LB - -------------------------------------------------------------------- Loaded Rate - -------------------------------------------------------------------- Senior Manager 86.00 - -------------------------------------------------------------------- Manager 77.00 - -------------------------------------------------------------------- Supervisor 52.00 - -------------------------------------------------------------------- Lawyer 100.00 - -------------------------------------------------------------------- Senior Engineer 69.00 - -------------------------------------------------------------------- Engineer 58.00 - -------------------------------------------------------------------- Specialist 46.00 - -------------------------------------------------------------------- Designer 46.00 - -------------------------------------------------------------------- Draftsman 46.00 - -------------------------------------------------------------------- Sr. Plant Technician 46.00 - -------------------------------------------------------------------- Senior Secretary 35.00 - -------------------------------------------------------------------- Secretary 35.00 - -------------------------------------------------------------------- Clerical 35.00 - -------------------------------------------------------------------- - --------------------------------------------------------------------
19 EX-10.5 31 y57012ex10-5.txt CORPORATE SERVICES AGREEMENT 1 Exhibit 10.5 CORPORATE SERVICES AGREEMENT THIS CORPORATE SERVICES AGREEMENT (this "Agreement"), dated as of March 24, 2000, is entered into by and between NRG Energy, Inc., a Delaware corporation (the "Provider"), and NRG South Central Generating LLC, a Delaware limited liability company (the "Company"). RECITALS WHEREAS, the Company's Affiliate, Louisiana Generating LLC ("Generating"), has obtained the rights to acquire, own and operate certain electric generation assets located in New Roads, Louisiana (the "Facility"); and WHEREAS, in order to effect Generating's acquisition of the Facility, the Company has chosen to issue approximately $800 million in bonds (the "Financing"); and WHEREAS, the Company desires to employ the services of the Provider to assist in its compliance with its various obligations under the Financing documents and other related business functions; and WHEREAS, the Provider agrees to provide various services to the Company in support of the Financing as provided in this Agreement. NOW THEREFORE, in consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS 1.1 Definitions. Whenever used in this Agreement with initial capitalization, the following terms shall have the meanings specified or referred to in this Article 1. "Affiliate" means, with respect to any person or entity, (i) each entity that such person or entity Controls, (ii) each person or entity that Controls such person or entity, and (iii) each entity that is under common Control with such person or entity. 2 "Agreement" shall have the meaning provided in the introductory paragraph hereof. "Control" means the possession, directly or indirectly, through one or more intermediaries, of (i) in the case of a corporation, a majority of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, a majority of the beneficial interest therein; and (iv) in the case of any other entity, a majority of the economic, beneficial or voting interest therein. "Effective Date" means March 24, 2000. "Outsource" means to cause a Service to be provided by a third-party provider which is not an Affiliate of the Provider. "Outsourced Services" shall means those Services which the Provider Outsources to third-party providers which are not Affiliates of the Provider. "Services" means the performance of any work, direction of work, technical or commercial information, data, consulting, staff augmentation or any other corporate business function performed for or on behalf of the Company by the Provider in functional areas such as but not limited to: human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. 1.2 Terminology. Unless the context of this Agreement clearly requires otherwise, (a) pronouns, wherever used herein, and of whatever gender, will include natural persons and corporations and associations of every kind and character, (b) the word "included" or "including" will mean "including without limitation", (c) the word "or" will have the inclusive meaning represented by the phrase "and/or", (d) the words "hereof," "herein," "hereunder," and similar terms in this Agreement will refer to this Agreement as a whole and not any particular section or article in which such words appear and (e) all terms defined in this Agreement in the singular will have the same meaning when used in the plural and vice versa. The section, article and other headings in this Agreement are for reference purposes and will not control or affect the construction of this Agreement or the interpretation hereof in any respect. Article, section and subsection references are to this Agreement unless otherwise specified. 2 3 ARTICLE 2 SERVICES 2.1 General. The Company hereby retains the Provider, and the Provider accepts the obligation, to provide to the Company certain Services in accordance with the terms of this Agreement. At the Provider's election, it may cause one or more of its Affiliates or third-party contractors to provide the Services; provided, however, that the Provider shall remain primarily responsible for the provision of the Services (including Outsourced Services) in accordance with the terms of this Agreement. 2.2 Services. The Provider shall provide all Services to the Company on an "as-requested" basis in support of the day-to-day business of the Company. The Company shall use a letter, work order, purchase order or other official written document to authorize the performance of Services by the Provider. Such document shall state, as a minimum, the scope of Services to be performed, schedule requirements, a budget for such Services and a reference to this Agreement. The Provider shall acknowledge requested Services in writing. 2.3 Personnel. The Provider shall provide as required by the Company all technical, professional, supervisorial, managerial, administrative and other personnel as are necessary to perform the Services. Such personnel shall be qualified and experienced in the Services to which they are assigned. The working hours, rates of compensation and all other matters relating to the employment of individuals employed by the Provider or its Affiliates in the performance of the Services shall be determined solely by the Provider or its respective Affiliates. Prior to the performance of any Services requested by the Company, the Company, upon request to the Provider or its Affiliate as the case may be, shall have the right to review and approve the Provider's staffing of the assignment. 2.4 Standards for Performance of Services. The Provider shall, and shall cause its Affiliates and the providers of Outsourced Services to, perform the Services with reasonable diligence and dispatch, in a prudent, cost effective and efficient manner, in accordance with all applicable laws, regulations, codes, permits, licenses and standards, and in accordance with the terms and conditions of this Agreement. The Provider may determine in its sole discretion whether or not to Outsource a Service. 3 4 2.5 Right to Request Instruction. At any time, the Provider may, if it reasonably deems it to be necessary or appropriate, request written instructions from the Company in a timely manner prior to taking action with respect to any matter contemplated by this Agreement, and may defer action thereon pending the receipt of such written instructions. ARTICLE 3 PAYMENT 3.1 Payment. The Company, in consideration for the performance of the Services by the Provider, agrees to pay the Provider all pre-approved charges, costs, expenses, taxes, fees and losses not compensated by insurance, which are incurred by Provider in the performance of the Services hereunder. These charges, costs, expenses, taxes, fees and losses shall include, but are not limited to: (a) Charges for the time of all personnel employed by the Provider in the performance of the Services at each person's standard intracompany labor rate as set forth by personnel category on Annex A hereto, which time charges include federal and state payroll taxes and insurance, Provider benefit programs, overhead and an arms-length, commercially reasonable mark-up. Such charges shall be subject to appropriate annual adjustment for any changes in payroll taxes or insurance, or changes in benefit programs. The Company shall be notified of any increase in labor rates for each upcoming calendar year during the fourth quarter of the then current calendar year. (b) Transportation, travel, hotel and living expenses, including use of employees' personal cars at the Provider's current standard rates. All reasonable moving, relocation, travel and living expenses incurred in connection with assignment of the Provider's permanent personnel to a location other than the Provider's permanent offices and from such location at the conclusion of assignment. (c) Miscellaneous expenses, including but not limited to telegrams, telex, telefacsimile, telephone services, postage and similar miscellaneous items incurred in connection with the Services, all at the Provider's current standard rates. 4 5 (d) Reproduction costs of all drawings, manuals, specifications, and other documents required for the Services; and costs for the use of computers, all at the Provider's current standard rates or at actual cost to the Provider if prepared by others. (e) Cost of any permits, fees, licenses or royalties required. Costs of any sales, use or similar taxes or fees imposed by a federal, state, municipal or other government or agency thereof. (f) Fees, costs, damages, or disbursements incurred in connection with any labor, patent, or commercial litigation or any third party claim, suit, or cause of action, arising out of or in connection with the performance of the Services by the Provider (except disputes between the Provider and the Company) or claims, suites or causes of action pursued on behalf of the Company by the Provider. (g) Premiums and brokerage fees on all bonds and insurance policies which may be required by the Company in addition to those listed herein, and any loss under the deductible features of any insurance policies, whether furnished by the Provider or the Company. 3.2 Invoicing. (a) The Provider shall invoice the Company by the fifteenth (15th) day of each month for all Services performed with respect to the preceding month and any adjustments that may be necessary to correct prior invoices. All invoices shall reflect in reasonable detail a description of the Services performed during the preceding month and shall be due and payable within thirty (30) days after its receipt. Documentation backing up invoiced charges shall be made available to the Company upon request. The Company shall pay all undisputed amounts on each invoice, but shall be entitled to withhold payment of any amount in dispute and shall notify the Provider within thirty (30) days from receipt of the invoice of the disputed amount and the reasons each such charge is disputed by the Company. The Provider shall promptly provide the Company with records relating to the disputed amount so as to enable the parties to resolve the dispute. 5 6 (b) Any statement or payment not disputed in writing by either party within two years of the date of such statement or payment shall be considered final and no longer subject to adjustment. The Company shall not be obligated to pay for any changes for which statements for payment are submitted more than two years after the termination of this Agreement. ARTICLE 4 LIMITED WARRANTY 4.1 Warranty. The Provider warrants that the Services performed under this Agreement will be in accordance with accepted professional standards and practices existing as of the date that such Services are performed. The sole and exclusive remedy for breach of this warranty shall be for the Provider to re-perform the defective portion of the Services within a period of one (1) year from the date that the defective Service was performed under this Agreement. The Company shall promptly provide the Provider written notice of the performance of defective Service. All costs of any re-performance shall be reimbursed by the Company to the Provider but the Provider shall receive no additional profit thereon. 4.2 Disclaimer. There are no warranties other than the above, either express or implied, including without limitation any warranties of merchantability or fitness for particular purpose applicable to the Services performed under this Agreement. ARTICLE 5 LIMITATION OF LIABILITY 5.1 Limitation of Liability. Whether due to delay, breach of contract or warranty, tort (including, without limitation, negligence), or any other cause, neither the Provider nor its Affiliates or subcontractors shall be liable for any special, indirect, punitive, or consequential damages of any nature, including, without limitation, loss of actual or anticipated profits, revenues, or product, loss by reason of shutdown, nonoperation, or increased expense of manufacturing or operation, or any costs, labor, or materials required for reconstruction or repairs. The Provider's maximum liability under or arising out of this Agreement shall in no event exceed the value of the Services performed during the calendar year prior to the cause giving rise to or creating any such liability. 6 7 ARTICLE 6 TERM AND TERMINATION; EVENTS OF DEFAULT 6.1 Term. The term of this Agreement shall commence on the Effective Date and shall continue until terminated in writing by the Company or terminated pursuant to Section 6.3 hereof. 6.2 Events of Default. If one or more of the following events occurs with respect to a party hereto, it will constitute an "Event of Default" with respect to such party: (a) Failure to Perform Obligations. Such party fails to perform or observe any material obligation under this Agreement and such failure continues for more than thirty (30) days after the non-defaulting party has given notice thereof to such party (or if the nature of such default is such that it is not capable of being cured within thirty (30) days, then the failure of such party to commence to cure such default within thirty (30) days and to diligently and continuously pursue the cure of such default thereafter, but in no event may such extended cure period exceed one hundred eighty (180) days); (b) Bankruptcy. Such party files a voluntary petition in bankruptcy, makes an assignment for the benefit of creditors, is adjudicated a bankrupt, or is declared insolvent. 6.3 Remedies; Exclusivity. At any time during the continuance of an Event of Default, the non-defaulting party will have the right to (a) elect, by giving notice to the defaulting party, not to be bound in any respect by the provisions of this Agreement during such continuance, in which case such party will have no obligations or liabilities hereunder during such period, or (b) terminate this Agreement upon giving notice of termination to the defaulting party. No failure on the part of either the Provider or the Company to exercise, and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude the exercise of any other such right, power, or privilege or further exercise thereof. 7 8 ARTICLE 7 MISCELLANEOUS 7.1 Severability. In the event any portion of this Agreement shall be found by a court of competent jurisdiction to be unenforceable, that portion of the Agreement will be null and void and the remainder of the Agreement will be binding on the parties as if the unenforceable provisions had never been contained herein. To the fullest extent permitted by law, the remedies set forth in Section 6.3 are the exclusive remedies for a default hereunder; provided that with respect to (i) disputed or unpaid invoices relating to Services rendered prior to any termination and (ii) claims for indemnity relating to events that occurred prior to any termination each party shall also have all the rights and remedies contemplated in Sections 7.10 and 7.11 herein or otherwise provided in law or equity. 7.2 Assignment. Except for the ability of the Provider to cause one or more of the Services to be performed by one of its Affiliates or a third-party provider, no party shall have the right to assign its rights or obligations under this Agreement without the consent of the other party; provided, however, that the Company may transfer, sell, pledge, encumber or assign this Agreement in connection with any financing or other financial arrangements by or for the benefit of the Company or its Affiliate, Louisiana Generating LLC without the consent of the Provider. 7.3 Entire Agreement. This Agreement constitutes the entire agreement of the parties relating to the performance of the Services. All prior or contemporaneous written or oral agreements are merged herein. 7.4 Law. This Agreement shall be subject to and governed by the laws of the State of New York, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state (other than Section 5-1401 of the New York General Obligations Law). 7.5 Amendment or Modification. This Agreement may be amended or modified from time to time only by a written amendment signed by the parties hereto. 7.6 Notices. Any notice, request, instruction, correspondence or other document to be given hereunder by either party to the other (herein collectively called "Notice") shall be in writing and delivered personally or mailed, postage prepaid, or by telegram or telecopier, as follows: 8 9 (a) if to the Company, to: NRG South Central Generating LLC 1221 Nicollet Mall, Suite 700 Minneapolis, MN 55403 Attention: President (b) if to the Provider, to: NRG Energy, Inc. 1221 Nicollet Mall, Suite 700 Minneapolis, MN 55403 Attention: Vice President of Corporate Operating Services 7.7 Insurance. The Company shall carry and keep in force, at all times, Commercial General Liability insurance in such policy limits as are usual and customary for similar businesses in the independent power industry and as it deems necessary to protect it from risks of loss arising from the performance of Services under this Agreement. The Company shall name the Provider, its directors, officers, employees and agents as additional insureds on these policies. The Company waives all rights and any subrogation rights such as it or its insurers may have against the Provider, its vendors and subcontractors and their employees, agents, officers, directors, and any of their affiliated or associated companies, for any losses or damages, including without limitation all consequential damages resulting from any and all risks and losses, however and whenever arising, from the Services performed hereunder, or other risks covered under a Commercial General Liability insurance policy. 7.8 Prosecution of the Work; Force Majeure. Provider shall substantially perform the Services in accordance with a schedule mutually agreed upon between the parties. Any completion dates specified are tentative only and Provider shall have no liability to the Company for late completion. If the performance of the Services is delayed or affected by any of the following force majeure occurrences: acts or failures to act by any contractors, engineers, vendors, or consultants employed by the Company or any other party not in privity of this Agreement; acts of God or the elements; acts or failures to act by government or any agency thereof; changes, inaccuracies, incompleteness, or differences in site conditions or any data or 9 10 information supplied to the Provider; changes in laws or regulations; delays in permitting; delays in receipt of engineering data or vendor drawings; fire; unusually severe weather, natural disasters, or unavoidable casualties; riot; civil disorders; labor shortages or disputes; strikes, picketing, or arbitration proceedings; delays in transportation, material, or equipment deliveries; material, equipment, or fuel shortages; or any other causes beyond the Provider's reasonable control, the parties shall negotiate to extend the schedule for the period of time attributable to such delay and all fixed elements of pricing, if any, shall be equitably adjusted. 7.9 No Third-Party Beneficiary. The provisions of this Agreement are enforceable solely by the parties to this Agreement, and no other person shall have the right, separate and apart from the Company or the Provider, to enforce any provision of this Agreement or to compel any party to this Agreement to comply with the terms of this Agreement. 7.10 Disputes. The Provider and the Company agree to negotiate in good faith in an effort to resolve any dispute related to this Agreement that may arise between the parties. If the dispute cannot be resolved promptly by negotiation at a senior management level, then either party may give the other party written notice that the dispute should be submitted to mediation. Promptly thereafter, a mutually acceptable mediator shall be chosen by the parties, who shall share the cost of mediation services equally. If the dispute has not been resolved by mediation within ninety (90) days after the date of written notice requesting mediation, then either party may initiate litigation and pursue any and all remedies at law or at equity that such party is entitled to. 7.11 Indemnification. (a) The Company agrees that it will indemnify and hold harmless the Provider, its Affiliates and their respective directors, managers, officers, employees, and agents from and against any and all losses, claims, damages and liabilities, joint or several, to which the Provider may become subject under any applicable federal or state law, or otherwise, relating to or arising out of the engagement of the Provider pursuant to, and the performance by the Provider of the services contemplated by, this Agreement. The Company will reimburse the Provider for all costs and expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation of or defense of any pending or threatened claim or any action or 10 11 proceeding covered by such indemnity. The Company will not be liable under the foregoing indemnification provisions to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted primarily from the bad faith, gross negligence or willful misconduct of the Provider or the relevant Affiliate. (b) The Provider agrees that it will indemnify and hold harmless the Company and its directors, managers, officers, employees, and agents from and against any and all losses, claims, damages and liabilities, joint or several, to which the Company may become subject under any applicable federal or state law, or otherwise, relating to or arising out of the willful misconduct or gross negligence of the Provider, or its Affiliates or any third parties engaged by the Provider. The Provider will reimburse the Company for all costs and expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation of or defense of any pending or threatened claim or any actions or proceedings covered by such indemnity. The Provider will not be liable under the foregoing indemnification provisions to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted primarily from the bad faith, gross negligence or willful misconduct of the Company. 7.12 The Company is Sole Beneficiary. The Company acknowledges that the Services shall be provided only with respect to the businesses of the Company. The Company shall not request performance of any Services for the benefit of any entity other than the Company. 7.13 Renegotiation of Commercial Terms. The parties acknowledge that the commercial terms of this Agreement reflect the Affiliate relationship that exists between the Company and the Provider. In the event that any portion of the Company, its Affiliate, Generating, or the Company's members (NRG Central U.S. LLC or South Central Generation Holding LLC) is sold, transferred or conveyed to a non-Affiliate, the Company and the Provider agree to renegotiate the commercial terms of this Agreement to reflect an arms-length commercial arrangement. 11 12 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed on their behalf by their duly authorized officers. NRG ENERGY, INC. By: /s/ Craig A. Mataczynski ------------------------------ Name: Craig A. Mataczynski Title: Senior Vice President NRG SOUTH CENTRAL GENERATING LLC By: /s/ Craig A. Mataczynski ------------------------------ Name: Craig A. Mataczynski Title: President 12 13 ANNEX A NRG Energy, Inc. 2000 Standard Labor Rates for Intracompany Transactions
Fully Loaded Standard Rate Category Executive $ 210.00 Regional Manager $ 136.00 Sr. Attorney $ 113.00 Attorney $ 100.00 Exec. Dir. Bus. Dev. $ 113.00 Dir. Bus. Dev. $ 100.00 Mrg. Bus. Dev. $ 86.00 Exec. Dir. Finance/Tax $ 113.00 Dir. Finance/Tax $ 86.00 Sr. Financial Analyst $ 69.00 Financial Analyst $ 52.00 Exec. Dir. Ops. Tech. Supp. & Engineering $ 113.00 Dir. Ops. Tech. Supp. & Engineering $ 86.00 Mgr. Ops. Tech. Supp./Engineer $ 77.00 Sr. HR Generalist $ 100.00 HR Generalist $ 77.00 Sr. Accountant $ 52.00 Accountant $ 46.00 Administrative Support $ 35.00
13 EX-10.6 32 y57012ex10-6.txt CORPORATE SERVICES AGREEMENT 1 Exhibit 10.6 CORPORATE SERVICES AGREEMENT THIS CORPORATE SERVICES AGREEMENT (this "Agreement"), dated as of March 24, 2000, is entered into by and between NRG Energy, Inc., a Delaware corporation (the "Provider"), and Louisiana Generating LLC, a Delaware limited liability company (the "Company"). RECITALS WHEREAS, the Company has obtained the rights to acquire, own and operate certain electric generation assets located in New Roads, Louisiana (the "Facility"); and WHEREAS, the Company desires to employ the services of the Provider to assist in its operation of the Facility and related business functions; and WHEREAS, the Provider agrees to provide various services to the Company in support of the operations of the Facility as provided in this Agreement. NOW THEREFORE, in consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS 1.1 Definitions. Whenever used in this Agreement with initial capitalization, the following terms shall have the meanings specified or referred to in this Article 1. "Affiliate" means, with respect to any person or entity, (i) each entity that such person or entity Controls, (ii) each person or entity that Controls such person or entity, and (iii) each entity that is under common Control with such person or entity. "Agreement" shall have the meaning provided in the introductory paragraph hereof. "Control" means the possession, directly or indirectly, through one or more intermediaries, of (i) in the case of a corporation, a majority of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited 2 partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, a majority of the beneficial interest therein; and (iv) in the case of any other entity, a majority of the economic, beneficial or voting interest therein. "Effective Date" means March 24, 2000. "Outsource" means to cause a Service to be provided by a third-party provider which is not an Affiliate of the Provider. "Outsourced Services" shall means those Services which the Provider Outsources to third-party providers which are not Affiliates of the Provider. "Services" means the performance of any work, direction of work, technical or commercial information, data, consulting, staff augmentation or any other corporate business function performed for or on behalf of the Company by the Provider in functional areas such as but not limited to: human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. 1.2 Terminology. Unless the context of this Agreement clearly requires otherwise, (a) pronouns, wherever used herein, and of whatever gender, will include natural persons and corporations and associations of every kind and character, (b) the word "included" or "including" will mean "including without limitation", (c) the word "or" will have the inclusive meaning represented by the phrase "and/or", (d) the words "hereof," "herein," "hereunder," and similar terms in this Agreement will refer to this Agreement as a whole and not any particular section or article in which such words appear and (e) all terms defined in this Agreement in the singular will have the same meaning when used in the plural and vice versa. The section, article and other headings in this Agreement are for reference purposes and will not control or affect the construction of this Agreement or the interpretation hereof in any respect. Article, section and subsection references are to this Agreement unless otherwise specified. 2 3 ARTICLE 2 SERVICES 2.1 General. The Company hereby retains the Provider, and the Provider accepts the obligation, to provide to the Company certain Services in accordance with the terms of this Agreement. At the Provider's election, it may cause one or more of its Affiliates or third-party contractors to provide the Services; provided, however, that the Provider shall remain primarily responsible for the provision of the Services (including Outsourced Services) in accordance with the terms of this Agreement. 2.2 Services. The Provider shall provide all Services to the Company on an "as-requested" basis in support of the day-to-day business of the Company. The Company shall use a letter, work order, purchase order or other official written document to authorize the performance of Services by the Provider. Such document shall state, as a minimum, the scope of Services to be performed, schedule requirements, a budget for such Services and a reference to this Agreement. The Provider shall acknowledge requested Services in writing. 2.3 Personnel. The Provider shall provide as required by the Company all technical, professional, supervisorial, managerial, administrative and other personnel as are necessary to perform the Services. Such personnel shall be qualified and experienced in the Services to which they are assigned. The working hours, rates of compensation and all other matters relating to the employment of individuals employed by the Provider or its Affiliates in the performance of the Services shall be determined solely by the Provider or its respective Affiliates. Prior to the performance of any Services requested by the Company, the Company, upon request to the Provider or its Affiliate as the case may be, shall have the right to review and approve the Provider's staffing of the assignment. 2.4 Standards for Performance of Services. The Provider shall, and shall cause its Affiliates and the providers of Outsourced Services to, perform the Services with reasonable diligence and dispatch, in a prudent, cost effective and efficient manner, in accordance with all applicable laws, regulations, codes, permits, licenses and standards, and in accordance with the terms and conditions of this Agreement. The Provider may determine in its sole discretion whether or not to Outsource a Service. 3 4 2.5 Right to Request Instruction. At any time, the Provider may, if it reasonably deems it to be necessary or appropriate, request written instructions from the Company in a timely manner prior to taking action with respect to any matter contemplated by this Agreement, and may defer action thereon pending the receipt of such written instructions. ARTICLE 3 PAYMENT 3.1 Payment. The Company, in consideration for the performance of the Services by the Provider, agrees to pay the Provider all pre-approved charges, costs, expenses, taxes, fees and losses not compensated by insurance, which are incurred by Provider in the performance of the Services hereunder. These charges, costs, expenses, taxes, fees and losses shall include, but are not limited to: (a) Charges for the time of all personnel employed by the Provider in the performance of the Services at each person's standard intracompany labor rate as set forth by personnel category on Annex A hereto, which time charges include federal and state payroll taxes and insurance, Provider benefit programs, overhead and an arms-length, commercially reasonable mark-up. Such charges shall be subject to appropriate annual adjustment for any changes in payroll taxes or insurance, or changes in benefit programs. The Company shall be notified of any increase in labor rates for each upcoming calendar year during the fourth quarter of the then current calendar year. (b) Transportation, travel, hotel and living expenses, including use of employees' personal cars at the Provider's current standard rates. All reasonable moving, relocation, travel and living expenses incurred in connection with assignment of the Provider's permanent personnel to a location other than the Provider's permanent offices and from such location at the conclusion of assignment. (c) Miscellaneous expenses, including but not limited to telegrams, telex, telefacsimile, telephone services, postage and similar miscellaneous items incurred in connection with the Services, all at the Provider's current standard rates. 4 5 (d) Reproduction costs of all drawings, manuals, specifications, and other documents required for the Services; and costs for the use of computers, all at the Provider's current standard rates or at actual cost to the Provider if prepared by others. (e) Cost of any permits, fees, licenses or royalties required. Costs of any sales, use or similar taxes or fees imposed by a federal, state, municipal or other government or agency thereof. (f) Fees, costs, damages, or disbursements incurred in connection with any labor, patent, or commercial litigation or any third party claim, suit, or cause of action, arising out of or in connection with the performance of the Services by the Provider (except disputes between the Provider and the Company) or claims, suites or causes of action pursued on behalf of the Company by the Provider. (g) Premiums and brokerage fees on all bonds and insurance policies which may be required by the Company in addition to those listed herein, and any loss under the deductible features of any insurance policies, whether furnished by the Provider or the Company. 3.2 Invoicing. (a) The Provider shall invoice the Company by the fifteenth (15th) day of each month for all Services performed with respect to the preceding month and any adjustments that may be necessary to correct prior invoices. All invoices shall reflect in reasonable detail a description of the Services performed during the preceding month and shall be due and payable within thirty (30) days after its receipt. Documentation backing up invoiced charges shall be made available to the Company upon request. The Company shall pay all undisputed amounts on each invoice, but shall be entitled to withhold payment of any amount in dispute and shall notify the Provider within thirty (30) days from receipt of the invoice of the disputed amount and the reasons each such charge is disputed by the Company. The Provider shall promptly provide the Company with records relating to the disputed amount so as to enable the parties to resolve the dispute. 5 6 (b) Any statement or payment not disputed in writing by either party within two years of the date of such statement or payment shall be considered final and no longer subject to adjustment. The Company shall not be obligated to pay for any changes for which statements for payment are submitted more than two years after the termination of this Agreement. ARTICLE 4 LIMITED WARRANTY 4.1 Warranty. The Provider warrants that the Services performed under this Agreement will be in accordance with accepted professional standards and practices existing as of the date that such Services are performed. The sole and exclusive remedy for breach of this warranty shall be for the Provider to re-perform the defective portion of the Services within a period of one (1) year from the date that the defective Service was performed under this Agreement. The Company shall promptly provide the Provider written notice of the performance of defective Service. All costs of any re-performance shall be reimbursed by the Company to the Provider but the Provider shall receive no additional profit thereon. 4.2 Disclaimer. There are no warranties other than the above, either express or implied, including without limitation any warranties of merchantability or fitness for particular purpose applicable to the Services performed under this Agreement. ARTICLE 5 LIMITATION OF LIABILITY 5.1 Limitation of Liability. Whether due to delay, breach of contract or warranty, tort (including, without limitation, negligence), or any other cause, neither the Provider nor its Affiliates or subcontractors shall be liable for any special, indirect, punitive, or consequential damages of any nature, including, without limitation, loss of actual or anticipated profits, revenues, or product, loss by reason of shutdown, nonoperation, or increased expense of manufacturing or operation, or any costs, labor, or materials required for reconstruction or repairs. The Provider's maximum liability under or arising out of this Agreement shall in no event exceed the value of the Services performed during the calendar year prior to the cause giving rise to or creating any such liability. 6 7 ARTICLE 6 TERM AND TERMINATION; EVENTS OF DEFAULT 6.1 Term. The term of this Agreement shall commence on the Effective Date and shall continue until terminated in writing by the Company or terminated pursuant to Section 6.3 hereof. 6.2 Events of Default. If one or more of the following events occurs with respect to a party hereto, it will constitute an "Event of Default" with respect to such party: (a) Failure to Perform Obligations. Such party fails to perform or observe any material obligation under this Agreement and such failure continues for more than thirty (30) days after the non-defaulting party has given notice thereof to such party (or if the nature of such default is such that it is not capable of being cured within thirty (30) days, then the failure of such party to commence to cure such default within thirty (30) days and to diligently and continuously pursue the cure of such default thereafter, but in no event may such extended cure period exceed one hundred eighty (180) days); (b) Bankruptcy. Such party files a voluntary petition in bankruptcy, makes an assignment for the benefit of creditors, is adjudicated a bankrupt, or is declared insolvent. 6.3 Remedies; Exclusivity. At any time during the continuance of an Event of Default, the non-defaulting party will have the right to (a) elect, by giving notice to the defaulting party, not to be bound in any respect by the provisions of this Agreement during such continuance, in which case such party will have no obligations or liabilities hereunder during such period, or (b) terminate this Agreement upon giving notice of termination to the defaulting party. No failure on the part of either the Provider or the Company to exercise, and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude the exercise of any other such right, power or privilege or further exercise thereof. 7 8 ARTICLE 7 MISCELLANEOUS 7.1 Severability. In the event any portion of this Agreement shall be found by a court of competent jurisdiction to be unenforceable, that portion of the Agreement will be null and void and the remainder of the Agreement will be binding on the parties as if the unenforceable provisions had never been contained herein. To the fullest extent permitted by law, the remedies set forth in Section 6.3 are the exclusive remedies for a default hereunder; provided that with respect to (i) disputed or unpaid invoices relating to Services rendered prior to any termination and (ii) claims for indemnity relating to events that occurred prior to any termination each party shall also have all the rights and remedies contemplated in Sections 7.10 and 7.11 herein or otherwise provided in law or equity. 7.2 Assignment. Except for the ability of the Provider to cause one or more of the Services to be performed by one of its Affiliates or a third-party provider, no party shall have the right to assign its rights or obligations under this Agreement without the consent of the other party; provided, however, that the Company may transfer, sell, pledge, encumber or assign this Agreement in connection with any financing or other financial arrangements by or for the benefit of the Company or its Affiliate, NRG South Central Generating LLC without the consent of the Provider. 7.3 Entire Agreement. This Agreement constitutes the entire agreement of the parties relating to the performance of the Services. All prior or contemporaneous written or oral agreements are merged herein. 7.4 Law. This Agreement shall be subject to and governed by the laws of the State of New York, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state (other than Section 5-1401 of the New York General Obligations Law). 7.5 Amendment or Modification. This Agreement may be amended or modified from time to time only by a written amendment signed by the parties hereto. 7.6 Notices. Any notice, request, instruction, correspondence or other document to be given hereunder by either party to the other (herein collectively called "Notice ") shall be in writing and delivered personally or mailed, postage prepaid, or 8 9 by telegram or telecopier, as follow: (a) if to the Company, to: Louisiana Generating LLC 1221 Nicollet Mall, Suite 700 Minneapolis, MN 55403 Attention: President (b) if to the Provider, to: NRG Energy, Inc. 1221 Nicollet Mall, Suite 700 Minneapolis, MN 55403 Attention: Vice President of Corporate Operating Services 7.7 Insurance. The Company shall carry and keep in force, at all times, Commercial General Liability insurance in such policy limits as are usual and customary for similar businesses in the independent power industry and as it deems necessary to protect it from risks of loss arising from the performance of Services under this Agreement. The Company shall name the Provider, its directors, officers, employees and agents as additional insureds on these policies. The Company waives all rights and any subrogation rights such as it or its insurers may have against the Provider, its vendors and subcontractors and their employees, agents, officers, directors, and any of their affiliated or associated companies, for any losses or damages, including without limitation all consequential damages resulting from any and all risks and losses, however and whenever arising, from the Services performed hereunder, or other risks covered under a Commercial General Liability insurance policy. 7.8 Prosecution of the Work; Force Majeure. Provider shall substantially perform the Services in accordance with a schedule mutually agreed upon between the parties. Any completion dates specified are tentative only and Provider shall have no liability to the Company for late completion. If the performance of the Services is delayed or affected by any of the following force majeure occurrences: acts or failures to act by any contractors, engineers, vendors, or consultants employed by the Company or any other party not in privity of this Agreement; acts of God or the elements; acts or failures to act by government or any agency thereof; changes, 9 10 inaccuracies, incompleteness, or differences in site conditions or any data or information supplied to the Provider; changes in laws or regulations; delays in permitting; delays in receipt of engineering data or vendor drawings; fire; unusually severe weather, natural disasters, or unavoidable casualties; riot; civil disorders; labor shortages or disputes; strikes, picketing, or arbitration proceedings; delays in transportation, material, or equipment deliveries; material, equipment, or fuel shortages; or any other causes beyond the Provider's reasonable control, the parties shall negotiate to extend the schedule for the period of time attributable to such delay and all fixed elements of pricing, if any, shall be equitably adjusted. 7.9 No Third-Party Beneficiary. The provisions of this Agreement are enforceable solely by the parties to this Agreement, and no other person shall have the right, separate and apart from the Company or the Provider, to enforce any provision of this Agreement or to compel any party to this Agreement to comply with the terms of this Agreement. 7.10 Disputes. The Provider and the Company agree to negotiate in good faith in an effort to resolve any dispute related to this Agreement that may arise between the parties. If the dispute cannot be resolved promptly by negotiation at a senior management level, then either party may give the other party written notice that the dispute should be submitted to mediation. Promptly thereafter, a mutually acceptable mediator shall be chosen by the parties, who shall share the cost of mediation services equally. If the dispute has not been resolved by mediation within ninety (90) days after the date of written notice requesting mediation, then either party may initiate litigation and pursue any and all remedies at law or at equity that such party is entitled to. 7.11 Indemnification. (a) The Company agrees that it will indemnify and hold harmless the Provider, its Affiliates and their respective directors, managers, officers, employees, and agents from and against any and all losses, claims, damages and liabilities, joint or several, to which the Provider may become subject under any applicable federal or state law, or otherwise, relating to or arising out of the engagement of the Provider pursuant to, and the performance by the Provider of the services contemplated by, this Agreement. The Company will reimburse the Provider for all costs and expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation of or defense of any pending or threatened claim 10 11 or any action or proceeding covered by such indemnity. The Company will not be liable under the foregoing indemnification provisions to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted primarily from the bad faith, gross negligence or willful misconduct of the Provider or the relevant Affiliate. (b) The Provider agrees that it will indemnify and hold harmless the Company and its directors, managers, officers, employees, and agents from and against any and all losses, claims, damages and liabilities, joint or several, to which the Company may become subject under any applicable federal or state law, or otherwise, relating to or arising out of the willful misconduct or gross negligence of the Provider, or its Affiliates or any third parties engaged by the Provider. The Provider will reimburse the Company for all costs and expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation of or defense of any pending or threatened claim or any actions or proceedings covered by such indemnity. The Provider will not be liable under the foregoing indemnification provisions to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted primarily from the bad faith, gross negligence or willful misconduct of the Company. 7.12 The Company is Sole Beneficiary. The Company acknowledges that the Services shall be provided only with respect to the businesses of the Company. The Company shall not request performance of any Services for the benefit of any entity other than the Company. 7.13 Renegotiation of Commercial Terms. The parties acknowledge that the commercial terms of this Agreement reflect the Affiliate relationship that exists between the Company and the Provider. In the event that any portion of the Company, its parent, NRG South Central Generating LLC ("NRG South Central"), or NRG South Central's members (NRG Central U.S. LLC or South Central Generation Holding LLC) is sold, transferred or conveyed to a non-Affiliate, the Company and the Provider agree to renegotiate the commercial terms of this Agreement to reflect an arms-length commercial arrangement. 11 12 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed on their behalf by their duly authorized officers. NRG ENERGY, INC. By: /s/ Craig A. Mataczynski ------------------------------------ Name: Craig A. Mataczynski Title: Senior Vice President LOUISIANA GENERATING LLC By: /s/ Craig A. Mataczynski ------------------------------------ Name: Craig A. Mataczynski Title: Vice President 12 13 ANNEX A NRG Energy, Inc. 2000 Standard Labor Rates for Intracompany Transactions
Fully Loaded Standard Rate Category Executive $ 210.00 Regional Manager $ 136.00 Sr. Attorney $ 113.00 Attorney $ 100.00 Exec. Dir. Bus. Dev. $ 113.00 Dir. Bus. Dev. $ 100.00 Mrg. Bus. Dev. $ 86.00 Exec. Dir. Finance/Tax $ 113.00 Dir. Finance/Tax $ 86.00 Sr. Financial Analyst $ 69.00 Financial Analyst $ 52.00 Exec. Dir. Ops. Tech. Supp. & Engineering $ 113.00 Dir. Ops. Tech. Supp. & Engineering $ 86.00 Mgr. Ops. Tech. Supp./Engineer $ 77.00 Sr. HR Generalist $ 100.00 HR Generalist $ 77.00 Sr. Accountant $ 52.00 Accountant $ 46.00 Administrative Support $ 35.00
13 EX-10.7 33 y57012ex10-7.txt CORPORATE SERVICES AGREEMENT 1 Exhibit 10.7 CORPORATE SERVICES AGREEMENT THIS CORPORATE SERVICES AGREEMENT (this "Agreement") dated as of August 17, 2000, is entered into by and between NRG Energy, Inc., a Delaware Corporation (the "Provider"), and NRG Sterlington Power LLC, a Delaware limited liability company (the "Company"). RECITALS 1. The Company has been formed in order to develop, own and operate an approximately 200 MW peaking power generation facility (the "Facility") in Sterlington, Louisiana. 2. The Company desires to employ the services of the Provider to assist in its operation of the Facility and related business functions; and 3. The Provider agrees to provide various services to the Company in support of the operations of the Facility as provided in this Agreement. AGREEMENT In consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledge, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS 1.1 Definitions. Whenever used in this Agreement with initial capitalization, the following terms shall have the meanings specified or referred to in this Article 1. "Affiliate" means, with respect to any person or entity, (i) each entity that such person or entity Controls, (ii) each person or entity that Controls such person or entity, and (iii) each entity that is under common Control with such person or entity. "Agreement" shall have the meaning provided in the introductory paragraph hereof. "Control" means the possession, directly or indirectly, through one or more intermediaries, of (i) in the case of a corporation, a majority of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); (iii) in the case of a trust or estate, including a business trust, a majority of the beneficial interest 1 2 therein; and (iv) in the case of any other entity, a majority of the economic or beneficial interest therein. "Effective Date" means the date of this Agreement. "Outsource" means to cause a Service to be provided by a third-party provider which is not an Affiliate of the Provider. "Outsourced Services" shall mean those Services which the Provider Outsources to third-party providers which are not Affiliates of the Provider. "Services" means the performance of any work, direction of work, technical or commercial information, data, consulting, staff augmentation or any other corporate business function performed for or on behalf of the Company by the Provider in functional areas such as but not limited to: human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. 1.2 Terminology. Unless the context of this Agreement clearly requires otherwise, (a) pronouns, wherever used herein, and of whatever gender, will include natural persons and corporations and associations of every kind and character, (b) the word "included" or "including" will mean "including without limitation", (c) the word "or" will have the inclusive meaning represented by the phrase "and/or", (d) the words "hereof," "herein," "hereunder," and similar terms in this Agreement will refer to this Agreement as a whole and not any particular section or article in which such words appear and (e) all terms defined in this Agreement in the singular will have the same meaning when used in the plural and vice versa. The section, article and other headings in this Agreement are for reference purposed and will not control or affect the construction of this Agreement or the interpretation hereof in any respect. Article, section and subsection references are to his Agreement unless otherwise specified. ARTICLE 2 SERVICES 2.01 General. The Company hereby retains the Provider, and the Provider accepts the obligation, to provide to the Company certain Services in accordance with the terms of this Agreement. At the Provider's election, it may cause one or more of its Affiliates or third-party contractors to provide the Services; provided, however, that the Provider shall remain responsible for the provision of the Services (including Outsourced Services) in accordance with the terms of this Agreement. 2.2 Services. The Provider shall provide all Services to the Company on an as-requested basis in support of the day-to-day business of the Company. The Company shall use a 2 3 letter, work order, purchase order or other official document to authorize the performance of Services by Provider. Such document shall state, as a minimum, the scope of Services to be performed, schedule requirements, budget and a reference to this Agreement. The Provider shall acknowledge requested Services in writing. 2.3 Personnel. The Provider shall provide as required by the Company all technical, professional, supervisorial, managerial, administrative and other personnel as are necessary to perform the Services. Such personnel shall be qualified and experienced in the Services to which they are assigned. The working hours, rates of compensation and all other matters relating to the employment of individuals employed by the Provider or its Affiliates in the performance of the Services shall be determined solely by the Provider or its respective Affiliates. 2.4 Standards for Performance of Services. The Provider shall, and shall cause its Affiliates and the providers of Outsourced Services to, perform the Services with reasonable diligence and dispatch in a prudent, cost effective and efficient manner, in accordance with all applicable laws, regulations, codes, permits, licenses, and standards, and in accordance with the terms and conditions of this Agreement. The Provider may determine in its sole discretion whether or not to Outsource a Service. 2.5 Right to Request Instruction. At any time, the Provider may, if it reasonably deems it to be necessary or appropriate, request written instructions from the Company prior to the necessity for taking action with respect to any matter contemplated by this Agreement, and may defer action thereon pending the receipt of such written instructions. ARTICLE 3 PAYMENT 3.1 Payment. The Company, in consideration for the performance of the Services by the Provider, agrees to pay the Provider all pre-approved charges, costs, expenses, taxes, fees and losses not compensated by insurance, which are incurred by Provider in the performance of the Services hereunder. These charges, costs, expenses, taxes, fees and losses shall include, but are not limited to: (a) Charges for the time of all personnel employed by the Provider in the performance of the Services at each person's standard intracompany labor rate as set forth by personnel category on Annex A hereto, which time charges include federal and state payroll taxes and insurance, Provider benefit programs, overhead and an arms-length, commercially reasonable mark-up. Such charges shall be subject to appropriate adjustment for any changes in payroll taxes or insurance, or changes in benefit programs. (b) Transportation, travel, hotel and living expenses, including use of employees' personal cars at Provider's current standard rates. All reasonable moving, 3 4 relocation, travel and living expenses incurred in connection with assignment of Provider's permanent personnel to a location other than Provider's permanent offices and from such location at the conclusion of assignment. (c) Miscellaneous expenses, including but not limited to telegrams, telex, telefacsimile, telephone services, postage and similar miscellaneous items incurred in connection with the Services, all at Provider's current standard rates. (d) Reproduction costs of all drawings, manuals, specifications, and other documents required for the Services; and costs for the use of computer, all at Provider's current standard rates or at actual cost to Provider if prepared by others. (e) Cost of any permits, fees, licenses or royalties required. Costs of any sales, use or similar taxes or fees imposed by a federal, state, municipal or other government or agency thereof. (f) Fees, costs, damages, or disbursements incurred in connection with any labor, patent, or commercial litigation or any third party claim, suit, or cause of action, arising out of or in connection with the performance of the Services by Provider (except disputes between Provider and the Company) or claims, suites or causes of action pursued on behalf of the Company by Provider. (g) Premiums and brokerage fees on all bonds and insurance policies which may be required by Company in addition to those listed herein, and any loss under the deductible features of any insurance policies, whether furnished by Provider or Company. 3.2 Invoicing. --------- (a) The Provider shall invoice the Company by the fifteenth (15th) day of each month for all Services performed with respect to the preceding month and any adjustments that may be necessary to correct prior invoices. All invoices shall reflect in reasonable detail a description of the Services performed during the preceding month and documentation available to the Provider backing up invoiced charges and shall be due and payable within thirty (30) days after its receipt. The Company shall pay all undisputed amounts on each invoice, but shall be entitled to withhold payment of any amount in dispute and shall notify the Provider within thirty (30) days from receipt of the invoice of the disputed amount and the reasons each such charge is disputed by the Company. The Provider shall promptly provide the Company with records relating to the disputed amount so as to enable the parties to resolve the dispute. (b) Any statement or payment not disputed in writing by either party within two years of the date of such statement or payment shall be considered final and no longer subject to adjustment. The Company shall not be obligated to pay for any changes 4 5 for which statements for payment are submitted more than two years after the termination of this Agreement. ARTICLE 4 LIMITED WARRANTY 4.1 Warranty. Provider warrants that the Services performed under this Agreement will be in accordance with accepted professional standards and practices existing as of the date that such Services are performed. The sole and exclusive remedy for breach of this warranty shall be for Provider to re-perform the portion of defective Services, written notice of which is promptly given by Company to Provider within a period of one (1) year from the date that the defective Service was performed under this Agreement. All costs of any re-performance shall be reimbursed by Company to Provider but Provider shall receive no additional profit thereon. 4.2 Disclaimer. There are no warranties other than the above, either express or implied, including without limitation any warranties of merchantability or fitness for particular purpose applicable to Providers services performed under this Agreement. ARTICLE 5 LIMITATION OF LIABILITY 5.1 Limitation of Liability. Whether due to delay, breach of contract or warranty, tort (including without limitation negligence), or any other cause, neither Provider nor its Affiliates or subcontractors shall be liable for any special, indirect, punitive, or consequential damages of any nature, including without limitation loss of actual or anticipated profits, revenues, or product, loss by reason of shutdown, nonoperation, or increased expense of manufacturing or operation, or any costs, labor, or materials required for reconstruction or repairs. Provider's maximum liability under or arising out of this Agreement shall in no event exceed the value of the Services performed during the calendar year prior to the cause giving rise to or creating any such liability. ARTICLE 6 TERM AND TERMINATION; EVENTS OF DEFAULT 6.01 Term. The term of this Agreement shall commence on the Effective Date and shall continue until terminated in writing by the Company. 6.02 Events of Default. If one or more of the following events occurs with respect to a party hereto, it will constitute an "Event of Default" with respect to such party: 5 6 (a) Failure to Perform Obligations. Such party fails to perform or observe any material obligation under this agreement and such failure continues for more than thirty (30) days after the non-defaulting party has given notice thereof to such party (or if the nature of such default is such that it is not capable of being cured within thirty (30) days, then the failure of such party to commence to cure such default within thirty (30) days and to diligently and continuously pursue the cure of such default thereafter, but in no event may such extended cure period exceed one hundred eighty (180) days); (b) Bankruptcy. Such party becomes subject to a bankruptcy or is declared insolvent. 6.03 Remedies; Exclusivity. At any time during the continuance of an Event of Default, the non-defaulting party will have the right to (a) elect, by giving notice to the defaulting party, not to be bound in any respect by the provisions of this Agreement during such continuance, in which case such party will have no obligations or liabilities hereunder during such period, (b) terminate the Agreement upon giving notice of termination to the defaulting party. No failure on the part of either Provider, the Company to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof. ARTICLE 7 MISCELLANEOUS 7.1 Severability. In the event any portion of this Agreement shall be found by a court of competent jurisdiction to be unenforceable, that portion of the Agreement will be null and void and the remainder of the Agreement will be binding on the parties as if the unenforceable provisions had never been contained herein. To the fullest extent permitted by Law, the remedies set forth in this Section 6.3 are the exclusive remedies for a default hereunder; provided that with respect to (i) disputed or unpaid invoices relating to services rendered prior to any termination and (ii) claims for indemnity relating to events that occurred prior to any termination each party shall also have all rights and remedies contemplated herein in Sections 7.10 and 7.11 or otherwise provided in Law or Equity. 7.2 Assignment. Except for the ability of the Provider to cause one or more of the Services to be performed by one of its Affiliates or a third-party provider, no party shall have the right to assign its rights or obligations under this Agreement without the consent of the other party. 7.3 Entire Agreement. This Agreement constitutes the entire agreement of the parties 6 7 relating to the performance of the Services. All prior or contemporaneous written or oral agreements are merged herein. 7.4 Law. This Agreement shall be subject to and governed by the laws of the State of New York, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state. 7.5 Amendment of Modification. This Agreement may be amended or modified from time to time only by a written amendment signed by the parties hereto. 7.6 Notices. Any notice, request, instruction, correspondence or other document to be given hereunder by either party to the other (herein collectively called "Notice") shall be in writing and delivered personally or mailed, postage prepaid, or by telegram or telecopier, as follows: (a) if to the Company, to: NRG Sterlington Power LLC c/o NRG Energy, Inc. 901 Marquette Avenue, Suite 2300 Minneapolis, Minnesota 55402 Attention: President (b) if to Provider, to: NRG Energy, Inc. 901 Marquette Avenue, Suite 2300 Minneapolis, MN 55402 Attention: President, Worldwide Operations 7.7 Insurance. The Company shall carry and keep in force, at all times, Commercial General Liability insurance in such policy limits as are usual and customary for its business and as it deems necessary to protect it from risks of loss arising from the performance of Service under this Agreement. The Company shall name the Provider as an additional insured on these policies and shall indemnify Provider to the same extent. The Company waives all rights and any subrogation rights that it or its insurers may have against Provider, its vendors and subcontractors and their employees, agents, officers, directors, and any of their affiliated or associated companies, for any losses or damages, including without limitation all consequential damages resulting from any and all risks and losses, however and whenever arising, from the Services performed hereunder, or other risks covered under a Commercial General Liability insurance policy. 7 8 7.8 Prosecution of the Work; Force Majeure. Provider shall substantially perform the Services in accordance with a schedule mutually agreed upon between the parties. Any completion dates specified are tentative only and Provider shall have no liability to the Company for late completion. If the prosecution of the Services is delayed or affected by any of the following force majeure occurrences: acts or failures to act by the Company or any separate contractors, engineers, vendors, or consultants employed by the Company or any other party not in privity of this Agreement; acts of God or the elements; acts or failures to act by government or any agency thereof; changes, inaccuracies, incompleteness, or differences in site conditions or any data or information supplied to the Provider; changes in laws or regulations; delays in permitting; delays in receipt of engineering data or vendor drawings; fire; unusually sever weather, natural disasters, or unavoidable casualties; riot; civil disorders; labor shortages or disputes; strikes, picketing, or arbitration proceedings; delays in transportation, material, or equipment deliveries; material, equipment, or fuel shortages; or any other causes beyond the Provider's reasonable control, the schedule shall be extended for the period of time attributable to such delay and all fixed elements of pricing, if any, shall be equitably adjusted. 7.9 No Third-Party Beneficiary. The provisions of this Agreement are enforceable solely by the parties to this Agreement, and no other person shall have the right, separate and apart from the Company or the Provider, to enforce any provision of this Agreement or to compel any party to this Agreement to comply with the terms of this Agreement. 7.10 Disputes. The Provider and the Company agree to negotiate in good faith in an effort to resolve any dispute related to this Agreement that may arise between the parties. If the dispute cannot be resolved promptly by negotiation, at a senior management level the either party may give the other party written notice that the dispute should be submitted to mediation. Promptly thereafter, a mutually acceptable mediator shall be chosen by the parties. who shall share the cost of mediation services equally. If the dispute has not been resolved by mediation within ninety (90) days after the date of written notice requesting mediation, then either party may initiate litigation and pursue any and all remedies at law or at equity that such party is entitled to. 7.11 Indemnification. (a) The Company agrees that it will indemnify and hold harmless the Provider, its Affiliates and their respective directors, officers, employees, and agents from and against any and all losses, claims, damages and liabilities, joint or several, to which the Provider may become subject under any applicable federal or state law, or otherwise, relating to or arising out of the engagement of the Provider pursuant to, and the performance by the Provider of the services contemplated by, this Agreement. The Company will reimburse the Provider for all costs and expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation of or defense of any pending or threatened claim or any action or proceeding covered by such indemnity. The Company will not be liable under the foregoing indemnification provisions to the extent that any loss, claim, damage, liability or 8 9 expense is found in a final judgment by a court to have resulted primarily from the bad faith or gross negligence of the Provider or the relevant Affiliate. (b) The Provider agrees that it will indemnify and hold harmless the Company and its directors, officers, employees, and agents from and against any and all losses, claims, damages and liabilities, joint or several, to which the Company may become subject under any applicable federal or state law, or otherwise, relating to or arising out of the willful misconduct or gross negligence of the Provider or its Affiliates. The Provider will reimburse the Company for all costs and expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation of or defense of any pending or threatened claim or any actions or proceedings covered by such indemnity. The Provider will not be liable under the foregoing indemnification provisions to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted primarily from the bad faith or gross negligence of the Company. 7.12 The Company is Sole Beneficiary. The Company acknowledges that the Services shall be provided only with respect to the businesses of the Company. The Company shall not request performance of any Services for the benefit of any entity other than the Company. 9 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed on their behalf by their duly authorized officers. NRG ENERGY, INC. By: /s/ Craig A. Mataczynski -------------------------------------- Name: Craig A. Mataczynski Title: Senior Vice President NRG STERLINGTON POWER LLC By: /s/ [illegible] -------------------------------------- Name: [illegible] Title: [illegible] 10 11 ANNEX A NRG Energy, Inc. 2000 Standard Labor Rates for Intracompany Transactions
------------------------------------------------------------------------- Fully Loaded Category Standard Rate ------------------------------------------------------------------------- Executive $ 210.00 ------------------------------------------------------------------------- Regional Manager $ 136.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Sr. Attorney $ 129.00 ------------------------------------------------------------------------- Attorney $ 100.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Exec. Dir. Bus. Dev. $ 113.00 ------------------------------------------------------------------------- Dir. Bus. Dev. $ 100.00 ------------------------------------------------------------------------- Mrg. Bus. Dev. $ 86.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Exec. Dir. Finance/Tax $ 113.00 ------------------------------------------------------------------------- Dir. Finance/Tax $ 86.00 ------------------------------------------------------------------------- Sr. Financial Analyst $ 69.00 ------------------------------------------------------------------------- Financial Analyst $ 52.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Exec. Dir. Ops. Tech. Supp. & Engineering $ 113.00 ------------------------------------------------------------------------- Dir. Ops. Tech. Supp. & Engineering $ 86.00 ------------------------------------------------------------------------- Mgr. Ops. Tech. Supp./Engineer $ 77.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Sr. HR Generalist $ 100.00 ------------------------------------------------------------------------- HR Generalist $ 77.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Sr. Accountant $ 52.00 ------------------------------------------------------------------------- Accountant $ 46.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Administrative Support $ 35.00 -------------------------------------------------------------------------
11 EX-10.8 34 y57012ex10-8.txt CORPORATE SERVICES AGREEMENT 1 Exhibit 10.8 CORPORATE SERVICES AGREEMENT THIS CORPORATE SERVICES AGREEMENT (this "Agreement") dated as of August 4, 2000, is entered into by and between NRG Energy, Inc., a Delaware Corporation (the "Provider"), and Big Cajun I Peaking Power LLC, a Delaware limited liability company (the "Company"). RECITALS 1. The Company has been formed in order to develop, own and operate an approximately 240 MW peaking power generation facility (the "Facility") at the site of NRG South Central Generating LLC's Big Cajun I generating facility located in New Roads, Louisiana. 2. The Company desires to employ the services of the Provider to assist in its operation of the Facility and related business functions; and 3. The Provider agrees to provide various services to the Company in support of the operations of the Facility as provided in this Agreement. AGREEMENT In consideration of the premises and the covenants, conditions, and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledge, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS 1.1 Definitions. Whenever used in this Agreement with initial capitalization, the following terms shall have the meanings specified or referred to in this Article 1. "Affiliate" means, with respect to any person or entity, (i) each entity that such person or entity Controls, (ii) each person or entity that Controls such person or entity, and (iii) each entity that is under common Control with such person or entity. "Agreement" shall have the meaning provided in the introductory paragraph hereof. "Control" means the possession, directly or indirectly, through one or more intermediaries, of (i) in the case of a corporation, a majority of the outstanding voting securities thereof; (ii) in the case of a limited liability company, partnership, limited partnership or venture, the right to more than 50% of the distributions therefrom (including liquidating distributions); 1 2 (iii) in the case of a trust or estate, including a business trust, a majority of the beneficial interest therein; and (iv) in the case of any other entity, a majority of the economic or beneficial interest therein. "Effective Date" means the date of this Agreement. "Outsource" means to cause a Service to be provided by a third-party provider which is not an Affiliate of the Provider. "Outsourced Services" shall mean those Services which the Provider Outsources to third-party providers which are not Affiliates of the Provider. "Services" means the performance of any work, direction of work, technical or commercial information, data, consulting, staff augmentation or any other corporate business function performed for or on behalf of the Company by the Provider in functional areas such as but not limited to: human resources, accounting, finance, treasury, tax, office administration, information technology, engineering, construction management, environmental, legal and safety. 1.2 Terminology. Unless the context of this Agreement clearly requires otherwise, (a) pronouns, wherever used herein, and of whatever gender, will include natural persons and corporations and associations of every kind and character, (b) the word "included" or "including" will mean "including without limitation", (c) the word "or" will have the inclusive meaning represented by the phrase "and/or", (d) the words "hereof," "herein," "hereunder," and similar terms in this Agreement will refer to this Agreement as a whole and not any particular section or article in which such words appear and (e) all terms defined in this Agreement in the singular will have the same meaning when used in the plural and vice versa. The section, article and other headings in this Agreement are for reference purposed and will not control or affect the construction of this Agreement or the interpretation hereof in any respect. Article, section and subsection references are to his Agreement unless otherwise specified. ARTICLE 2 SERVICES 2.01 General. The Company hereby retains the Provider, and the Provider accepts the obligation, to provide to the Company certain Services in accordance with the terms of this Agreement. At the Provider's election, it may cause one or more of its Affiliates or third-party contractors to provide the Services; provided, however, that the Provider shall remain responsible for the provision of the Services (including Outsourced Services) in accordance with the terms of this Agreement. 2.2 Services. The Provider shall provide all Services to the Company on an as- 2 3 requested basis in support of the day-to-day business of the Company. The Company shall use a letter, work order, purchase order or other official document to authorize the performance of Services by Provider. Such document shall state, as a minimum, the scope of Services to be performed, schedule requirements, budget and a reference to this Agreement. The Provider shall acknowledge requested Services in writing. 2.3 Personnel. The Provider shall provide as required by the Company all technical, professional, supervisorial, managerial, administrative and other personnel as are necessary to perform the Services. Such personnel shall be qualified and experienced in the Services to which they are assigned. The working hours, rates of compensation and all other matters relating to the employment of individuals employed by the Provider or its Affiliates in the performance of the Services shall be determined solely by the Provider or its respective Affiliates. 2.4 Standards for Performance of Services. The Provider shall, and shall cause its Affiliates and the providers of Outsourced Services to, perform the Services with reasonable diligence and dispatch in a prudent, cost effective and efficient manner, in accordance with all applicable laws, regulations, codes, permits, licenses, and standards, and in accordance with the terms and conditions of this Agreement. The Provider may determine in its sole discretion whether or not to Outsource a Service. 2.5 Right to Request Instruction. At any time, the Provider may, if it reasonably deems it to be necessary or appropriate, request written instructions from the Company prior to the necessity for taking action with respect to any matter contemplated by this Agreement, and may defer action thereon pending the receipt of such written instructions. ARTICLE 3 PAYMENT 3.1 Payment. The Company, in consideration for the performance of the Services by the Provider, agrees to pay the Provider all pre-approved charges, costs, expenses, taxes, fees and losses not compensated by insurance, which are incurred by Provider in the performance of the Services hereunder. These charges, costs, expenses, taxes, fees and losses shall include, but are not limited to: (a) Charges for the time of all personnel employed by the Provider in the performance of the Services at each person's standard intracompany labor rate as set forth by personnel category on Annex A hereto, which time charges include federal and state payroll taxes and insurance, Provider benefit programs, overhead and an arms-length, commercially reasonable mark-up. Such charges shall be subject to appropriate adjustment for any changes in payroll taxes or insurance, or changes in benefit programs. (b) Transportation, travel, hotel and living expenses, including use of 3 4 employees' personal cars at Provider's current standard rates. All reasonable moving, relocation, travel and living expenses incurred in connection with assignment of Provider's permanent personnel to a location other than Provider's permanent offices and from such location at the conclusion of assignment. (c) Miscellaneous expenses, including but not limited to telegrams, telex, telefacsimile, telephone services, postage and similar miscellaneous items incurred in connection with the Services, all at Provider's current standard rates. (d) Reproduction costs of all drawings, manuals, specifications, and other documents required for the Services; and costs for the use of computer, all at Provider's current standard rates or at actual cost to Provider if prepared by others. (e) Cost of any permits, fees, licenses or royalties required. Costs of any sales, use or similar taxes or fees imposed by a federal, state, municipal or other government or agency thereof. (f) Fees, costs, damages, or disbursements incurred in connection with any labor, patent, or commercial litigation or any third party claim, suit, or cause of action, arising out of or in connection with the performance of the Services by Provider (except disputes between Provider and the Company) or claims, suites or causes of action pursued on behalf of the Company by Provider. (g) Premiums and brokerage fees on all bonds and insurance policies which may be required by Company in addition to those listed herein, and any loss under the deductible features of any insurance policies, whether furnished by Provider or Company. 3.2 Invoicing. --------- (a) The Provider shall invoice the Company by the fifteenth (15th) day of each month for all Services performed with respect to the preceding month and any adjustments that may be necessary to correct prior invoices. All invoices shall reflect in reasonable detail a description of the Services performed during the preceding month and documentation available to the Provider backing up invoiced charges and shall be due and payable within thirty (30) days after its receipt. The Company shall pay all undisputed amounts on each invoice, but shall be entitled to withhold payment of any amount in dispute and shall notify the Provider within thirty (30) days from receipt of the invoice of the disputed amount and the reasons each such charge is disputed by the Company. The Provider shall promptly provide the Company with records relating to the disputed amount so as to enable the parties to resolve the dispute. (b) Any statement or payment not disputed in writing by either party within two years of the date of such statement or payment shall be considered final and no 4 5 longer subject to adjustment. The Company shall not be obligated to pay for any changes for which statements for payment are submitted more than two years after the termination of this Agreement. ARTICLE 4 LIMITED WARRANTY 4.1 Warranty. Provider warrants that the Services performed under this Agreement will be in accordance with accepted professional standards and practices existing as of the date that such Services are performed. The sole and exclusive remedy for breach of this warranty shall be for Provider to re-perform the portion of defective Services, written notice of which is promptly given by Company to Provider within a period of one (1) year from the date that the defective Service was performed under this Agreement. All costs of any re-performance shall be reimbursed by Company to Provider but Provider shall receive no additional profit thereon. 4.2 Disclaimer. There are no warranties other than the above, either express or implied, including without limitation any warranties of merchantability or fitness for particular purpose applicable to Providers services performed under this Agreement. ARTICLE 5 LIMITATION OF LIABILITY 5.1 Limitation of Liability. Whether due to delay, breach of contract or warranty, tort (including without limitation negligence), or any other cause, neither Provider nor its Affiliates or subcontractors shall be liable for any special, indirect, punitive, or consequential damages of any nature, including without limitation loss of actual or anticipated profits, revenues, or product, loss by reason of shutdown, nonoperation, or increased expense of manufacturing or operation, or any costs, labor, or materials required for reconstruction or repairs. Provider's maximum liability under or arising out of this Agreement shall in no event exceed the value of the Services performed during the calendar year prior to the cause giving rise to or creating any such liability. ARTICLE 6 TERM AND TERMINATION; EVENTS OF DEFAULT 6.01 Term. The term of this Agreement shall commence on the Effective Date and shall continue until terminated in writing by the Company. 6.02 Events of Default. If one or more of the following events occurs with respect to a 5 6 party hereto, it will constitute an "Event of Default" with respect to such party: (a) Failure to Perform Obligations. Such party fails to perform or observe any material obligation under this agreement and such failure continues for more than thirty (30) days after the non-defaulting party has given notice thereof to such party (or if the nature of such default is such that it is not capable of being cured within thirty (30) days, then the failure of such party to commence to cure such default within thirty (30) days and to diligently and continuously pursue the cure of such default thereafter, but in no event may such extended cure period exceed one hundred eighty (180) days); (b) Bankruptcy. Such party becomes subject to a bankruptcy or is declared insolvent. 6.03 Remedies; Exclusivity. At any time during the continuance of an Event of Default, the non-defaulting party will have the right to (a) elect, by giving notice to the defaulting party, not to be bound in any respect by the provisions of this Agreement during such continuance, in which case such party will have no obligations or liabilities hereunder during such period, (b) terminate the Agreement upon giving notice of termination to the defaulting party. No failure on the part of either Provider, the Company to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under this Agreement will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof. ARTICLE 7 MISCELLANEOUS 7.1 Severability. In the event any portion of this Agreement shall be found by a court of competent jurisdiction to be unenforceable, that portion of the Agreement will be null and void and the remainder of the Agreement will be binding on the parties as if the unenforceable provisions had never been contained herein. To the fullest extent permitted by Law, the remedies set forth in this Section 6.3 are the exclusive remedies for a default hereunder; provided that with respect to (i) disputed or unpaid invoices relating to services rendered prior to any termination and (ii) claims for indemnity relating to events that occurred prior to any termination each party shall also have all rights and remedies contemplated herein in Sections 7.10 and 7.11 or otherwise provided in Law or Equity. 7.2 Assignment. Except for the ability of the Provider to cause one or more of the Services to be performed by one of its Affiliates or a third-party provider, no party shall have the right to assign its rights or obligations under this Agreement without the consent of the other party. 6 7 7.3 Entire Agreement. This Agreement constitutes the entire agreement of the parties relating to the performance of the Services. All prior or contemporaneous written or oral agreements are merged herein. 7.4 Law. This Agreement shall be subject to and governed by the laws of the State of New York, excluding any conflicts-of-law rule or principle that might refer the construction or interpretation of this Agreement to the laws of another state. 7.5 Amendment of Modification. This Agreement may be amended or modified from time to time only by a written amendment signed by the parties hereto. 7.6 Notices. Any notice, request, instruction, correspondence or other document to be given hereunder by either party to the other (herein collectively called "Notice") shall be in writing and delivered personally or mailed, postage prepaid, or by telegram or telecopier, as follows: (a) if to the Company, to: Big Cajun I Peaking Power LLC c/o NRG Energy, Inc. 901 Marquette Avenue, Suite 2300 Minneapolis, Minnesota 55402 Attention: President (b) if to Provider, to: NRG Energy, Inc. 901 Marquette Avenue, Suite 2300 Minneapolis, MN 55402 Attention: President, Worldwide Operations 7.7 Insurance. The Company shall carry and keep in force, at all times, Commercial General Liability insurance in such policy limits as are usual and customary for its business and as it deems necessary to protect it from risks of loss arising from the performance of Service under this Agreement. The Company shall name the Provider as an additional insured on these policies and shall indemnify Provider to the same extent. The Company waives all rights and any subrogation rights that it or its insurers may have against Provider, its vendors and subcontractors and their employees, agents, officers, directors, and any of their affiliated or associated companies, for any losses or damages, including without limitation all consequential damages resulting from any and all risks and losses, however and whenever arising, from the Services performed hereunder, or other risks covered under a Commercial General Liability insurance policy. 7 8 7.8 Prosecution of the Work; Force Majeure. Provider shall substantially perform the Services in accordance with a schedule mutually agreed upon between the parties. Any completion dates specified are tentative only and Provider shall have no liability to the Company for late completion. If the prosecution of the Services is delayed or affected by any of the following force majeure occurrences: acts or failures to act by the Company or any separate contractors, engineers, vendors, or consultants employed by the Company or any other party not in privity of this Agreement; acts of God or the elements; acts or failures to act by government or any agency thereof; changes, inaccuracies, incompleteness, or differences in site conditions or any data or information supplied to the Provider; changes in laws or regulations; delays in permitting; delays in receipt of engineering data or vendor drawings; fire; unusually sever weather, natural disasters, or unavoidable casualties; riot; civil disorders; labor shortages or disputes; strikes, picketing, or arbitration proceedings; delays in transportation, material, or equipment deliveries; material, equipment, or fuel shortages; or any other causes beyond the Provider's reasonable control, the schedule shall be extended for the period of time attributable to such delay and all fixed elements of pricing, if any, shall be equitably adjusted. 7.9 No Third-Party Beneficiary. The provisions of this Agreement are enforceable solely by the parties to this Agreement, and no other person shall have the right, separate and apart from the Company or the Provider, to enforce any provision of this Agreement or to compel any party to this Agreement to comply with the terms of this Agreement. 7.10 Disputes. The Provider and the Company agree to negotiate in good faith in an effort to resolve any dispute related to this Agreement that may arise between the parties. If the dispute cannot be resolved promptly by negotiation, at a senior management level the either party may give the other party written notice that the dispute should be submitted to mediation. Promptly thereafter, a mutually acceptable mediator shall be chosen by the parties. who shall share the cost of mediation services equally. If the dispute has not been resolved by mediation within ninety (90) days after the date of written notice requesting mediation, then either party may initiate litigation and pursue any and all remedies at law or at equity that such party is entitled to. 7.11 Indemnification. (a) The Company agrees that it will indemnify and hold harmless the Provider, its Affiliates and their respective directors, officers, employees, and agents from and against any and all losses, claims, damages and liabilities, joint or several, to which the Provider may become subject under any applicable federal or state law, or otherwise, relating to or arising out of the engagement of the Provider pursuant to, and the performance by the Provider of the services contemplated by, this Agreement. The Company will reimburse the Provider for all costs and expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation of or defense of any pending or threatened claim or any action or proceeding covered by such indemnity. The Company will not be liable under the 8 9 foregoing indemnification provisions to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted primarily from the bad faith or gross negligence of the Provider or the relevant Affiliate. (b) The Provider agrees that it will indemnify and hold harmless the Company and its directors, officers, employees, and agents from and against any and all losses, claims, damages and liabilities, joint or several, to which the Company may become subject under any applicable federal or state law, or otherwise, relating to or arising out of the willful misconduct or gross negligence of the Provider or its Affiliates. The Provider will reimburse the Company for all costs and expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation of or defense of any pending or threatened claim or any actions or proceedings covered by such indemnity. The Provider will not be liable under the foregoing indemnification provisions to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted primarily from the bad faith or gross negligence of the Company. 7.12 The Company is Sole Beneficiary. The Company acknowledges that the Services shall be provided only with respect to the businesses of the Company. The Company shall request performance of any Services for the benefit of any entity other than the Company. 9 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed on their behalf by their duly authorized officers. NRG ENERGY, INC. By: /s/ Craig A. Mataczynski --------------------------------- Name: Craig A. Mataczynski Title: Senior Vice President BIG CAJUN I PEAKING POWER LLC By: /s/ [illegible] --------------------------------- Name: [illegible] Title: [illegible] 10 11 ANNEX A NRG Energy, Inc. 2000 Standard Labor Rates for Intracompany Transactions
------------------------------------------------------------------------- Fully Loaded Category Standard Rate ------------------------------------------------------------------------- Executive $ 210.00 ------------------------------------------------------------------------- Regional Manager $ 136.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Sr. Attorney $ 129.00 ------------------------------------------------------------------------- Attorney $ 100.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Exec. Dir. Bus. Dev. $ 113.00 ------------------------------------------------------------------------- Dir. Bus. Dev. $ 100.00 ------------------------------------------------------------------------- Mrg. Bus. Dev. $ 86.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Exec. Dir. Finance/Tax $ 113.00 ------------------------------------------------------------------------- Dir. Finance/Tax $ 86.00 ------------------------------------------------------------------------- Sr. Financial Analyst $ 69.00 ------------------------------------------------------------------------- Financial Analyst $ 52.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Exec. Dir. Ops. Tech. Supp. & Engineering $ 113.00 ------------------------------------------------------------------------- Dir. Ops. Tech. Supp. & Engineering $ 86.00 ------------------------------------------------------------------------- Mgr. Ops. Tech. Supp./Engineer $ 77.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Sr. HR Generalist $ 100.00 ------------------------------------------------------------------------- HR Generalist $ 77.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Sr. Accountant $ 52.00 ------------------------------------------------------------------------- Accountant $ 46.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Administrative Support $ 35.00 -------------------------------------------------------------------------
11 EX-10.9 35 y57012ex10-9.txt COAL TRANSPORTATION AGREEMENT 1 Exhibit 10.9 COAL TRANSPORTATION AGREEMENT BETWEEN LOUISIANA GENERATING, LLC AND THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY AND AMERICAN COMMERCIAL MARINE SERVICE COMPANY 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS................................................. 2 ARTICLE II FILING, APPROVAL, COMMENCEMENT OF SERVICE EFFECTIVE DATE AND TERM............................................... 5 Section 1. Term........................................................ 5 Section 2. Commencement of Service..................................... 5 A. Effective Date of Agreement........................... 5 B. Initiation of Service................................. 5 ARTICLE III LG'S COAL TENDER COMMITMENT................................. 6 Section 1. Coal Tonnage Subject to this Agreement...................... 6 Section 2. Minimum Volume Commitment................................... 6 Section 3. Volume Shortfall Payment.................................... 7 Section 4. Shipment of Processed Coal.................................. 8 Section 5. Reports..................................................... 8 ARTICLE IV CARRIERS' OBLIGATION TO TRANSPORT COAL AND PROVIDE EQUIPMENT................................................... 8 Section 1. Transportation Obligation................................... 8 Section 2. BN Equipment Supply......................................... 9 Section 3. ACMS Equipment Supply....................................... 9 A. Equipment Supply...................................... 9 B. Requirements for Terminal............................. 9 C. Storage Capacity...................................... 9 ARTICLE V LG'S OBLIGATION TO SUPPLY EQUIPMENT........................ 10 Section 1. Supply of Equipment........................................ 10 Section 2. Car Damage................................................. 10 Section 3. Car Destruction............................................ 11 Section 4. Provision of Unloading Facilities.......................... 12 Section 5. Provision of Harbor and Shift Boat......................... 13 ARTICLE VI RAIL OPERATING AND SCHEDULING PROCEDURES................... 13 Section 1. Train Size................................................. 13 Section 2. Minimum Shipment Weight.................................... 13 Section 3. Minimum Tender............................................. 14 Section 4. Advance Notice and Loading................................. 14 Section 5. Placement and Free Time - Origin........................... 14 Section 6. Rail Car Demurrage at Terminal............................. 16 Section 7. Constructive Placement..................................... 16 Section 8. Service Commitment......................................... 17 Section 9. Routing.................................................... 19
i 3 TABLE OF CONTENTS
Page ---- ARTICLE VII SERVICE AND MAINTENANCE.................................... 20 Section 1. Service and Maintenance of LG Railcars..................... 20 Section 2. Holding and Storage of Empty Or Loaded Unit Trains......... 22 Section 3. Weighing and Determination of Weights...................... 24 Section 4. Overloaded Car(s).......................................... 24 Section 5. Release of Crews/Removal of Locomotives.................... 25 ARTICLE VIII TERMINAL AND BARGE OPERATING PROCEDURES.................... 25 Section 1. Control of Loading and Unloading........................... 25 Section 2. Control of Service Performance............................. 25 Section 3. Notice of Barge ETA........................................ 26 Section 4. Origin Demurrage........................................... 26 Section 5. Destination Demurrage...................................... 26 Section 6. Free Time.................................................. 27 A. Alternate A - Standby Unloading...................... 27 B. Alternate B - Additional Set Of Barges Unloading..... 27 C. Alternate C - Single Barge Unloading................. 27 D. Designation of Alternates............................ 28 Section 7. Computation of Free Time................................... 28 Section 8. Adjustment for Force Majeure............................... 29 Section 9. ACMS Operating Obligations................................. 29 ARTICLE IX LG OPERATING PROCEDURES.................................... 30 Section 1. Responsibility for Unloading............................... 30 Section 2. Berthing and Mooring....................................... 30 Section 3. Excess Return Tonnage...................................... 30 ARTICLE X RATES AND RATE ADJUSTMENT.................................. 31 Section 1. Minimum Base Rate.......................................... 31 Section 2. Effective Rate............................................. 32 Section 3. Adjustment to Rates and Charges............................ 32 ARTICLE XI BILLING PROCEDURES......................................... 34 Section 1. Transportation Billing..................................... 34 Section 2. Payment.................................................... 34 Section 3. All Other Charges.......................................... 35 ARTICLE XII FORCE MAJEURE.............................................. 35 Section 1. Definition................................................. 35 Section 2. Effect of Force Majeure.................................... 36
ii 4 TABLE OF CONTENTS
Page ---- ARTICLE XIII INDEMNITY AND INSURANCE.................................... 38 Section 1. Indemnity by ACMS.......................................... 38 Section 2. Indemnity by LG............................................ 38 Section 3. Insurance to be Maintained by ACMS......................... 39 ARTICLE XIV COAL LOSS AND DAMAGE....................................... 40 Section 1. Liability for Loss of Coal Transported by BN............... 40 Section 2. Liability for Loss of Coal Transported by ACMS............. 40 Section 3. General Average............................................ 41 Section 4. Disclaimer of Damages...................................... 41 Section 5. Private Carriage........................................... 42 ARTICLE XV TERMINATION................................................ 42 ARTICLE XVI ASSIGNMENT AND SUCCESSION.................................. 42 ARTICLE XVII AMENDMENT, MODIFICATION AND WAIVER......................... 43 ARTICLE XVIII MISCELLANEOUS.............................................. 44 Section 1. Subcontracting............................................. 44 Section 2. Independent Contractor..................................... 44 Section 3. Waivers and Remedies....................................... 44 Section 4. Notice..................................................... 44 Section 5. Severability, Effect of Agreement.......................... 46 Section 6. Confidentiality............................................ 46 Section 7. Representations and Warranties............................. 47 Section 8. Counterparts............................................... 48 Section 9. Remediation................................................ 48 Section 10. Construction............................................... 49
iii 5 COAL TRANSPORTATION AGREEMENT THIS AGREEMENT (the "Agreement") is made as of the 22nd day of January, 1997, by and among the BURLINGTON NORTHERN AND SANTA FE RAIL COMPANY (BN), a Delaware corporation; AMERICAN COMMERCIAL MARINE SERVICE COMPANY ("ACMS"), a Delaware corporation; and LOUISIANA GENERATING, L.L.C. ("LG"), a Delaware limited liability company. W I T N E S S E T H WHEREAS, BN is a common carrier by rail with legal authority pursuant to 49 U.S.C. Section 10709 to enter into a binding contract to provide coal transportation services to LG; and WHEREAS, ACMS owns and operates a coal receiving, storage and transfer facility in St. Louis, Missouri and also owns, operates, and/or charters, through affiliated companies, river vessels suitable for transportation of coal on the Mississippi River; and WHEREAS, LG intends to purchase and operate the Big Cajun No. II steam-electric generating plant and coal unloading dock, located at approximately Mile 263 AHP near New Roads, Louisiana (the "LG Power Plant") pursuant to the Asset Purchase Agreement as hereinafter defined; and WHEREAS, LG will require large quantities of coal for the operation of the LG Power Plant; and WHEREAS, BN and ACMS have been the sole suppliers of transportation of coal for the LG Power Plant under long term arrangements with the prior operator of Big Cajun No. II commencing in 1979; and 6 WHEREAS, LG, BN and ACMS all desire that BN and ACMS continue to transport for LG pursuant to the terms of this Agreement certain tonnages of coal from mines in the Wyoming Powder River Basin to the LG Power Plant, and BN and ACMS are willing to provide such transportation; and WHEREAS, pursuant to Cajuns Chapter 11 Case Number 94-11474 pending before the United States Bankruptcy Court for the Middle District of Louisiana (the "Chapter 11 Proceeding") and LG's planned purchase of the LG Power Plant and related assets from Cajun Electric Power Cooperative, Inc., BN and ACMS have each agreed to renegotiate their respective long-term arrangements on amended terms set forth in this Agreement in order to continue to supply, on a joint basis, all coal transportation requirements for the LG Power Plant. NOW, THEREFORE, in consideration of the premises, the mutual covenants herein set forth, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties do hereby agree as follows: ARTICLE I DEFINITIONS ----------- The following terms shall have the following meanings for purposes of this Agreement: "AAR" shall mean the Association of American Railroads. "AAR Interchange Rules" shall mean the rules set out in the Field Manual and Office Manual of the Interchange rules adopted by the AAR, as amended from time to time. "Agreement" shall have the meaning set forth in the premises clause. 2 7 "Asset Purchase Agreement" shall mean the Amended and Restated Asset Purchase and Reorganization Agreement among LG, the Trustee and, as to certain specific sections of the Agreement only, NRG Energy, Inc., Zeigler Coal Holding Company and Southern Electric International, Inc., as of September 30, 1996, as the same may be amended from time to time. "Cajun" shall mean Cajun Electric Power Cooperative, Inc. "Calendar Year" shall mean a year commencing January 1 and ending December 31. "Carrier" or "Carriers" shall mean collectively BN and ACMS. "Chapter 11 Proceeding" shall have the meaning set forth in the Recitals. "Coal" shall mean crushed raw coal (2x0 in size) unprocessed and classified as bituminous (including sub-bituminous) whose Standard Transportation Commodity Code (STCC) is 11212, as set forth in the STCC Tariff ICC STCC 6001 Series in effect on the date this Agreement is executed or its successor. Coal greater than 2x0 may be shipped only upon mutual consent of the parties which consent shall not be unreasonably withheld. The Coal may be treated to prevent freezing or to suppress dusting after mutual determination by the parties that the agents used for such treatment shall not adversely affect the facilities or equipment of ACMS or BN, or the operation thereof. "Coal Cars" shall mean LG supplied open-top rail cars equipped with rotary couplers, having a capacity of not less than 204,000 pounds, suitable for use in service between Origin and the Terminal, and suitable for use in service in the Coal unloading equipment maintained by ACMS. "Designated Loading Point" shall mean that point on Origin mines' trackage at which any further train movement is at the direction of the mine operator. 3 8 "Destination" shall mean the private barge coal unloading facility at the LG Power Plant at approximately mile 263 AHP near New Roads, LA. "Effective Date" shall mean the Effective Date under the Asset Purchase Agreement. "Effective Rate" shall have the meaning set forth in Article I. "LG Power Plant" shall have the meaning set forth in the Recitals. "Origin" shall mean all existing BN-served Wyoming Powder River Basin mines in Campbell and Converse Counties that are now operating and, with mutual written consent of Carriers and LG, those mines that become operational during the term of this Agreement. "Origin Loading Facilities" shall mean the equipment necessary to load Unit Train shipments of Coal at Origin including but not limited to rail trackage, Coal silos and/or hoppers, conveyor belts, preparation plants, and storage facilities at or for Origin. "STB" shall mean the Surface Transportation Board or its successor agency or body having the same or similar jurisdiction over common carriers by rail. "Tender" shall mean (a) with respect to a shipment of Coal by rail, to make available for loading into Coal Cars; (b) with respect to Coal Cars, to release Coal Cars into the control of BN; and (c) with respect to a shipment of Coal by barge, to make available for unloading and loading into barges at the Terminal. "Terminal" shall mean ACMS' Hall Street Terminal in St. Louis, Missouri. "Ton" shall mean a ton of 2,000 pounds, avoirdupois. "Transportation of Coal" shall mean movement of Coal from Origin to Destination including rail transportation from Origin to the Terminal, receiving, interim storage, loading to barge at the Terminal and barge transportation from the Terminal to Destination. 4 9 "Trustee" shall mean Ralph R. Mabey, as Chapter 11 Trustee of Cajun. "Trustee's Plan of Reorganization" shall mean the Trustee's Plan of Reorganization as may be amended from time to time for Cajun, pending in the Chapter 11 Proceeding. "Unit Train" shall mean an assembly of Coal Cars continuously cycling from one Origin to the Terminal on one bill of lading. ARTICLE II FILING, APPROVAL, COMMENCEMENT OF SERVICE EFFECTIVE DATE AND TERM ----------------------- Section 1. Term. ----- The term of this Agreement shall be for a period of five years, commencing on the Effective Date (as defined below), and ending five years thereafter except as provided in Article XII, Section 2.D. Section 2. Commencement of Service. ------------------------ A. Effective Date of Agreement. ---------------------------- This Agreement is entered into and becomes binding upon the signatories upon the Effective Date as defined in the Asset Purchase Agreement. B. Initiation of Service. ---------------------- Transportation service will initiate under this Agreement as of the first train to commence loading at Origin on or after 12:01 a.m. on the calendar day next following the Effective Date. Coal en route by train or barge or in transit at the Terminal, prior to 12:01 a.m. of the day 5 10 following the Effective Date shall be transported to Destination under existing Coal transportation arrangements between Carriers and Cajun. ARTICLE III LG'S COAL TENDER COMMITMENT --------------------------- Section 1. Coal Tonnage Subject to this Agreement. --------------------------------------- LG shall Tender to Carriers at Origin all Coal required for operation of all of the Coal fired generation units at LG's Power Plant including the three Coal fired generation units currently in operation, any additional Coal fired generating unit(s) which might be constructed at LG's Power Plant during the term of this Agreement, and all of the Coal required for maintaining a storage pile of the proper size at the LG Power Plant, as determined by LG in its sole discretion, from time to time. Section 2. Minimum Volume Commitment. -------------------------- At least ninety (90) days prior to the beginning of each Calendar Year (except 1997), LG shall provide to Carriers a declaration of the Tons of Coal expected to be Tendered during the next Calendar Year ("Declared Tonnage"). Subject to the other provisions of this Agreement, the Declared Tonnage for a Calendar Year shall represent LG's best estimate of the tonnage expected to be Tendered for such Calendar Year. The Declared Tonnage for the portion of the 1997 Calendar Year that remains after the Effective Date shall be provided not later than thirty (30) days after the Effective Date. Said declaration(s) shall also include a shipping schedule of the amounts of Coal that LG expects to Tender during each month of such year. During the Calendar Years 1998-2001, LG shall Tender not less than {***} Tons per year (the "Minimum Volume Commitment"). During the Calendar Years 1997 and 2002 (assuming an Effective Date 6 11 in 1997), the Minimum Volume Commitment shall be prorated by multiplying a ratio, the numerator of which is the number of days in a Calendar Year that Transportation of Coal will be provided by Carriers under this Agreement and the denominator is 365 days, multiplied by {***} Tons. LG shall Tender all shipments of Coal on a ratable and mutually agreeable quarterly schedule taking into consideration LG's seasonal Coal consumption. LG may increase or decrease the Declared Tonnage for a Calendar Year quarter by as much as {***} of the quarterly Declared Tonnage upon written notice to Carriers 60 days prior to the beginning of the quarter. Neither the declaration of Declared Tonnage, the amendment of such declaration or the ultimate accuracy of such declaration shall be deemed to relieve LG of its obligation to Tender to Carriers the Coal tonnage subject to this Agreement. If the Effective Date occurs after 1997, then all dates and references to Calendar Years shall be adjusted as appropriate to give effect to the five (5) year term provided for under Article II, Section 1. Section 3. Volume Shortfall Payment. ------------------------- If in any Calendar Year, LG does not Tender Tons of Coal at least equal to the Minimum Volume Commitment (for reasons other than an event of Force Majeure), LG shall pay to Carriers, not as a penalty, but as compensation for lost traffic in the form of liquidated damages, agreed upon as reasonable and in full settlement for LG's failure to meet the Minimum Volume Commitment, an amount equal to fifty {***} of the Effective Rate (as defined in Article X) applicable for the fourth quarter of the Calendar Year in question, multiplied by the number of Tons by which LG failed to meet the Minimum Volume Commitment (the "Volume Shortfall Payment"). This Section shall not authorize LG to transport any tonnage for any Calendar Year via any transportation mode other than BN and ACMS. 7 12 Section 4. Shipment of Processed Coal. --------------------------- The rates, terms and conditions of this Agreement apply to the transportation of raw, untreated Coal and do not apply to the transportation of artificially dried or processed Coal. Section 5. Reports. -------- Within forty-five (45) days after the end of each Calendar Year (and within forty-five (45) days after termination of this Agreement), LG shall send a written notice to Carriers certifying for such year (A) the Minimum Volume Commitment; (B) the number of Tons of Coal Tendered or caused to be Tendered by LG for transportation hereunder; (C) the total number of Tons of Coal required for operation of the LG Power Plant and the maintenance of the storage pile at such plant; (D) the number of Tons of Coal transported hereunder by Carriers; and (E) the dollar amount of any Volume Shortfall Payment due. If Carriers accept LG's report or fail to advise LG of any exceptions within forty-five (45) days of receipt of the report, the contents thereof shall be deemed final and binding on the parties. If Carriers advise LG within forty-five (45) days of their receipt of LG's report that they take exception to any portion thereof, the parties shall meet in an attempt to resolve their differences in accordance with Article XVIII, Section 9. Any Volume Shortfall Payment agreed to be owing shall be paid by LG within thirty (30) days after the date such payment is agreed or deemed to be agreed to be owing. ARTICLE IV CARRIERS' OBLIGATION TO TRANSPORT COAL AND PROVIDE EQUIPMENT ------------------------------------------------------------ Section 1. Transportation Obligation. -------------------------- Carriers agree to transport to Destination all Coal declared and Tendered hereunder by LG during the term hereof, in accordance with the procedures described herein. 8 13 Section 2. BN Equipment Supply. ------------------- BN hereby agrees to furnish all equipment, other than Coal Cars, that it deems necessary in its sole discretion in order to transport the Tendered Coal by rail from Origin to the Terminal in accordance with this Agreement and in conformance with the rights, duties and obligations contained herein. Section 3. ACMS Equipment Supply. --------------------- A. Equipment Supply. ---------------- ACMS hereby agrees to furnish all equipment, including a sufficient number of barges and towboats, that it deems necessary in its sole discretion in order to transport the Tendered Coal by barge from the Terminal to Destination under normal operating conditions and in accordance with this Agreement and in conformance with the rights, duties and obligations contained herein. B. Requirements for Terminal. ------------------------- ACMS shall provide and operate the Terminal for the transfer of Coal from Unit Trains to ACMS' barges. Such Terminal shall be capable of handling LG's Coal requirements when Tendered in accordance with Article III, Section 2. The Terminal will be equipped with rotary dumper equipment for the unloading of Unit Trains. It will include sufficient area for the storage of Coal as provided below in Paragraph C of this Section. Conveyors, stacking and reclaiming equipment shall be provided, together with a complete loading dock for the high speed loading of ACMS' barge tows. C. Storage Capacity. ---------------- ACMS shall maintain only one portion of the Terminal storage area for the handling of LG's Coal. ACMS reserves the right to commingle Coal belonging to LG originating from more 9 14 than one mine. The amount of storage used for LG's Coal shall be determined by Carriers to efficiently manage BN and ACMS equipment and facilities and to best accommodate LG's Declared Tonnage as provided in Article III, Section 2 hereof up to a maximum of 150,000 Tons of storage. If LG requests that additional Tons of Coal be stored at the Terminal and space is available, LG may be charged a reasonable charge which shall be mutually agreed upon by the parties. ARTICLE V LG'S OBLIGATION TO SUPPLY EQUIPMENT ----------------------------------- Section 1. Supply of Equipment. ------------------- A. LG hereby agrees to supply sufficient Coal Cars including spare cars at no cost to Carriers in order to transport the Coal Tendered pursuant to this Agreement. LG shall supply enough Coal Cars such that each trainset shall be comprised of at least {***} Coal Cars plus five (5) percent spare cars for each trainset. Said Coal Cars to be furnished shall be approved for use by BN and shall have a volume capacity of approximately 4,000 cubic feet and a net capacity of not less than 102 tons per car in steel and 118 tons per car in aluminum and shall be suitable for use at Origin and the Terminal. B. LG agrees that it will assume all owners' responsibility for Coal Cars as designated in the AAR Interchange Rules and shall comply with the rules and regulations of the Federal Railroad Administration (the "FRA") applicable to such Coal Cars. Section 2. Car Damage. ---------- If LG-provided Coal Cars are damaged while in the possession of Carriers and on Carriers' trackage, BN or ACMS will give notice to LG promptly by telephone or facsimile of 10 15 the damage or derailment giving car initial and number and will provide written notice within thirty (30) days of the damage or derailment. LG will designate an appropriate individual and location for such notification. If LG's Coal Cars are damaged under conditions for which Carriers are liable under the AAR Interchange Rules (except for damage due to defect in design, materials or workmanship or the negligence of LG), Carriers will, if no LG spare Coal Cars are available, furnish Coal Cars of not less than 100 tons marked capacity, if available, at no additional cost to LG for a period of time not to exceed 120 days following the date of damage. If suitable replacement Coal Cars are not available, the Minimum Shipment Weight shall be adjusted pursuant to Article VI. In the event LG supplied cars are damaged and Carriers are liable pursuant to this Section, Carriers shall: a) perform repairs to LG Coal Cars at a BN repair facility at no charge to LG and pay for any transportation to and from such facility; or if Carriers elect not to repair LG Coal Cars at a BN repair facility; b) perform repairs at no charge to LG at a non-BN repair facility designated by LG and acceptable to Carriers (such acceptance shall not be unreasonably withheld by Carriers), and pay for any transportation to and from such facility. Such Coal Cars shall be transported by Carriers as soon as practicable; c) perform all repair work on LG Coal Cars at either a BN repair facility or a non-BN repair facility, in accordance with all AAR and FRA requirements. All damaged LG Coal Cars shall be repaired to a condition equal to that before the damage occurred. Carriers shall notify LG when repairs to LG Coal Cars have been completed and returned to service. Section 3. Car Destruction. --------------- In the event LG-provided Coal Cars are destroyed while in the possession of Carriers and on Carriers' trackage, BN or ACMS will give notice to LG promptly by telephone or facsimile of 11 16 such destruction giving car initial and number and will provide written notice within thirty (30) days of the destruction. LG will designate an appropriate individual and location for such notification. If LG's Coal Cars are destroyed under conditions for which Carriers are liable under the AAR Interchange Rules. Carriers will, if no LG spare Coal Cars are available, furnish substitute Coal Cars of not less than 100 tons marked capacity, if available, at no additional cost to LG for a period not to exceed 120 days following settlement of claim for such destroyed Coal Car, but in no event is this period to exceed 365 days following date of actual destruction. If suitable replacement cars are not available, the Minimum Shipment Weight shall be adjusted pursuant to Article VI. Settlement for such destroyed Coal Car, if Carriers are liable, shall be on the basis of cost of reproduction new less depreciation and salvage in accordance with Rule 107 of the AAR Interchange Rules. Such amounts will be paid within forty-five (45) days of receipt of LG's invoice. Carriers will not be liable for such destruction that is the result of a defect in design, materials and/or workmanship in the Coal Cars or the negligence of LG. Section 4. Provision of Unloading Facilities. --------------------------------- LG shall provide Destination facilities at the LG Power Plant capable of unloading ACMS' individual barges at the rate of 3,000 tons per hour. For use in conjunction with LG's dock at the Destination unloading facility. LG shall provide a mooring area for holding of loaded tows and the make-up of outbound empty tows. The mooring area shall be capable and suitable in all respects for the handling of up to 35 loaded barges and 35 empty barges. Operation, repair and maintenance of the Destination dock, unloading facility, and mooring area shall be at the sole risk and expense of LG and shall be provided without cost or other expense to ACMS. 12 17 Section 5. Provision of Harbor and Shift Boat. ---------------------------------- LG shall provide and operate at its sole risk and expense harbor and shift boats sufficient to handle the shifting of loaded and empty barges to and from the Destination dock and the mooring area and the rewiring of outbound empty barges in a tow-like fashion as specified by ACMS. ARTICLE VI RAIL OPERATING AND SCHEDULING PROCEDURES ---------------------------------------- Section 1. Train Size. ---------- LG shall provide sufficient empty Coal Cars to assemble trains of at least {***} cars. If an Origin mine is unable to load a train to the Minimum Shipment Weight as a result of LG's failure to furnish a sufficient number of Coal Cars, the Minimum Shipment Weight shall be applied. Section 2. Minimum Shipment Weight. ----------------------- A. The "Minimum Shipment Weight" for trainloads of Coal Tendered by LG for transportation under this Agreement shall be {***} tons for aluminum Coal Cars and {***} tons for steel Coal Cars. B. For purposes of the billing of rates under Article X, Section 1, except for LG's failure to provide sufficient empty Coal Cars as provided in Section 1 above, all trainloads of Coal Tendered by LG with a shipment weight of less than the applicable Minimum Shipment Weight shall be assessed on the basis of the Minimum Shipment Weight. 13 18 C. The number of Tons upon which transportation charges are paid, regardless of whether actually transported, shall be counted toward LG meeting the Minimum Volume Commitment. 14 19 Section 3. Minimum Tender. -------------- A. Each Unit Train for loading shall contain no less than {***} Coal Cars except as provided for in this Section ("Minimum Tender"). B. In the event LG is unable to furnish for loading at least {***} Coal Cars because cars have been damaged, destroyed, or derailed by Carriers and have been removed from service, and if Carriers are unable to substitute Carrier coal cars pursuant to Article V, the per shipment Minimum Tender of {***} Coal Cars shall be reduced by the number of coal cars Carriers are unable to substitute under the provisions of Article V, but the minimum tender per shipment shall in no case be less than {***} Coal Cars, unless mutually agreed upon by LG and BN. Section 4. Advance Notice and Loading. -------------------------- A. LG will make Coal Cars available at Origin for loading without Carriers or the mine operator ordering placement of Coal Cars. BN shall furnish the mine operator not fewer than four (4) hours advance notice of the arrival of such Coal Cars at Origin for loading. B. LG and the mine operator will be responsible for the loading of Coal into the Coal Cars. The parties agree to cooperate with the mine operator to provide for the complete and efficient loading of the Coal Cars at Origin. BN shall provide locomotives and train crews to move trains through the Origin Loading Facilities at a controlled speed which will allow for the full and uniform loading of each Coal Car. Section 5. Placement and Free Time -- Origin. --------------------------------- A. LG and the mine operator shall have {***} hours to load each train ("Loading Free Time"). Loading Free Time shall commence when the locomotives have arrived at the Designated Loading Point and the train crew has requested loading instructions, or when the train is Constructively Placed, and shall end when LG or the mine operator has released the train. 15 20 B. LG shall pay BN an Origin Detention Charge of {***} for each hour or fraction thereof that actual loading time exceeds its Loading Free Time; PROVIDED, HOWEVER, that when a Loading Disability under Section 4 paragraph E of this Article occurs during a train's Loading Free Time, LG's Loading Free Time shall be extended for the duration of such Loading Disability; and, PROVIDED FURTHER, that when a Loading Disability occurs (other than a cause directly attributable to BN) after a train's Loading Free Time expires, LG shall be required to pay an Origin Detention Charge during such Loading Disability. In lieu of such Origin Detention Charges following the expiration of a train's Loading Free Time, LG may request that BN release the locomotives and crew for which LG shall pay a release charge of {***}. BN shall return the locomotives and crew to the train at the expiration of the Loading Disability at no additional charge to LG. C. If a train cannot be positioned on Origin trackage due to any cause attributable to LG or its mine operator, that train shall be considered Constructively Placed. D. If, due to any cause attributable to BN, a train arrives at Origin before another train has been released, the second and subsequent train(s) shall not be considered placed or Constructively Placed, and Loading Free Time for such train shall not commence until the locomotives have arrived at the Designated Loading Point on Origin trackage and the crew has requested loading instructions. E. "Loading Disability" means any of the following events which results in the inability to load Coal into the Coal Cars at Origin: (i) a cause directly attributable to BN, (ii) an Act of God, (iii) a strike or other labor disturbance, (iv) a riot or other civil disturbance, (v) unusual snow and/or ice accumulation sufficient to immobilize train operations and prevent loading of such train, (vi) governmental acts or regulations, or (vii) mechanical or electrical 16 21 breakdown, explosion or fire, not reasonably within the control of LG or its mine operator, in a Loading Facility. "Loading Disability Time" means the period of time from which LG or the mine operator is prevented from loading a train at Origin due to a Loading Disability. LG or the mine operator shall notify BN immediately by telephone (i) as to the time and nature of commencement of the Loading Disability and (ii) as to the time of termination of the Loading Disability. Section 6. Rail Car Demurrage at Terminal. ------------------------------ LG shall pay BN a terminal detention charge of {***} for each hour or fraction thereof that actual unloading is delayed for reasons attributable to LG. Section 7. Constructive Placement. ---------------------- A. If a train cannot be positioned on mine operator's trackage at Origin due to any cause attributable to LG or its mine operator, that train shall be considered "Constructively Placed". B. A Constructively Placed train shall be held at the nearest available hold point as determined by BN. Immediately upon arrival of the train at the hold point, BN shall notify the mine operator or LG by radio, telephone, wire or other reasonable means, of the date and hour that hold time begins. Immediately upon departure of the train from the hold point, BN shall notify the mine operator or LG by radio, telephone, wire or other reasonable means, of the date and hour that the hold time ends. C. For purposes of computing the loading or unloading time of a Constructively Placed train: a) the time elapsed while transporting a Constructively Placed train from the hold point to Origin shall be excluded from Loading Free Time. 17 22 b) If the train must reverse direction to reach the nearest available hold point, the time required for the train to return to the point of reverse direction shall be included in Loading Free Time. Section 8. Service Commitment. ------------------ A. BN will operate Unit Trains between Origin and the Terminal during each Calendar Year of this Agreement on an average round trip cycle time that shall be calculated by application of the following formulas ("Annual Service Standard"): 1) For mines located North of Reno Junction: a) {***} b) {***} c) {***} d) {***} e) {***} 2) For mines located South of Reno Junction: a) {***} b) {***} c) {***} d) {***} e) {***} For Example: If LG Tenders 6,100,000 tons from mines located north of Reno Junction, the calculation would be as follows: {***} The average cycle time shall not include: 18 23 (i) Loading at Origin; (ii) Time elapsed for delays that are the result of a Force Majeure; for purposes of this Section such delays shall not be subject to the 24 hour provision set forth in Article XII; and (iii) Time elapsed for delays that are attributable to LG, including but not limited to, delays resulting from removal of excess Coal under Article VII, release or hold time under Article VI and miscellaneous handling of Coal Cars under Article VII, and (iv) Time elapsed for trains held due to bunching at Origin mine or the Terminal; PROVIDED, HOWEVER, that elapsed transit time for bunching at Origin shall be included if LG has allowed BN the option of routing an empty train from its original Origin to an alternate Origin and the alternate Origin has Coal available for loading. The cycle time of such additional trainset put into service to transport deficit tonnage, described below, shall not be included in determining whether or not BN has met the Annual Service Standard. B. In the event BN fails to meet the Annual Service Standard during any Calendar Year due to causes other than those described in this Section, such as to prevent the delivery of LG's Minimum Volume Commitment as provided in Article III, Section 2, and if LG has complied with its obligations to supply sufficient Coal Cars to transport its Minimum Volume Commitment, LG shall give notice to BN in writing within fifteen (15) days after the end of the Calendar Year of the amount of the deficit tonnage for that year resulting from BN's inability to meet the Annual Service Standard. If the deficit is due to BN's failure to meet the Annual Service Standard. BN shall, without additional charge to LG, take all reasonable steps, including the addition of locomotives and Coal Cars, to transport the deficit tonnage in the quarter or quarters designated by LG which in no case shall be later than 6 months from the end of the 19 24 Calendar Year in which the deficit occurred and at a schedule consistent with the ability of BN and the Origin mine(s) to load. In addition, Carriers may at any time provide Carrier-owned or leased train sets, without additional charge to LG, for Transportation of Coal pursuant to this Agreement, consistent with the ability of the Origin mine(s) to load the Coal. If Carriers are unable to furnish Coal Cars, LG may, with Carriers' consent, furnish Coal Cars and Carriers shall reimburse LG for the reasonable cost of providing such Coal Cars. The freight charges for transporting said deficit tonnage shall be the rate in effect for the fourth quarter of the year during which the deficit occurs. If LG does not provide timely notice of claimed deficit tonnage, Carriers will have no obligation to transport said tonnage. C. Deficit tonnage incurred during one Calendar Year and delivered during the following Calendar Year will be deemed to be Tons received during the prior Calendar Year. Section 9. Routing. ------- A. Loaded trains under this Agreement shall be transported via BN from Origin to the Terminal via Alliance and Lincoln, Nebraska, and West Quincy, Illinois ("Route-Of-Movement"); PROVIDED, HOWEVER, that BN may use alternate routes at its discretion; PROVIDED, FURTHER that BN's decision to use alternate routes other than for reasons of Force Majeure shall not reduce BN's obligation to comply with the Annual Service Standard. In Force Majeure situations, BN shall have the right to either declare its right to suspend its obligations pursuant to Article XII hereof or to mitigate Force Majeure events through reroute operations. In such event, LG may be charged a reasonable reroute charge which shall be mutually agreed upon by the parties. 20 25 B. Transportation of Empty Trains. ------------------------------ As part of the Transportation provided under this Agreement BN shall, at no additional charge to LG, transport empty trains to Origin from the Terminal or points intermediate on the Route-Of-Movement for the purpose of subsequent loading under the terms of this Agreement. C. Delivery of New Trains. ---------------------- LG may deliver, from time to time, newly purchased or leased trainsets (not currently in service under this Agreement) to BN. In the case of a newly leased trainset, if the trainset is in BN's PRB revenue service immediately prior to its lease by LG, BN will transport such trainset to Origin {***}. In the case of a newly-purchased trainset, the following shall apply: 1) If LG delivers the trainset to a point on the BN system but not on the Route-Of-Movement, BN will transport such trainset to Origin [***] and in consideration of that transportation will be entitled to use such trainset for one complete cycle from the PRB to a destination of BN's choice and back to Origin {***}; BN may exercise its right to cycle such trainset to a destination of its choice at any time within six (6) months of delivery of such trainset, subject to LG's agreement to the schedule for its use. 2) If LG delivers the newly purchased trainset to a point on the Route-Of-Movement, BN will transport such trainset to Origin {***}, and will not be entitled under this Agreement to use such trainset in non-LG service. ARTICLE VII SERVICE AND MAINTENANCE ------------------------- Section 1. Service and Maintenance of LG Railcars. -------------------------------------- A. Upon reasonable request from LG, BN will stop a Unit Train of Coal Cars on the return empty movement at a maintenance facility at an intermediate point on BN's Route-Of- 21 26 Movement between the Terminal and Origin where trackage is available to accommodate such Unit Train. For removal and replacement of Coal Cars in said Unit Train, LG shall pay BN a charge of {***} per hour or fraction thereof for such services. The time will be computed from the time the Unit Train stops for removal or replacement of Coal Cars until such time as the last Coal Car is removed from the Unit Train. This paragraph will also apply to switching of Coal Cars into or out of an empty Unit Train at Origin or the Terminal. B. If, upon delivery of such an empty Unit Train of Coal Cars at the car maintenance facility, BN is instructed by LG to leave the entire Unit Train of empty Coal Cars and remove the locomotives, a charge of {***} per train will be assessed in addition to the charges set out in Paragraph A. Upon request from LG, BN will remove the entire Unit Train of empty Coal Cars from the car maintenance facility and return it to Unit Train service at no additional charge. C. If the car maintenance facility is served by another rail carrier which necessitates a switch movement of the entire Unit Train of empty Coal Cars or a lesser number of Coal Cars to or from a connecting railroad, BN will provide services and be paid charges as outlined in Paragraph A and B, Article VII, Section 1; PROVIDED, HOWEVER, that any switching or other charges imposed by the connecting railroad shall be paid by LG. The switching and handling time will be continuous from the time the Unit Train is made available for delivery until such time as the locomotives have been attached to the empty Unit Train or empty Coal Cars are available for movement or until such time as the locomotives have been detached from the empty Unit Train or empty Coal Cars. D. If during the term of this Agreement, LG's car maintenance facility is on trackage served by BN or on trackage served by another rail carrier, but is located at a point which is not on the Route-Of-Movement, BN will provide services and be paid charges as outlined in 22 27 Paragraphs A and B of Article VII, Section 1 herein, which shall be in addition to a line haul charge covering any out-of-route movement. The line haul charges covering out-of-route movement are as follows:
Rates in Cents Per Car Per Mile, Number of Cars Minimum 75 Miles Per Tender ---------------- -------------- {***} 25 or less {***} 26 to 75 {***} More than 75
The charge set out in this paragraph will not apply to Coal Cars damaged under circumstances for which Carriers are liable under Article V (except for Coal Cars damaged due to a defect or defects in design, materials, or workmanship or the negligence of LG). Section 2. Holding and Storage of Empty Or Loaded Unit Trains. -------------------------------------------------- A. If BN-owned trackage is available at a location on the Route-Of-Movement and upon request of LG, BN will, on the return movement from the Terminal to Origin, place an entire Unit Train of empty Coal Cars on such trackage for storage. Upon subsequent request from LG, BN will remove the Unit Train from such storage and return it to service. BN will be paid {***} in total for its services in placing and removing such Unit Train. In addition, storage charges of {***} shall be paid by LG for each 24-hour period or fraction thereof that such Unit Train is stored. B. Upon request of LG, BN will, on the return movement from the Terminal to Origin, place an entire Unit Train of empty Coal Cars on a privately-owned or leased storage track if located on the Route-Of-Movement. Upon subsequent request of LG, BN will remove 23 28 the entire Unit Train from such storage track and return it to service. BN will be paid {***} in total for its services in placing and removing such Unit Train and returning it to service. C. If LG's owned or leased storage track is served by another rail carrier which necessitates a switch movement at an intermediate point on the Route-Of-Movement of an empty Unit Train to or from a connecting railroad, then upon request of LG, BN will switch said Unit Train to or from the other carrier. BN will be paid {***} for each such service to or from a connecting carrier. In addition, LG shall pay BN {***} for each hour, or fraction thereof, required for any switching. Any switching or other charges imposed by the connecting railroad shall be paid by LG. D. If LG's owned or leased storage track is located at a point which is not on the Route-Of-Movement, BN will move the empty Unit Train to and from such storage track and be paid charges as outlined in Paragraphs D and E of this Section, which shall be in addition to the line haul charges for any such out-of-route movement. The line haul charges covering out-of-route movement are as follows:
Rates in Cents Per Car Per Mile, Number of Cars Minimum 75 Miles Per Tender ---------------- -------------- {***} 25 or less {***} 26 to 75 {***} More than 75
E. If LG requests BN to hold a train and if trackage is available, LG shall pay to BN a Hold Charge of {***} for each hour or fraction thereof that each Unit Train is held; PROVIDED, HOWEVER, that such Hold Charge shall not apply (i) to a train being held during 24 29 Loading Free Time; (ii) to a train subject to a Detention Charge; or (iii) where a train is held because it cannot be placed for reasons set forth in Article VI, Section 7. Section 3. Weighing and Determination of Weights. ------------------------------------- A. The parties agree that the weight of the Coal in the Coal Cars will be determined at Origin by the mine operator. Carriers shall not be responsible for such weight determination. Weighing shall be performed on scales inspected and certified in accordance with the specifications of the then-current Institute of Standards and Technology (Handbook - 44) for such scales, subject to supervision and/or verification by Carriers or their agent, and the results furnished to LG and Carriers. B. If any Unit Train cannot be weighted due to a breakdown of scales, the lading weight per car of such train shall be determined by averaging the lading weight per car of the last five (5) trains of like equipment (i.e., aluminum or steel Coal Cars) under this Agreement weighted at that Origin prior to such breakdown. If fewer than five (5) trains under this Agreement were weighed at that Origin prior to the breakdown, the weight per car shall be determined by averaging the weight per car of the train(s) (of like equipment) under this Agreement weighed at that Origin prior to the breakdown as well as the lading weight per car of train(s) under the Agreement first weighed at that Origin after the scales are repaired, so as to comprise a five (5) weighted train average. Section 4. Overloaded Car(s). ----------------- Unless LG is notified by BN that heavier weights are acceptable, if a loaded Coal Car is found by BN, as determined by the weighing procedures in Section 2 hereof, to weigh in excess of maximum gross weight on rail of 286,000 pounds for shipment in aluminum Coal Cars, or 268,000 pounds for shipments in steel Coal Cars (plus or minus one-half of one percent), BN 25 30 may, at its discretion, switch said overloaded Coal Cars and remove them from the train. LG or the mine operator shall then cause excess Coal to be removed from the overloaded Coal Car, and BN shall replace the Coal Car into the train. A charge of {***} per car will be assessed by BN for removal and reinsertion of overloaded cars en route. If the excess Coal can be removed during the Loading Free Time applicable under Article VI without removing the Coal Car from the train, it shall be done without the assessment by BN of any additional charges to LG. Section 5. Release of Crews/Removal of Locomotives. --------------------------------------- If upon request from LG, for reasons other than fault of BN or Force Majeure, BN releases crews and/or removes locomotives from a train at a point along the Route-Of-Movement where trackage is available or, at LG's direction, at the Terminal, LG will pay a release charge of {***} for each such occurrence, which charge shall include the subsequent return of crews and/or addition of locomotives to the train and return of the train to service. ARTICLE VIII TERMINAL AND BARGE OPERATING PROCEDURES --------------------------------------- Section 1. Control of Loading and Unloading. -------------------------------- ACMS shall be responsible for unloading of Coal Cars, Coal transfer, storage and loading of LG's Coal into barges at the Terminal. Section 2. Control of Service Performance. ------------------------------ ACMS shall have exclusive control of the methods of loading Coal into barges at the Terminal and transporting and delivering the Coal by barge to the Destination. The barges will move only at the convenience of ACMS along the direct Mississippi River route and either singly or with one or more other craft. ACMS shall have the right to shift or interchange the tow 26 31 from one to another towing vessel as frequently as it may find it convenient to do so, or to procure towage from any other vessel, including vessels not owned or operated by ACMS, to tie off the tow at any point and for any purpose, and to deviate from its route, and visit any port whether or not on said route and in any order. Section 3. Notice of Barge ETA. ------------------- ACMS will use commercially reasonable efforts to give LG advance telephone or facsimile notice of the expected time of arrival of each of its tows at Destination, such notice to be given at least 24 hours in advance of arrival. LG will at all times keep ACMS advised of persons authorized to receive such notices and at all times shall have at least one such authorized individual available to receive such notices at the unloading dock or Destination. Section 4. Origin Demurrage. ---------------- If, by reason of act or omission solely attributable to LG, ACMS' barge tows or single barge units, as described herein, are delayed in loading at the Terminal, then demurrage shall accrue at the rate of (i) {***} per hour or part thereof for each tow operating under Alternate A or Alternate B, and (ii) {***} per day for each barge operating under Alternate C, for such period of time that each tow or each barge, respectively, is thereby delayed in beginning or completing loading. Section 5. Destination Demurrage. --------------------- Unless otherwise specified by ACMS in accordance with this Article, ACMS will deliver LG's Coal in tows consisting of 15 to 30 barges. ACMS will allow those hours of free time specified in subsections (A) through (C) below for unloading and makeup of each tow. After expiration of the allowed free time, demurrage will accrue for all time used in excess of the allowed free time at the rate of {***} per hour or part thereof for Alternates A and B described 27 32 below and at the rate of {***} per day or part thereof for Alternate C (collectively, the "Demurrage Rates"). These Demurrage Rates will be adjusted under the provisions of Article X hereof. Section 6. Free Time. --------- A. Alternate A -- Standby Unloading -------------------------------- For standby unloading at Destination, ACMS will allow three hours free time plus one hour free time per barge for each tow, for unwiring, unloading, positioning and rewiring of each tow. In the event two or more tows are at the LG Power Plant within a 24 hour period, free time for the second and succeeding tows will commence at the expiration of free time for the preceding tow or when such tow has completed discharge, whichever first occurs. B. Alternate B -- Additional Set Of Barges Unloading. ------------------------------------------------- If an additional set of barges is utilized so that the arriving towboat may deliver a loaded tow and pick up the empty barges from the previous tow, ACMS will allow three hours free time for landing the inbound towboat and its tow and preparing the outbound empty tow for departure. In the event two or more tows arrive at the LG Power Plant within a 24 hour period, the three hour free time for the second and succeeding towboats will commence upon completion of unloading and rewiring of the preceding tow or at the end of a period of time beginning upon arrival of the preceding tow as described in Section 7 below, and equal to one hour for each barge contained in such tow, whichever first occurs. C. Alternate C -- Single Barge Unloading. ------------------------------------- ACMS may elect to deliver LG's Coal in single barge increments containing approximately I 500 net Tons. Under this Alternate C, lay time shall be computed from the first 7:00 a.m. following placement, actual or constructive, of one or more such single barges for 28 33 unloading. Following such commencement of lay time, ACMS will allow one day free time to unload any such barge then on placement. After expiration of the allowed free time, demurrage shall accrue at the rate specified above until the barge has completed unloading and is ready for departure. D. Designation of Alternates. ------------------------- The Alternate B unloading procedure, as described in Section 6 above, shall be the normal and preferred unloading procedure; however, ACMS may, at any time and in its sole judgment, upon providing 24 hour notice to LG, utilize the Alternate A unloading procedure described in Section 6 above. ACMS may also use the Alternate C unloading procedure at any time, PROVIDED, HOWEVER, that ACMS will provide reasonable advance notice to LG. Section 7. Computation of Free Time. ------------------------ For purposes of free time and demurrage for Section 6, free time shall be computed from the time and date ACMS lands its inbound tow alongside the destination dock, or mooring area, or in the event the dock is blocked, the time and date the master of the tow signifies his readiness to land alongside the dock. Computation of free time and demurrage thereafter shall cease when either (a) the towboat is faced up to the outbound empty tow and the master of the towboat establishes that the empty tow is properly made up and ready for departure, or (b) when the outbound empty tow is properly made up for departure and the towboat commences standing by for repairs, maintenance or other circumstances deemed necessary by ACMS. If a deficiency exists in the make-up of the outbound tow, free time and demurrage thereafter shall continue until such deficiency is corrected by LG. In the event ACMS is required to make-up an outbound tow or correct deficiencies in a tow improperly made up by LG, free time and demurrage thereafter shall continue until such deficiencies are corrected. 29 34 Section 8. Adjustment for Force Majeure. ---------------------------- ACMS charges for demurrage as provided herein shall be subject to adjustment by reason of Force Majeure, except that demurrage will continue to apply to all tows and single barges which have loaded but not completed unloading and rewiring prior to receipt of the Force Majeure notice. Section 9. ACMS Operating Obligations. -------------------------- ACMS shall be responsible for any damage to LG's Coal Cars while in ACMS' care, custody and control at the Terminal, except for damage due to defect in design, materials and workmanship or the negligence of LG, PROVIDED, HOWEVER, that such disclaimer shall not relieve ACMS from duties of care it may have by custom of trade or industry while conducting operations at the Terminal. Upon arrival of each Unit Train at the Terminal, ACMS shall: 1) Verify the number of Coal Cars from a listing of the Coal Car numbers to be provided in writing to ACMS by LG at least twelve (12) hours prior to arrival at the Terminal. The verification process will take place as the Coal Cars are placed for unloading. 2) Identify the Coal Car numbers not received at the Terminal and notify LG in writing within twenty-four (24) hours after the entire Unit Train is unloaded, except for Friday evenings and weekends, in which case the advice will be sent the next working day. 3) Report damage as noted during the unloading process. LG acknowledges that ACMS will not be responsible for checking or inspecting Coal Cars for damage. 4) Operate the thawing operation. 5) Uncouple and recouple cars at the Terminal when the Unit Train is split. 6) Maintain coal inventory records at the Terminal; PROVIDED, HOWEVER, that ACMS makes no representations or warranties as to the accuracy or completeness of such records, and such undertaking is subject to the disclaimer set forth in Article XIV, Section 2. 30 35 ARTICLE IX LG OPERATING PROCEDURES ----------------------- Section 1. Responsibility for Unloading. ---------------------------- The Destination dock, unloading facility, mooring area and shifting and harbor boat at the LG Power Plant shall be available as required for ACMS' use and without cost or charge to ACMS. LG shall be responsible for any damage to ACMS' floating equipment while in LG's care, custody or control, except for damage due to defect in design, materials and workmanship or the negligence of ACMS; PROVIDED, HOWEVER, that such disclaimer shall not relieve LG from duties of care it may have by custom of trade or industry. LG shall also be responsible for any loss or damage to rigging and mooring lines and shall equip the unloading facility with portable pumps which shall be used to pump any barge which may have been damaged in transit or while at dock. LG shall operate and maintain the Destination dock, unloading facility and mooring area in a commercially reasonable manner consistent with the normal industry practices so as to facilitate the efficient utilization of ACMS' barging equipment and the unloading of each barge as completely as practicable. Section 2. Berthing and Mooring. -------------------- LG shall provide ACMS barges with a safe berth at the Destination mooring area, dock, and unloading facility free of wharfage, dockage, port or other charges. LG will also maintain at least a 10 foot channel dredged between such areas and the sailing line. While barges are in the care, custody or control of LG, or its agents, contractors or subcontractors, all applicable U.S. Coast Guard Regulations shall be complied with, and in the event that ACMS should in any manner be held responsible for any act or omission of LG in such compliance, then LG agrees to indemnify, save and hold ACMS harmless for all such responsibility and liability. 31 36 Section 3. Excess Return Tonnage. --------------------- It is essential to proper maintenance and operation of hopper Coal barges that all Coal be removed at the time of each unloading. In the event that LG leaves excessive Coal in barges, ACMS shall be entitled to charge and collect an additional transportation charge of {***}/Ton of Coal returned. Estimates of Coal left in the barges shall be made by LG and ACMS by visual observation. If this method of estimation becomes a recurring problem, then Coal remaining in a barge shall be shoveled out and weighed periodically whenever a barge is taken out of service for repairs in order to compare the actual weighed tonnage with the visual estimate and thereafter corrections will be made as appropriate. In such event, demurrage charges, as provided herein, shall apply. ARTICLE X RATES AND RATE ADJUSTMENT ------------------------- Section 1. Minimum Base Rate. ----------------- The Base Rate for transportation of Coal in aluminum Coal Cars operating with net lading of at least 118 Tons Under this Agreement shall be {***} per Ton, as of January 1, 1997. The Base Rate for transportation of Coal in steel Coal Cars with net lading of at least 102 Tons under this Agreement shall be {***} per Ton, as of January 1, 1997. There shall be a surcharge paid directly to BN of {***} per Ton on all Tons moving in steel Coal Cars. Under no circumstances shall application of the rate adjustment mechanism contained in this Article cause the Effective Rate to fall below the Base Rate. 32 37 Section 2. Effective Rate. -------------- The Base Rate, as adjusted pursuant to Section 3 of this Article, shall be the "Effective Rate." All other charges and surcharges provided in this Agreement shall be adjusted at such times and in the same manner as the Base Rate and the Effective Rate. The Effective Rate, together with the other charges specified in this Agreement, shall constitute the entire compensation payable to Carriers for all Transportation of Coal provided under this Agreement. The adjustment mechanism specified in Section 3 of this Article shall constitute the sole means of adjusting the rates and other charges specified in this Agreement during the term hereof. If LG requests Carriers to perform services not specified under this Agreement, charges for such services shall be established by separate agreement. Section 3. Adjustment to Rates and Charges. ------------------------------- A. Commencing on April 1, 1997, the Effective Rates and other charges provided for in the Agreement shall be adjusted quarterly, upward or downward as provided herein. Adjustments shall be made through application of the following formula: AR = a x [{***}(b) + {***}(d) + {***}(1) --- --- --- c l in which, "AR" is the adjusted rate; "a" is the Base Rate; "b" is the most currently available [***], as published by the United States Department of Commerce, for two quarters 33 38 prior to the quarter of adjustment (e.g., for the quarter beginning April 1, 1997, the {***} for the fourth quarter of 1996 shall apply); "c" is the final {***} for the second quarter of 1996; "d" is the {***} for the quarter immediately prior to the quarter of adjustment (e.g., for the quarter beginning April 1, 1997, the first quarter 1997 average shall apply) PROVIDED, HOWEVER, at no time shall "d" be less than {***}; "e" is {***}. B. The adjustment process described in Paragraph A shall be repeated on every July 1, October 1, January 1, and April 1 thereafter during the term of this Agreement, with the new Effective Rate and other charges for the three month period following each such "Adjustment Date" being determined by application of the formula described in Paragraph A for that Adjustment Date to the Base Rate and other charges. C. In computing the quarterly adjustment under Paragraph A, all published indices shall be rounded to the nearest thousandth of an index point, all calculated indices shall be rounded to the nearest tenth of an index point, and all rates and charges shall be rounded to the nearest whole cent. If there is no nearest thousandth of an index point, tenth of an index point or whole cent, as the case may be, indices, rates and charges shall be rounded to the nearest even thousandth of an index point, tenth of an index point or whole cent. For example, $15.935 and $15.945 would be rounded to $15.94. D. LG shall reimburse ACMS for any taxes paid on fuel used in commercial transportation on inland waterways pursuant to 26 U.S.C. Section 4042, its successor statutes, or any similar taxes imposed upon fuel use or related commercial use of the Mississippi River 34 39 system, above and in excess of the {***} currently being levied and paid by ACMS. LG shall reimburse ACMS quarterly for the amount of such tax paid by ACMS in providing river transportation service under this Agreement. For purposes of such quarterly billings, ACMS shall determine from its Boat History Report the total number of taxable vessel operating hours in LG's service. The ratio of such taxable hours in LG's service to all vessel operating hours in taxable service shall be applied to ACMS' monthly vessel fuel consumption reports to establish total taxable fuel consumption of vessels operating in LG's service. Fuel burned in generators, heaters, boilers and in exempt waters is not presently subject to this taxation and shall not be billed to LG. ACMS shall provide LG all documentation to support billings with respect to the Federal Tax on inland waterways. ARTICLE XI BILLING PROCEDURES ------------------ Section 1. Transportation Billing. ---------------------- Carriers shall bill LG for Transportation of Coal based upon the greater of (i) the actual weight of Coal per train (as determined under Article VII) or (ii) the applicable Minimum Shipment Weight. For purposes of determining the actual weight, all shipments hereunder shall take place under a BN bill of lading that recites that the transportation is governed by this Agreement, but does not state the rate. Section 2. Payment. ------- All payments for amounts due hereunder must be made by wire to Carriers' designated bank account within {***} days from the date the invoice is received. If LG fails to make payment within {***} days from the date the invoice is received, LG shall pay a late charge 35 40 in the amount of 1/365th of the sum of {***} on the date the payment becomes overdue times the amount due and unpaid, commencing from the expiration of said {***} day period until such amount is paid. Section 3. All Other Charges. ----------------- Carriers shall each bill LG for ancillary services based upon the adjusted charges provided elsewhere in this Agreement. Payment for said charges shall be remitted to the applicable invoicing party. Interest shall be applied in the manner set forth in Section 2 of this Article. ARTICLE XII FORCE MAJEURE ------------- Section 1. Definition. ---------- Except as otherwise expressly provided in this Agreement, no party shall be liable for any loss or damage resulting from failure to perform or the delays in performance resulting from and occasioned by an event of Force Majeure. The term "Force Majeure" or an event of Force Majeure as used herein shall mean any cause beyond the reasonable control of the party affected which by exercise of due diligence it shall be unable to overcome, including, without limitation, by enumeration, allocations, expropriations, requisitions, priorities, boycotts, embargos, restraint or other acts of courts or governmental or civil, military or naval authorities (whether acting legally or otherwise); Acts of God; lock or river-outages, perils or accidents of the sea or other water; defects, failures or breakage in hull, turbines, generators, machinery, equipment or appliances; acts of war, hostilities, blockages, interferences of public enemies or belligerents, 36 41 rebellion, civil strife, or commotion; sabotage, vandalism or malicious mischief; fire or explosion from any cause or wheresoever occurring; epidemics, pestilence or quarantine; labor stoppage, riots, disorders, storms, landslides, floods, washouts, earthquake, lightning, unusual snow accumulations, inoperability of facilities at Origin, the Terminal or Destination or electrical generation, transmission or distribution facilities, shortage of diesel fuel for locomotives or towboats, derailments, failure of LG's coal suppliers to supply Coal, or from any other cause whatsoever and wheresoever occurring beyond the reasonable control of the respective parties, whether of the kind enumerated herein or otherwise. It shall not, however, include any change in demand or projected demand for electrical power or for transportation not due to events of Force Majeure, whether foreseeable or not. Section 2. Effect of Force Majeure. ----------------------- A. If because of an event of Force Majeure that endures for twenty-four (24) continuous hours or more, a party is unable to carry out any of its obligations under this Agreement, and if such party promptly, but not to exceed ten (10) calendar days from commencement of the event of Force Majeure, gives the other parties written notice of such Force Majeure, then the obligation of the party giving such notice shall be suspended to the extent made necessary by the Force Majeure and during its continuance (including the original 24-hour period); PROVIDED, HOWEVER, that the aforementioned 24-hour rule shall not apply in the case of derailments; and PROVIDED, FURTHER, that an event of Force Majeure shall not reduce LG's Minimum Volume Commitment for any Calendar Year unless an event or events of Force Majeure have occurred during such Calendar Year for an aggregate number of days exceeding 15 days in which case the Minimum Volume Commitment for such year shall be 37 42 reduced by a percentage equal to the ratio of the number of days of Force Majeure during such Calendar Year in excess of {***} over 365. B. The party experiencing Force Majeure shall take prompt actions to remove such causes of Force Majeure insofar as practicable, with all reasonable dispatch, and its performance shall be resumed immediately after such causes have been removed; PROVIDED, HOWEVER, that nothing contained in this Section 2 shall cause the party affected by the Force Majeure to submit to what it considers to be an unfavorable labor agreement. C. When the Force Majeure condition has terminated, the party claiming the Force Majeure shall notify the other parties in writing as soon as practicable, but not to exceed ten (10) days, certifying that the amount of time expended due to the Force Majeure. D. Notwithstanding the foregoing or any other provision of this Agreement, in the event a single Force Majeure condition claimed by LG extends for a period of 90 days or more, the original term of this Agreement shall be deemed to have been extended for an equivalent time period. E. In the event a single Force Majeure condition claimed by Carriers has existed for a period of {***} days or more, and has substantially prevented performance during such period, LG may acquire and transport fuel via a mode other than Carriers for the remaining duration of the condition of Force Majeure; PROVIDED, HOWEVER, that if Carriers declare a Force Majeure the effect of which is expressly limited to achievement of the Annual Service Standard, this paragraph shall not apply as long as Coal supply at the Terminal, en route in barges and at the LG Power Plant exceeds 14 days bum; PROVIDED, FURTHER, that if rerouting of any aspect of the transportation service, including the use of an alternative terminal will enable either or both of Carriers to continue to participate in the transportation despite the event of Force 38 43 Majeure. LG will take all commercially reasonable steps necessary to permit continued service by either or both of Carriers; PROVIDED, FURTHER, that LG is not required to incur out of pocket expense to take such steps, except to the extent that the parties hereto may otherwise mutually agree. Carriers will not be responsible for any expense whatsoever incurred by LG as a result of such transportation via a mode other than Carriers. ARTICLE XIII INDEMNITY AND INSURANCE ----------------------- Section 1. Indemnity by ACMS. ----------------- ACMS agrees to indemnify and save harmless LG from any and all suits, actions, causes of action and claims of action of whatever character which may be brought or made against LG by ACMS' agents, servants, employees or any third party on account of injuries or damages sustained or alleged to have been sustained while ACMS, such agents, servants or employees were performing any act or thing required to be done under the provisions of this Agreement whether caused by the sole act, negligence or default of LG or otherwise. Section 2. Indemnity by LG. --------------- A. LG agrees to indemnify and save harmless Carriers, their subcontractors, affiliates and the vessels employed by ACMS, in the performance of Coal transfer, storage and transportation hereunder, from any and all suits, actions, causes of action and claims of action of whatever character which may be brought or made against Carriers, their subcontractors, affiliates and said vessels by LG's agents, servants or employees on account of injuries or damages sustained or alleged to have been sustained while such agents, servants or employees 39 44 were performing any act or thing required to be done under the provisions of this Agreement whether caused by sole act, negligence or default of ACMS or otherwise. B. LG hereby agrees to release, indemnify and save harmless ACMS, its subcontractors, its affiliates and vessels employed by it or them in the performance of the Coal transfer, storage and transportation hereunder from or against any loss or damage to the Coal transferred, stored and transported under this Agreement, whether such loss or damage is caused by AMCS' negligence or not. C. If an ACMS towing vessel or barge comes into collision with another vessel or object, LG agrees to indemnify ACMS, its subcontractors, its affiliates and vessels employed by it or them in the performance of the transportation movements hereunder, with respect to any payment which LG receives or may be entitled to receive from such other vessel or object. Section 3. Insurance to be Maintained by ACMS. ---------------------------------- ACMS shall, at its own expense, carry and maintain collision and protection and indemnity insurance with waiver of subrogation against LG, or other insurance covering the liability of the vessels and their owners against loss of life and personal injury to members of their crews or to any third party, including transportation, wages, maintenance and cure. The deductibles, if any, applicable under said policies are to be borne by ACMS. All policies pursuant to which such insurance is provided shall name LG as assured or additional assured under such policy. 40 45 ARTICLE XIV COAL LOSS AND DAMAGE -------------------- Section 1. Liability for Loss of Coal Transported by BN. -------------------------------------------- Liability for damage to or loss of Coal transported by BN pursuant to this Agreement shall be determined as if BN were providing transportation hereunder as a common carrier pursuant to the Interstate Commerce Commission Termination Act, as amended. BN will not be, liable for Coal loss or damage caused by improper loading at Origin or defects in the design or manufacture of Coal Cars, except for Coal Cars supplied by BN. Section 2. Liability for Loss of Coal Transported by ACMS. ---------------------------------------------- LG warrants that ACMS shall not be held accountable or otherwise liable for any discrepancy in Coal inventories; any loss, shrinkage or damage to LG's Coal shall be borne by LG, whether occurring during storage, transfer, affreightment, unloading or otherwise; and whether such loss, shrinkage or damage was caused, directly or indirectly, by ACMS' negligence. LG shall, at its own expense, obtain and keep in full force and effect during the term of this Agreement or any extension thereof, insurance on the full value of all Coal received, stored, transferred and transported by ACMS under this Agreement. All policies pursuant to which such insurance is provided shall name ACMS, its subcontractors, its affiliates and the vessels employed by it or them in the performance of the Coal transfer, storage and transportation hereunder as assured or as additional assureds under such policy, which shall also be endorsed to waive rights or subrogation against said parties. The deductibles, if any, applicable under any of said insurance policies are to be borne by LG. Full evidence of such insurance in form and substance satisfactory to ACMS shall be provided to ACMS prior to the 41 46 first delivery of Coal to the Terminal. LG shall also, at its own expense, carry and maintain Longshoremen's and Harbor Worker's Compensation Act insurance covering its employees. Section 3. General Average. --------------- General average shall be payable according to York-Antwerp Rules, 1950, and as to matters not therein provided for according to the laws and usage of the Port of New York. The general average in each instance shall be prepared by average adjusters selected by ACMS and consented to by LG. In the event of accident, danger, damage or disaster, before or after commencement of the voyage, resulting from any cause whatsoever, whether due to negligence or not, for which, or for the consequence of which ACMS is not responsible, by statute, contract, or otherwise, the goods, shippers, consignees, or owners of the goods shall contribute with ACMS in general average to the payment of any sacrifices, losses, or expenses of a general average nature that may be made or incurred and shall pay salvage and special charges incurred in respect of the goods. If a salving ship is owned or operated by ACMS, salvage shall be paid for in full as if such salving ship or ships belonged to strangers. Such deposit as ACMS or its agents may deem sufficient to the estimated contribution of goods, or any salvage, or special charges thereon, shall, if required, be made by the goods, shippers, consignees or owners of the goods to ACMS before delivery. This section shall not give rise to any liability of BN. Section 4. Disclaimer of Damages. --------------------- In no event shall BN, ACMS or LG be liable for special or consequential damages or lost profits relating to this Agreement. 42 47 Section 5. Private Carriage. ---------------- ACMS and its affiliated marine companies are private carriers in respect to this Agreement, therefore, nothing set forth in this Agreement or performance hereunder shall be deemed to subject ACMS to the jurisdiction of the STB. ARTICLE XV TERMINATION ----------- If any party shall default in any material obligation of this Agreement which is not excused as Force Majeure, and continues in such default for a period of sixty (60) days after written notice thereof is given by any non-defaulting party to such defaulting party of the existence of such default, or, if more than sixty (60) days are required to correct with reasonable diligence the matters complained of in said notice and such defaulting party shall fail within said sixty (60) day period to commence the action necessary to correct such matters and thereafter prosecute the same to completion with reasonable diligence, the non-defaulting party may, at its option, and without prejudice to its other rights and remedies hereunder, at law or in equity, terminate this Agreement by written notice to the party in default. ARTICLE XVI ASSIGNMENT AND SUCCESSION ------------------------- No party may assign this Agreement or any of its rights or obligations hereunder, in whole or in part, without the prior written consent of the other parties which consent shall not be unreasonably withheld. Such consent shall not be required where the assignment is made to a purchaser or assignee of substantially all of the assets of such party by way of merger, consolidation, transfer, sale or lease of substantially all of its assets, divestiture pursuant to an 43 48 order or decree of court, or similar court reorganization; PROVIDED, HOWEVER, that no assignment shall be effective until and unless the assignee agrees in writing to assume all obligations of the assignor hereunder. Any party hereto may assign any receivables due them under this Agreement without the consent of the other parties; PROVIDED, HOWEVER, such assignment shall not relieve the assignor of any of its rights or obligations under this Agreement. ACMS may, without the consent of LG or BN, assign this Agreement in whole or in part to American Commercial Lines, Inc., or one of its wholly-owned subsidiaries; and upon such assignee expressly assuming in writing, to the extent of such assignment, the obligations of ACMS hereunder, and if each such assignee has a net worth equal to that ACMS, LG shall, to the extent of such assignment, release ACMS from all further obligations under this Agreement. Subject to the foregoing, this Agreement shall bind and inure to the benefit of the parties, their successors, and assigns. ARTICLE XVII AMENDMENT, MODIFICATION AND WAIVER ---------------------------------- Any amendment, modification, or waiver of any provision of this Agreement, or any consent to any departure therefrom, shall not be effective in any event unless the same is in writing and signed by the proper party or parties, and then such modification, wavier, or consent shall be effective only in the specific instance and for the specific purpose given. 44 49 ARTICLE XVIII MISCELLANEOUS ------------- Section 1. Subcontracting. -------------- It is understood that nothing herein contained shall prevent ACMS from subleasing or from subcontracting for any of the services provided for herein, but ACMS shall remain responsible to LG for the performance of all such services. Section 2. Independent Contractor. ---------------------- Nothing herein contained shall be construed as a contract by LG for chartering, hiring or leasing of any barge, towboat, railroad locomotive or rail car or other equipment of ACMS or BN nor shall any of the agents, servants or employees of ACMS or BN be regarded as employees of LG, it being understood that ACMS and BN are in all respects independent contractors and that LG shall exercise no control over such barges, towboats, railroad locomotives or rail cars or other equipment, or the agents, servants or employees of ACMS or BN except as specifically provided herein. Section 3. Waivers and Remedies. -------------------- The failure of one of the parties hereto to insist in any one or more instances upon strict performance of any of the obligations of the other party pursuant to this Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver of the performance of any such obligation or the relinquishment of any such rights for the future, but the same shall continue and remain in full force and effect. Section 4. Notice. ------ Any notice, election or correspondence required or permitted hereunder shall become effective upon receipt and, except invoices and payments, shall be deemed to have been properly 45 50 given or delivered when made in writing and delivered personally to the parry to whom directed, or when sent by United States mail, overnight or express delivery, with all necessary postage and charges fully prepaid and delivery verified, and addressed to the party to whom directed at its specified address: To LG: NRG Energy, Inc. 1221 Nicolett Mall, Suite 700 Minneapolis, MN 55403 Attention: Vice President, U.S. Business Development Zeigler Coal Holding Company 50 Jerome Lane Fairview Heights, Illinois 62208 Attention: Alan D. Williams, Manager, Business Development Southern Electric International, Inc. Suite 500 900 Ashwood Parkway Atlanta, GA 30338 Attention: Gary Kubick, Project Director To BN: Burlington Northern Railroad Company 2650 Lou Menk Drive Fort Worth, TX 76131-2830 Attention: Coal Business Unit To ACMS: American Commercial Marine Service Company P.O. Box 610 1701 East Market Street Jeffersonville, IN 47130 Attention: Senior Vice President - Sales and Marketing
or to such other addresses as may have been furnished in writing by any of the foregoing to the other persons named above. Any notice pertaining to matters of an emergency or an operating nature may be delivered by mail, messenger, telephone, telefax or by any other reasonable means, to such representative of the party hereto being notified as may be appropriate, and such 46 51 notice shall be effective upon receipt. If given by telephone or verbally, the notice shall be confirmed in writing as soon as practicable thereafter. Section 5. Severability, Effect of Agreement. --------------------------------- A. Any provisions of this Agreement prohibited or unenforceable by reason of any applicable law of any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Where, however, the conflicting provisions of any such applicable law may be waived, they are hereby waived by the parties hereto to the full extent permitted by law, to the end that this Agreement shall be enforced as written. B. This Agreement exclusively and completely states the rights and obligations that Carriers have with respect to LG, and that LG has with respect to Carriers, concerning the subject matter of this Agreement and supersedes all other Agreements, oral or written, with respect hereto. C. This Agreement supersedes and replaces in their entirety that certain Revised and Restated Agreement No. 42875 (January 1, 1984 through December 31, 1994) previously entered between ACMS and Cajun, and that certain Coal Transportation Agreement ICC-BN-C-0774 between BN and Cajun dated November 30, 1983 (as amended). Section 6. Confidentiality. --------------- Except to the extent that disclosure is required by law, court order or decision, or applicable regulatory requirements, the provisions of this Agreement shall not be disclosed to or discussed with any third party other than counsel or consultants retained by Carriers or LG, all of 47 52 whom shall be advised of the confidential nature of this Agreement and information related to it; PROVIDED, HOWEVER, that LG may make only necessary disclosures in connection with the Chapter 11 Proceeding provided that it obtains confidential treatment to the extent permitted by the bankruptcy court and the presiding judge; PROVIDED, FURTHER, that LG shall be permitted to disclose the provisions of Article VI, Sections 1-7 to Coal suppliers that agree in writing to maintain the confidentiality of such information, where such disclosure is required for the proper administration of Coal supply arrangements. Where disclosure of information is required, the affected party shall give written notice thereof to the other parties as far in advance as practicable, shall confer with such other parties, and shall take such reasonable actions as are available under applicable to law to attempt to preserve the confidentiality of the material disclosed. Section 7. Representations and Warranties. ------------------------------ A. Carriers and LG represent and warrant to one another that: (i) they are duly organized and validly exist in good standing under the laws of their governing jurisdictions and/or states of incorporation, and have all requisite power and authority to enter into this Agreement and to carry out the terms and provisions thereof; (ii) the person(s) executing this Agreement on behalf of each party are duly authorized and empowered to bind their respective parties to this Agreement; and (iii) there is no action, proceeding, or investigation current or pending other than the Chapter 11 Proceeding and no term or provision of any charter, by-law, certificate, license, mortgage, indenture, contract, agreement, judgment, decree, order, statute, rule or regulation which in any way prevents, hinders, or otherwise adversely affects, or would be violated by, entering into and performing this Agreement. 48 53 B. Each person executing this Agreement on behalf of his respective party represents and warrants the execution of this Agreement and that he personally has authority to sign on behalf of the party that he represents. Section 8. Counterparts. ------------ This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and such counterparts together, shall constitute but one and the same instrument, which shall be sufficiently evidenced by any such original counterpart. Section 9. Remediation. ----------- If a party receiving a notice of default pursuant to Article XV does not agree that it has failed to comply with or perform any of the terms, covenants or conditions of this Agreement to be complied with or performed by it, in any material respect, such party may, within thirty (30) days after receipt of such notice of default, notify the other parties in writing of such disagreement (a "Notice of Contest"). Upon such Notice of Contest being given, no termination of this Agreement shall be effective unless and until a determination has been made that a default has occurred and the provisions of this Section have been implemented. The parties agree that any dispute arising in connection with the interpretation of this Agreement or the performance of any party under this Agreement or otherwise relating to this Agreement shall be treated in accordance with the procedures set forth in this Section, prior to the resort by any party to litigation in connection with such dispute. The dispute shall be referred for resolution first to each parties' senior corporate officers with the power to bind such parties. Such procedure shall be invoked by any party presenting to the other a "Notice of Request for Resolution of Dispute" (a "Resolution Notice") identifying the issues and dispute sought to be 49 54 addressed hereunder. A conference of the appointed officers of each of the parties shall be held as soon as possible but in no event later than (30) days after the delivery of the Resolution Notice. In the event that the conference between such individuals does not resolve the dispute, it may be litigated in any state or federal court of competent jurisdiction. Section 10. Construction. ------------ This Agreement is the product of arm's-length negotiations between the parties. No provision of this Agreement shall be construed against any party be virtue of that party being the drafter thereof. Use of the singular form shall be deemed, where appropriate, to include the plural, and use of the masculine gender shall be deemed to include the feminine. The terms of this Agreement and all rights and obligations hereunder shall be construed in accordance with the laws of the State of Missouri and, when appropriate, Federal law. 50 55 IN WITNESS WHEREOF, the parties have cause this Agreement to be executed as of the date first hereinabove written. BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY ATTEST: BY: /s/ Gregory T. Swinton _________________________________ /s/ [illegible] ITS: Senior Vice President Coal and ______________________________ Agricultural Commodities _______________________________ AMERICAN COMMERCIAL MARINE SERVICE COMPANY ATTEST: BY: /s/ Daniel J. Marquitz _________________________________ /s/ [illegible] ITS: Senior Vice President ______________________________ ________________________________ LOUISIANA GENERATING LLC BY: ZENERGY, INC. BY: /s/ Alan D. Williams ______________________________ ITS: President BY: NRG ENERGY, INC. BY: /s/ Craig A. Mataczynski ______________________________ ITS: Member BY: SOUTHERN ENERGY CAJUN, INC. BY: /s/ G.J. Kubick ______________________________ ITS: Vice President
51 EX-10.10 36 y57012ex10-10.txt AGREEMENT FOR SALE AND PURCHASE OF COAL 1 Exhibit 10.10 AGREEMENT BETWEEN LOUISIANA GENERATING, LLC AND TRITON COAL COMPANY FOR THE SALE AND PURCHASE OF COAL Execution Copy August 1, 1997 2 AGREEMENT BETWEEN LOUISIANA GENERATING, LLC AND TRITON COAL COMPANY FOR THE SALE AND PURCHASE OF COAL TABLE OF CONTENTS PAGE ---- July 31, 1997 i 3 1.01 MUTUAL OBLIGATIONS.................................................................................... 2 1.02 DEFINITIONS........................................................................................... 2 2.01 SELLER'S RESERVES AND PREPARATION FOR SELLING COAL.................................................... 7 2.02 SUBSTITUTION.......................................................................................... 8 3.01 EFFECTIVENESS; TERM OF AGREEMENT...................................................................... 9 3.02 EXTRAORDINARY MARKET OPPORTUNITIES.................................................................... 11 3.03 SELLER'S RIGHT TO MATCH PRICE......................................................................... 12 4.01 PRICE PER TON OF COAL................................................................................. 18 4.02 ADJUSTMENTS - GENERAL................................................................................. 19 4.03 ADJUSTMENT FOR CHANGES IN GOVERNMENTAL IMPOSITIONS.................................................... 19 4.04 CALORIFIC VALUE ADJUSTMENT............................................................................ 24 4.05 EMISSIONS ALLOWANCE ADJUSTMENT........................................................................ 24 4.06 EXCESS SO2 ALLOWANCE DUE SELLER....................................................................... 256 4.07 SO2 ALLOWANCE DUE PURCHASER........................................................................... 267 5.01 BILLING AND PAYMENT................................................................................... 27 5.02 THIRD PARTY ANNUAL AUDIT.............................................................................. 29 6.01 SHIPMENT.............................................................................................. 30 6.02 RAIL SHIPMENTS........................................................................................ 30 6.03 FREIGHT CHARGES, TITLE, AND RISK OF LOSS.............................................................. 32
i 4 6.04 LOADING COSTS CHARGEABLE TO SELLER.................................................................... 32 6.05 EXCESS FREIGHT COSTS CHARGEABLE TO SELLER............................................................. 33 6.06 PAYMENT OF EXCESS COSTS............................................................................... 33 7.01 SHIPPING NOTICE....................................................................................... 33 8.01 QUANTITY REQUIREMENTS................................................................................. 35 9.01 WEIGHING.............................................................................................. 36 10.01 COAL SPECIFICATIONS.................................................................................. 38 11.01 SAMPLING............................................................................................. 39 11.02 ANALYSIS............................................................................................. 41 12.01 REJECTION OF COAL FOR COAL QUALITY DEFICIENCIES...................................................... 43 12.02 SUSPENSION OF SHIPMENTS FOR COAL QUALITY DEFICIENCIES................................................ 44 13.01 AUTOMATIC TERMINATION................................................................................ 47 14.01 TERMINATION FOR UNREMEDIED DEFAULT................................................................... 47 15.01 FORCE MAJEURE........................................................................................ 48 16.01 CHANGES IN ENVIRONMENTAL RELATED REQUIREMENTS........................................................ 51 17.01 WARRANTIES........................................................................................... 55 17.02 DISCLAIMER OF WARRANTIES............................................................................. 56 18.01 INDEPENDENT CONTRACTOR............................................................................... 56 19.01 BINDING EFFECT....................................................................................... 56
ii 5 20.01 ASSIGNMENTS.......................................................................................... 56 21.01 RIGHT OF INSPECTION: ACCOUNTING..................................................................... 57 22.01 RIGHT OF INSPECTION: COAL PROPERTY................................................................... 58 22.02 RIGHT OF INSPECTION: PURCHASER's LAB................................................................ 59 23.01 WAIVER............................................................................................... 59 24.01 LIMITATION OF DAMAGES................................................................................ 59 25.01 DISPUTED MATTERS..................................................................................... 60 25.02 ARBITRATION.......................................................................................... 61 25.03 EXCEPTIONS........................................................................................... 64 26.01 NOTICES.............................................................................................. 65 27.01 REMEDIES CUMULATIVE.................................................................................. 66 28.01 AGENT FOR PURCHASER.................................................................................. 66 29.01 CAPTIONS............................................................................................. 67 30.01 APPLICABLE LAW....................................................................................... 67 31.01 COMPLIANCE WITH LAWS AND REGULATIONS................................................................. 67 32.01 ENTIRE AGREEMENT..................................................................................... 67 33.01 CONFIDENTIAL AND PROPRIETARY INFORMATION............................................................. 68 34.01 BIG CAJUN II, UNIT 3................................................................................. 69
iii 6 Execution Copy AGREEMENT BETWEEN LOUISIANA GENERATING, LLC AND TRITON COAL COMPANY FOR THE SALE AND PURCHASE OF COAL This Agreement is made and entered this 1st day of August, 1997 by and between Louisiana Generating, LLC, a limited liability company organized and existing under the laws of the State of Delaware, hereinafter referred to as "PURCHASER", and Triton Coal Company, a corporation organized and existing under the laws of the State of Delaware, hereinafter referred to as "SELLER." WITNESSETH: WHEREAS, SELLER owns or otherwise controls or has entered into contracts for the mining of the Coal Property (as hereinafter defined) from which SELLER desires to sell coal to PURCHASER. WHEREAS, PURCHASER intends to acquire Cajun Electric Power Cooperative, Inc.'s ("Cajun's") Big Cajun No. II steam-electric generating plant and coal unloading dock, located at approximately Mile 263 AHP near New Roads, Louisiana (the "Power Plant") pursuant to the Asset Purchase Agreement (as hereinafter defined) incorporated in the Trustee's Plan of Reorganization (as hereinafter defined) proposed in Cajun's Chapter 11 Case Number 94-11474 pending before the United States Bankruptcy Court for the Middle District of Louisiana (the "Chapter 11 Proceeding"); and 7 WHEREAS, PURCHASER will require large quantities of coal for the operation of the Power Plant. NOW, THEREFORE, in consideration of the premises and covenants herein, PURCHASER and SELLER agree as follows: 1.01 MUTUAL OBLIGATIONS. SELLER agrees to sell coal to PURCHASER, and PURCHASER agrees to buy coal from SELLER, on the terms and conditions, in the quantities, and of the quality set forth herein. 1.02 DEFINITIONS. The following definitions shall apply in this Agreement: a. "AAR" shall have the meaning set forth in Section 9.01. b. "ACMS" shall mean the American Commercial Marine Service Company. c. "ASSET PURCHASE AGREEMENT" shall mean the Second Amended and Restated Asset Purchase and Reorganization Agreement dated as of December 6, 1996 among PURCHASER, the Trustee and, as to certain specific sections of the Agreement only, NRG Energy, Inc., Zeigler Coal Holding Company, and Southern Energy, Inc., as the same may be amended from time to time. d. "ASTM" shall have the meaning set forth in Section 7.01. e. "BN" shall mean the Burlington Northern Santa Fe Railway Company. f. "BASE PRICE" shall have the meaning set forth in Section 4.01. g. "BILLING PRICE" is the Base Price as adjusted pursuant to Section 4.02. h. "CAJUN" shall have the meaning set forth in the Recitals. i. "CALORIFIC VALUE ADJUSTMENT" shall have the meaning set forth in Section 4.04. 2 8 j. "CARRIER"or "CARRIERS" shall mean collectively BN and ACMS or other Carriers under any replacement Transportation Agreement. k. "CHANGED GOVERNMENTAL IMPOSITIONS" shall have the meaning set forth in Section 4.03. l. "CHAPTER 11 PROCEEDING" shall have the meaning set forth in the Recitals. m. "COAL CARS" shall mean PURCHASER supplied open-top railcars equipped with rotary couplers, having a capacity of not less than 204,000 pounds, suitable for use in service between the relevant Origin and the Terminal, and suitable for use in service in the coal unloading equipment maintained by ACMS or any successor Carrier. n. "COAL PROPERTY" shall mean the real property, mineral interests, preparation plant facilities and loading facilities, with improvements thereto, referred to as the Buckskin Mine and the North Rochelle Mine, both located in Campbell County, Wyoming and the other approved coal properties described in Appendix A. o. "CONTRACT YEAR" shall mean each twelve (12) month period during the term of this Agreement following the Effective Date. p. "DELIVERED COST" shall mean, for purposes of calculating the Calorific Value Adjustment under Section 4.04, the sum of the Base Price plus the Transportation Rate to the Power Plant unloading facility, including the rail, transshipment and barge rates. 3 9 q. "DESIGNATED LOADING POINT" shall mean that point on Origin mines' trackage at which any further train movement is at the direction of the mine operator. r. "DISPUTED MATTER" shall have the meaning set forth in Section 25.01. s. "EFFECTIVE DATE" shall have the meaning set forth in Section 3.01. t. "EMISSIONS ADJUSTMENT" shall have the meaning set forth in Section 4.05. u. "ENVIRONMENTAL RELATED REQUIREMENT" shall have the meaning set forth in Section 16.01. v. "ESTIMATED DELIVERY REQUIREMENTS" shall have the meaning set forth in Section 8.01. w. "EXCLUDED PORTION" shall have the meaning set forth in Section 3.03. x. "EXTENDED TERM" shall have the meaning set forth in Section 3.01. y. "EXTRANEOUS MATERIAL" shall have the meaning set forth in Section 10.01. z. "EXTRAORDINARY SALES NOTICE" shall have the meaning set forth in Section 3.02. aa. "FORCE MAJEURE" shall have the meaning set forth in Section 15.01. bb. "GOVERNMENTAL IMPOSITIONS" shall have the meaning set forth in Section 4.03. cc. "GOVERNMENTAL IMPOSITIONS NOTICE" shall have the meaning set forth in Section 4.03. dd. "GSU" shall mean Gulf States Utilities or any successor in interest. ee. "HEARING" shall have the meaning set forth in Section 25.01(b). ff. "INDEPENDENT ARBITRATOR" shall have the meaning set forth in Section 25.02(b). 4 10 gg. "INITIAL TERM" shall mean the period of time beginning on the Effective Date and ending five (5) Contract Years from the Effective Date. hh. "INTERNAL MEDIATION NOTICE" shall have the meaning set forth in Section 25.01(a). ii. "NEW AGREEMENTS" shall have the meaning set forth in Section 3.03. jj. "ORIGIN" shall mean each of the existing Powder River Basin mines served by BN (or any successor Carrier) in Campbell and Converse Counties, Wyoming that is now operating, those mines listed in Appendix A, and those mines that become operational during the Initial Term of this Agreement and are approved by the prior written consent of PURCHASER, not to be unreasonably withheld. kk. "ORIGIN LOADING FACILITIES" shall mean the equipment necessary to load Unit Train Shipments of coal at an Origin, in accordance with PURCHASER's Transportation Agreement, including but not limited to rail trackage, coal silos and/or hoppers, conveyor belts, preparation plants and storage facilities at or for such Origin. ll. "OUTSIDE MEDIATION NOTICE" shall have the meaning set forth in Section 25.01(a). mm. "PAYMENT PERIOD" shall have the meaning set forth in Section 5.01. nn. "PERIODIC COAL PAYMENT" shall have the meaning set forth in Section 5.01. oo. "POWER PLANT" shall have the meaning set forth in the Recitals. pp. "PURCHASER" shall have the meaning set forth in the preamble. 5 11 qq. "PURCHASER APPOINTEE" shall have the meaning set forth in Section 25.02(b). rr. "PURCHASER'S DESIGNATED LABORATORY" shall have the meaning set forth in Section 11.02. ss. "REFEREE LABORATORY" shall have the meaning set forth in Section 11.02. tt. "SECTION 3.03 NOTICE" shall have the meaning set forth in Section 3.03. uu. "SELLER" shall have the meaning set forth in the preamble. vv. "SELLER APPOINTEE" shall have the meaning set forth in Section 25.02(b). ww. "SELLER PORTION" shall have the meaning set forth in Section 3.03. xx. A "SHIPMENT" shall begin when SELLER has loaded coal in sufficient quantities into a Unit Train provided by PURCHASER and shall end when the coal is unloaded at the Power Plant or other designated facility as provided herein. yy. "SURVIVING PROVISIONS" shall have the meaning set forth in Section 3.01. zz. "TENDER" shall mean (a) with respect to a Shipment of coal by rail, to make available for loading into Coal Cars; (b) with respect to Coal Cars, to release Coal Cars into the control of BN (or any successor Carrier); and (c) with respect to a Shipment of coal by barge, to make available for unloading and loading into barges at the Terminal. aaa. "TERMINAL" shall mean ACMS' Hall Street Terminal in St. Louis, Missouri or such other terminal as may be specified in a successor Transportation Agreement. bbb. "TON" or "TON" shall mean two thousand pounds avoirdupois weight. 6 12 ccc. "TRANSPORTATION AGREEMENT" shall mean the Transportation Agreement among PURCHASER, BN and ACMS or any replacement or successor Transportation Agreement. ddd. "TRIGGER DATE" shall have the meaning set forth in Section 4.01. eee. "TRANSPORTATION OF COAL" shall mean movement of Coal from Origin to destination including rail transportation from Origin to the Terminal, receiving, interim storage, loading to barge at the Terminal and barge transportation from the Terminal to destination. fff. "TRANSPORTATION RATE" shall mean those rates set forth in the Transportation Agreement. ggg. "TRUSTEE" shall mean Ralph R. Mabey, as Chapter 11 Trustee of Cajun. hhh. "TRUSTEE'S PLAN OF REORGANIZATION" shall mean the Trustee's Plan of Reorganization as may be amended from time to time for Cajun, pending in the Chapter 11 Proceeding. iii. "UNIT TRAIN" shall mean an assembly of Coal Cars transporting coal from one Origin to the Terminal on one bill of lading. 2.01 SELLER'S RESERVES AND PREPARATION FOR SELLING COAL. SELLER represents and warrants that SELLER owns or controls the Buckskin and North Rochelle mines and that such mines contain economically recoverable coal under current laws and regulations of a quality and in quantities which shall be sufficient to satisfy the requirements of 7 13 this Agreement and that all coal delivered hereunder shall be mined from the Coal Property or such other Origins as may be approved by PURCHASER pursuant to Section 2.02. SELLER hereby agrees to commit sufficient reserves of coal at the Buckskin and North Rochelle mines meeting the quality specifications of Section 10.01 so as to fulfill the quantity specifications herein. SELLER agrees and warrants that SELLER shall not use or sell coal meeting the quality specifications hereof from such mines in a way that shall reduce the economically recoverable balance of coal from such mines to an amount less than the amount required to be supplied hereunder. SELLER shall defend the title of PURCHASER with respect to all coal sold hereunder and, with respect to such title, shall indemnify PURCHASER from and against all claims, demands, actions, suits and judgments. 2.02 SUBSTITUTION. All coal delivered hereunder shall be shipped from the Coal Property or, at SELLER's sole option, after giving notice to PURCHASER, any Origin, provided SELLER obtains the prior written consent of PURCHASER with respect to such Origin, which consent shall not be unreasonably withheld and, provided further, that the coal shipped from any Origin other than the Coal Property satisfies the quality specifications of Section 10.01 hereof and, on the basis of a test burn, performs satisfactorily to PURCHASER in the Power Plant. In the event that SELLER requests that PURCHASER conduct a test burn of coal from a proposed substitute Origin, such test shall be promptly scheduled and performed consistent with PURCHASER's then current operating plans. SELLER shall promptly reimburse PURCHASER for all costs incurred by PURCHASER which are paid to third parties for conducting such test, 8 14 provided that PURCHASER shall pay the normal Transportation Rates (excluding any costs of segregating such coal or other extraordinary costs, which shall be paid by SELLER) associated with the transportation of such coal. PURCHASER shall not be required to perform more than two test burns in any Contract Year. PURCHASER shall solely determine the results of test burns in accordance with its standard operating procedures. PURCHASER shall promptly notify SELLER of its approval of such proposed Origin if use of such coal does not adversely affect PURCHASER's operations, provided, however, that PURCHASER shall retain the right to withdraw its approval of any Origin, including the Coal Property, if the use of coal from such Origin has, in PURCHASER's sole discretion reasonably exercised, a material adverse effect on PURCHASER's operations when compared to its historical operations. 3.01 EFFECTIVENESS; TERM OF AGREEMENT. This Agreement shall only become effective if the closing occurs under the Asset Purchase Agreement. SELLER shall provide the full coal requirements for the Power Plant for a period of five (5) Contract Years (the "Initial Term") commencing on the Closing Date of the Asset Purchase Agreement (the "Effective Date") of this Agreement. This Agreement shall continue in full force and effect during the Initial Term unless earlier terminated according to the provisions of this Agreement. PURCHASER shall have the right to purchase up to {***} tons of coal from other sources during the {***} Contract Year of the Initial Term hereof for purposes of test burns (the "Test Burn Amount"). In such event, SELLER has the right to provide make-up coal to PURCHASER, up to the Test Burn Amount so purchased, during the {***} Contract Year at the {***} Contract Year price, provided that the Test Burn Amount shall be deducted from Seller's Portion during such 9 15 sixth Contract Year for purposes of Section 3.03. SELLER agrees to give written notice to PURCHASER on or before the expiration of the {***} Contract Year if SELLER intends to provide such make-up coal, in which case SELLER will provide such coal within the first two (2) calendar months of such {***} Contract Year. This Agreement shall terminate upon the expiration of the Initial Term, provided, however, that the following provisions (the "Surviving Provisions") shall survive for an additional period of {***} Contract Years following the expiration of the Initial Term (the "Extended Term"): (i) Section 2.01 with respect to SELLER's reserves; (ii) Section 2.02 with respect to the substitution of coal from Origins other than the Coal Property; (iii) Section 3.03 with respect to PURCHASER's right to purchase the Excluded Portion (as hereinafter defined) from other sources and SELLER's matching rights; (iv) Section 19.01, Binding Effect; (v) Section 20.01, Assignments; (vi) Section 21.01 with respect to the parties' accounting inspection rights; (vii) Section 23.01, Waiver; (viii) Sections 25.01, 25.02 and 25.03 with respect to Disputed Matters; (ix) Section 26.01, Notices; (x) Section 29.01, Captions; (xi) Section 30.01, Applicable Law; (xii) Section 32.01, Entire Agreement; (xiii) Section 33.01 with respect to confidentiality; (xiv) Section 34.01 as it applies to Section 3.03; (xv) the Preambles, Recitals, such definitions in Section 1.02 and such of the Appendices as are used or referenced in the Surviving Provisions specified above; and (xvi) this Section 3.01. At the end of the Initial Term, the Surviving Provisions may, at the option of the parties: (i) continue in effect as the only surviving provisions of this Agreement; (ii) be incorporated in a New Agreement (as defined in Section 3.03); or (iii) 10 16 be incorporated in a separate agreement limited to the Surviving Provisions and such other provisions as the parties may agree. 3.02 EXTRAORDINARY MARKET OPPORTUNITIES. In the event PURCHASER has an identifiable new opportunity to make extraordinary off-system power sales, with respect to which, in order to provide a reasonable margin to PURCHASER, PURCHASER requires a lower coal price, PURCHASER shall promptly notify SELLER in writing (an "Extraordinary Sales Notice") of the required price and volume of coal associated with such opportunity. Such extraordinary market opportunity shall be for a minimum of either {***}. PURCHASER shall not use this provision to increase its margin on a sale it otherwise would have made, but only to make a sale it otherwise would not make. As soon as possible, but in any event within three (3) days of receiving an Extraordinary Sales Notice, SELLER shall notify PURCHASER in writing as to whether or not it elects to supply the required price and volume of coal associated with such opportunity. Any such coal provided by SELLER shall comply with the quality and other requirements of this Agreement. If SELLER fails to respond within such three (3) day period or if SELLER elects not to meet such price, or to provide the required volume, then PURCHASER may purchase the coal required to secure such extraordinary off-system power sales from any supplier who is willing to supply coal at the required price and volume. 11 17 SELLER shall have the right to designate an independent third party to audit, at SELLER's expense, the quantity and price terms of such sales, provided that such third party auditor (i) shall be required to keep such terms and the identity of the third party supplier confidential pursuant to the terms of a confidentiality agreement to be entered into among such auditor, SELLER and PURCHASER, which confidentiality agreement shall be reasonably acceptable to PURCHASER; and (ii) shall only be permitted to advise SELLER as to whether or not such third party sales are being made in accordance with the quantity and price terms described in the relevant Extraordinary Sales Notice. PURCHASER and SELLER agree to work together to identify such market opportunities. 3.03 SELLER'S RIGHT TO MATCH PRICE. During the Extended Term, PURCHASER shall have the right to purchase up to {***} tons of coal per year, plus or minus one Unit Train, (the "Excluded Portion") from other sources, provided that PURCHASER agrees to notify SELLER in writing prior to soliciting or negotiating such offers or such other arrangements. Subject to PURCHASER's right to obtain the Excluded Portion from other sources and to the other terms of this Section 3.03, SELLER shall have the right to supply coal to meet the remaining coal requirements of the Power Plant (including the requirements of GSU at Unit No. 3 and any new facilities which PURCHASER may construct at the Power Plant) (the "SELLER's Portion"), during the Extended Term. PURCHASER may solicit third party offers for SELLER's Portion. PURCHASER shall evaluate and determine the delivered cost per million BTU's, term, coal quality and other terms and conditions applicable to such third party offers (which it may 12 18 obtain by solicitation and/or through direct negotiations with other fuel suppliers submitting bona fide offers. In making such evaluations, PURCHASER shall consider coal handling costs, transportation, transloading, heat content, sulfur and other generally accepted industry fuel procurement practices. The following procedure shall be used to determine whether an offer from a fuel supplier for SELLER's Portion shall be deemed to be "bona fide" for purposes of this Section 3.03. If such supplier produces coal (i) in the Powder River Basin or (ii) in the United States west of the Mississippi River and, in the case of (ii) only, has (A) the ability to load out unit trains (consisting of a minimum of {***} coal cars) and (B) uncommitted reserve life equal to at least {***} times the volume that PURCHASER would offer to purchase from such third party supplier (the "Qualifying Characteristics") (which facts shall be verified by the independent auditor described below, provided that such verification shall be limited to obtaining written confirmation from such proposed supplier of the facts outlined above), the bona fides of such third party supplier shall be determined in the sole opinion of PURCHASER. If such third party supplier does not meet the Qualifying Characteristics outlined in sub-paragraphs (i) or (ii) above because such supplier does not produce coal in the Powder River Basin or in the United States west of the Mississippi River (and does not meet the additional sub-qualifications outlined above for suppliers who produce coal west of the Mississippi River), then PURCHASER shall provide the independent auditor with such information as is required to enable such auditor to determine whether the offer of such third party supplier is bona fide. In making such determination, the inquiry of the auditor shall be 13 19 limited to determining whether it is commercially reasonable to assume that the third party supplier has the ability to perform its obligations under the proposed offer. PURCHASER shall use its commercially reasonable efforts to provide SELLER with as much advance notice of the terms of such third party offers for SELLER's Portion as is consistent with PURCHASER's need to minimize its delivered cost of coal but in no event later than ninety (90) days prior to the end of the Initial Term (or, if (i) SELLER and PURCHASER have entered into a New Agreement for the supply of coal or (ii) PURCHASER and a third party supplier have entered into a contract for the sale of coal, no later than ninety (90) days prior to the expiration of such New Agreement or coal supply contract, as relevant). PURCHASER shall provide written notice to SELLER of such offers to supply the SELLER's Portion (a "Section 3.03 Notice") including all pertinent terms and conditions (which may include non-economic terms); which notice shall describe the f.o.b. mine price to SELLER which would result in the same evaluated delivered price to PURCHASER. SELLER shall have the right to verify, through an independent auditor, the terms and conditions of any such offer, provided that (i) PURCHASER consents to such independent auditor, which consent shall not be unreasonably withheld and (ii) such auditor enters into a confidentiality agreement with SELLER and PURCHASER that is reasonably acceptable to PURCHASER and that shall provide that such auditor shall not reveal the identity of the proposed third party suppliers. The cost of such verification shall be borne by SELLER. The purpose of such verification shall be limited to assessing the accuracy of the described terms and 14 20 conditions and to the matters relating to the bona fides of the third party suppliers described above. SELLER shall have the right, but not the obligation, within {***} working days of receiving a Section 3.03 Notice to provide written notice to PURCHASER of SELLER's intent to match the price at the same evaluated delivered cost per million BTU's and to match such other terms and conditions as are described in such Section 3.03 Notice. Notwithstanding the source of coal reflected in any Section 3.03 Notice given hereunder, SELLER shall have the right to match such terms and conditions with shipments originating either at the Coal Property or some other approved Origin or from a source (and with similar fuel characteristics) in the same geographic region as the source of fuel reflected in such Section 3.03 Notice, provided that such non-Origin sources from other geographic regions shall be subject to approval by PURCHASER as though they were proposed to be new Origins in accordance with Section 2.02. In no event shall the independent audit process described above extend beyond such {***} day period, provided that, if, within such {***} day period the independent auditor reports that PURCHASER's Section 3.03 Notice does not accurately describe the third party terms and conditions, PURCHASER shall correct its Section 3.03 Notice and SELLER's {***} working day period to provide notice of its intent to match shall be extended for an additional period of five (5) working days from SELLER's receipt of a corrected Section 3.03 Notice. If SELLER elects to match such offer, SELLER and PURCHASER shall cooperate in preparing and executing one or more new agreements (the "New Agreements") to replace this Agreement (except that the parties may elect to handle the Surviving Provisions pursuant to 15 21 Section 3.01), which New Agreements shall include: (i) the terms and conditions described in the Section 3.03 Notice and (ii) such other terms and conditions as SELLER and PURCHASER may agree; provided that if the parties fail to execute such New Agreement on or before the date that is forty-five (45) days prior to the end of the Initial Term (or if a New Agreement previously has been executed, on or before the date that is forty-five (45) days prior to the end of the term of such New Agreement) then PURCHASER shall be free to contract with the third party suppliers on the terms described below. In the event that SELLER elects to match such offer, SELLER, at its sole option, may also elect to negotiate the transportation of such coal from other sources to the Power Plant, provided that PURCHASER has not made prior contractual commitments to transport such coal; provided that nothing contained herein shall prohibit PURCHASER from contemporaneously negotiating a coal transportation agreement with a third party carrier. If SELLER negotiates a Transportation Agreement that is reasonably acceptable to PURCHASER and PURCHASER has not made prior contractual commitments to transport such coal, then PURCHASER shall execute such Transportation Agreement. In the event PURCHASER has not made prior contractual commitments to transport such coal and SELLER undertakes to negotiate such Transportation Agreement, SELLER agrees that it will be acting only as agent for, and representative of, PURCHASER for that limited purpose. SELLER's agency is limited to negotiating a coal Transportation Agreement with Carriers and is for the period beginning when SELLER gives notice to PURCHASER of SELLER's intent to match such third party notice, as provided herein, and ending with SELLER having completed its 16 22 negotiations within a reasonably short period of time. SELLER is not permitted to represent itself as agent of PURCHASER for any other purpose and may act as PURCHASER's agent only during the period of time established hereinabove. If PURCHASER has made a prior contractual commitment to transport such coal, SELLER may not act as PURCHASER's agent in negotiating a Transportation Agreement, but SELLER shall be free to contact the Carrier with whom PURCHASER has made such Transportation Agreement or any other Carrier for the purpose of determining whether SELLER can obtain a transportation rate from such Carrier that would enable SELLER to match the third party offer outlined in PURCHASER's Section 3.03 Notice, provided that nothing contained in this Agreement shall change the requirement that PURCHASER must be the signatory to any Transportation Agreement entered into to transport the coal to be purchased and sold hereunder. Nothing in this Section 3.03 shall restrict PURCHASER in the development of its own fuel procurement strategy, the choice of type of fuel or the quality thereof, the choice of third party fuel suppliers, etc., which it shall elect to purchase after the Initial Term of this Agreement. The only limitations on PURCHASER during the Extended Term shall be that all offers relating to SELLER's Portion which SELLER has the election to match hereunder must be from bona fide suppliers (established as described above), and must have a minimum term of {***}. In the event that SELLER does not elect to match all of the alternative terms and conditions offered by another supplier within the {***} day period described above (as the same may be extended to correct a Section 3.03 Notice), or SELLER and PURCHASER fail to execute a New Agreement within the time period described above, SELLER shall forego its right to match 17 23 that portion of PURCHASER's coal requirements provided that within {***} days of such event, PURCHASER executes an agreement with {***} from an alternate supplier to purchase such coal under the same terms as were described in the Section 3.03 Notice from PURCHASER to SELLER, provided that such third party agreement may differ from the terms described in the Section 3.03 Notice if such differences would not reasonably be deemed to be material to a decision by SELLER as to whether it desires to match such third party offer. Upon expiration of such coal supply agreement for SELLER's Portion, PURCHASER shall, once again during the Extended Term, grant SELLER the right to match any new offer. This matching right shall also again apply during the Extended Term upon the expiration of any New Agreement entered into between SELLER and PURCHASER as a result of SELLER electing to match the terms and conditions offered by a third party supplier. 4.01 PRICE PER TON OF COAL. The prices per ton f.o.b. railcar at the Coal Property or other approved Origins applicable to Shipments hereunder (the "Base Price") shall be as follows in the specified calendar years:
($/Ton) ------- 1997 {***} 1998 {***} 1999 {***} 2000 {***} 2001 {***} 2002 {***} 2003 {***}
It is understood that the prices specified above include all costs of Governmental Impositions, as of the earlier of January 1, 1998 or the Effective Date (the "Trigger Date"), as 18 24 allocated between PURCHASER and SELLER pursuant to Section 4.03, relating to the ownership or acquisition of the mineral, mining, processing, marketing or quality control work necessary to meet the quantity and quality specifications hereof. 4.02 ADJUSTMENTS - GENERAL. The Base Prices set forth in Section 4.01 shall be adjusted from time to time as provided in Section 4.03 hereof (as so adjusted, the "Billing Price"). Any adjustments to SELLER's account pursuant to Section 4.03 shall be included in the Base Price for the purposes of the Calorific Value Adjustment under Section 4.04. 4.03 ADJUSTMENT FOR CHANGES IN GOVERNMENTAL IMPOSITIONS. The term "Governmental Impositions," as used in this Agreement, means taxes, fees or other costs, including royalties or severance taxes imposed on SELLER by any government or governmental agency or as a result of costs arising from any governmental law or regulation directly affecting the ownership, production, severance, loading, transportation, preparation or sale of coal and reclamation of the source of coal shipped hereunder including all costs of compliance with the Federal Surface Mining Control and Reclamation Act of 1977 applicable to the Coal Property or other Origins, including (but not limited to) costs associated with all environmental protection performance standards under Sections 515 and 516 of such Act, with inspection and monitoring by state and/or federal regulatory authorities, with the obtaining of permits and with any performance bond which may be required under such Act. As an example, the term Governmental Impositions shall include ad valorem taxes and federal royalties levied by a political subdivision and severance taxes on coal; however, the term Governmental Impositions shall not include federal or state income taxes, ad valorem taxes on land, personal property, or 19 25 improvements thereto which are not levied directly upon the ownership, production, severance, loading, preparation, transportation, or sale of coal hereunder, unmined mineral taxes, special fund assessments related to worker's compensation insurance, orders or decrees revoking SELLER's self-insurance privileges and sales or use taxes (even if imposed on materials and supplies used in the production of coal hereunder.) The Base Prices specified in Section 4.01 include all costs of compliance by SELLER as of the Trigger Date with all Governmental Impositions in force as of such date. No adjustment to the Base Price shall be made under this Section 4.03 for costs occasioned by any Governmental Impositions in force on the Trigger Date or expressly included in the prices specified in Section 4.01, regardless of whether SELLER's costs as of the Trigger Date reflect the full costs of compliance with such Governmental Impositions. To the extent not prohibited by or inconsistent with other provisions of this Section 4.03, adjustments to the Base Price shall be made for changes in costs which directly affect coal actually mined or coal procured for delivery to PURCHASER hereunder and which result from SELLER's compliance with the following: (a) amendments to Governmental Impositions which are enacted or promulgated after the Trigger Date, (b) final judgments, orders or decrees issued by any court of law or equity or administrative or regulatory body after the Trigger Date, which reflect new and different interpretations of Governmental Impositions or (c) Governmental Impositions enacted after the Trigger Date (collectively; the "Changed Governmental Impositions"). However, no adjustment to the Base Price shall be made for changes in costs which result from any civil or criminal money fine or penalty imposed as the result of failure to comply with any Governmental Impositions unless 20 26 PURCHASER shall have specifically authorized the incurring of such fine or penalty; or any change in the millage rate or valuation of property for purposes of assessing any existing ad valorem tax. As of the Trigger Date certain of the Governmental Impositions applicable to this Agreement are set forth in Appendix B and relate to coal sold hereunder and are calculated in the manner indicated. In the event and whenever after the Trigger Date any of the events described in sub-parts (a), (b) or (c) above of the proceeding paragraph occurs, SELLER shall give PURCHASER prompt written notice thereof (a "Governmental Impositions Notice") as provided in Section 26.01. For purposes of this Section 4.03, if the Changed Governmental Imposition is stated in cents per ton, the Governmental Impositions Notice shall contain sufficient documentation and data to permit PURCHASER to verify SELLER's computations of the effect of such Governmental Impositions on SELLER's costs. In the event the Changed Governmental Imposition is not stated in cents per ton, SELLER shall furnish a preliminary Governmental Impositions Notice to PURCHASER notifying PURCHASER that such changed Governmental Imposition has occurred, which preliminary notice shall be followed by a final Governmental Impositions Notice within the time periods specified below. Subject to the following provisions of this Section 4.03, after PURCHASER delivers a Governmental Impositions Notice to SELLER, PURCHASER and SELLER shall jointly estimate and agree on the cost of such Governmental Impositions applicable to the coal sold hereunder and shall make an adjustment to the Base Prices specified in Section 4.01 accordingly. Changes in the 21 27 cost of Governmental Impositions shall be shared {***} to the PURCHASER's account and {***} to the SELLER's account. Where such Changed Governmental Imposition is stated in cents per ton, the adjustment to the Base Prices specified in Section 4.01 shall be made on such basis using the information contained in the Governmental Impositions Notice. Where such Changed Governmental Imposition is not stated in cents per ton, SELLER shall, within sixty (60) days after delivering the preliminary Governmental Impositions Notice to PURCHASER referenced above, prepare and submit to PURCHASER a final Governmental Impositions Notice in a format reasonably acceptable to PURCHASER detailing SELLER's determination of the actual cost impact of such Changed Governmental Imposition applicable to the coal delivered to PURCHASER hereunder. Such final notice shall also include a proposed cents per ton allocation of such actual cost impact based upon the quantity delivery commitment of SELLER and a method of adjusting for the continuing cost impact of such Changed Governmental Imposition. SELLER's final Governmental Impositions Notice submitted in accordance with this Section 4.03 shall be subject to PURCHASER's approval, which approval shall not be unreasonably withheld. In the event PURCHASER's approval and any adjustment to be made cannot be established within one hundred twenty (120) days after submittal by SELLER of its final Governmental Impositions Notice, the matter shall be submitted to outside mediation in accordance with Section 25.01(b). PURCHASER shall determine, after consulting in good faith with SELLER during such one hundred twenty (120) day period, the amount of an interim adjustment, if any, to partially compensate SELLER for the immediate impact of any such Changed Governmental Impositions. 22 28 PURCHASER's determination of the amount of any such interim adjustment will be made after consideration of the detailed statements and supporting information submitted by SELLER and will not, in PURCHASER's opinion, exceed the expected amount of the final adjustment. If the final adjustment approved by PURCHASER differs from any interim adjustment, a retroactive settlement shall be made. After the approval by PURCHASER of said final adjustment, the required changes to the Base Price hereunder and other affected provisions of this Agreement shall be made. After such final adjustment has been made, then during the period beginning up to twelve (12) months prior to the delivery of the Governmental Impositions Notice (or final Governmental Impositions Notice in the case of a Changed Governmental Imposition that is not stated in cents per ton) and during which such Changed Governmental Imposition was in effect, an adjustment to the Base Price specified in Section 4.01 (as such Base Price may have been adjusted pursuant to Section 4.02) shall be made for the cost of such Changed Governmental Imposition, applicable to the coal sold to PURCHASER hereunder, provided that in no event shall an adjustment to the Base Price be made for any period prior to the Trigger Date. The twelve (12) month limitation imposed in the prior sentence shall not apply to Governmental Impositions identified in governmental audits of severance tax or royalty rates or payments. PURCHASER also shall have the right, but not the obligation, to give SELLER notice as provided in Section 26.01, of any such Changed Governmental Impositions; and an adjustment to the Base Price specified in Section 4.01 shall then be made as described in this Section 4.03. 23 29 4.04 CALORIFIC VALUE ADJUSTMENT. The parties shall make a monthly adjustment to amounts paid by PURCHASER to SELLER hereunder in accordance with Section 5.01 upon the basis of the governing actual "as-received" calorific value of the coal as contained in the samples taken in accordance with Sections 11.01 and 11.02 and analyzed in accordance with Appendix G attached hereto and as compared to {***} btu/lb. This monthly adjustment (the "Calorific Value Adjustment") shall be made as set forth in Appendix C. 4.05 EMISSIONS ALLOWANCE ADJUSTMENT. The Base Prices specified in Section 4.01 above are based on the following assumed prices for emission allowances during the Initial Term hereof:
Assumed SO[2] Calendar Year Allowance Price(P[C]) ------------- ---------------- 2000 {***} 2001 {***} 2002 {***} 2003 {***}
Beginning on January 1, 2000 and continuing during the remainder of the Initial Term, PURCHASER shall determine the actual price of sulfur dioxide emission allowances during the immediately preceding month (P[A]), which price shall equal the "Market Price Indices," rounded to the nearest 1/10th of a cent per ton, for sulfur dioxide emission allowances that are published or provided by Cantor-Fitzgerald Environmental Brokerage Services. The Market Price Index for the current month is published in the prior month (i.e., the January 2000 Market Price Index is published in December 1999). If this information is no longer published, then PURCHASER and SELLER agree to negotiate in good faith on the use of a reasonably adequate substitute. 24 30 Upon determination of the actual price of sulfur dioxide emission allowances as specified above, PURCHASER shall compute an emissions allowance adjustment (the "Emissions Adjustment") as follows: Emissions Adjustment = ([P[A] -P[C]]/P[C] ) x A[S]; rounded to the nearest one-tenth of one cent per ton Where P[A] = Actual Monthly Market Price Index of sulfur dioxide emission allowances P[C] = Assumed sulfur dioxide emission allowance price for such calendar year A[S] = {***} per ton in 2000 {***} per ton in 2001 {***} per ton in 2002 {***} per ton in 2003 If P[A] is greater than P[C] during any such month, the Emissions Adjustment shall be multiplied by the number of tons of coal shipped hereunder during such month and SELLER shall promptly remit such amount in cash to PURCHASER in accordance with Section 5.01 (Billing and Payment). If P[A] is less than P[C] during any such month, the absolute value of the Emissions Adjustment shall be multiplied by the number of tons of coal shipped hereunder during such month and PURCHASER shall promptly remit such amount in cash to SELLER in accordance with Section 5.01 (Billing and Payment). 4.06 EXCESS SO[2] ALLOWANCE DUE SELLER. Beginning with calendar year 2000, if the actual SO[2] emissions of the Power Plant are less than {***} tons of SO[2] during any calendar year during the Initial Term, PURCHASER shall provide SELLER with allowances, as 25 31 calculated herein, by January 20th of the following calendar year rounded to the next closest allowance. The allowances due SELLER shall be calculated as follows: If the actual Annual Plant Burn for such calendar year is less than {***} MMBtu and actual Power Plant emissions for such calendar year are less than {***} tons of SO[2] (both as determined by PURCHASER) then: [{***} - APE - [{***}-APB] x {***}] x {***}= ADS If the actual Annual Plant Burn in such calendar year is greater than {***} MMBtu and the actual Power Plant SO[2] emissions for such calendar year are less than {***} tons of SO[2] then: [{***} - APE] x {***}=ADS. Where Power Plant SO[2] Allowances in Tons available = {***} Actual Plant Burn in MMBtu = APB Actual Plant Emissions in Tons of SO[2] = APE Allowances Due Seller = ADS A sample calculation of the SO[2] allowance due SELLER is set forth in Appendix E. If (i) {***} is not the correct number of SO[2] emissions allowances established for the Power Plant as of the applicable date or if GSU's interest in the Power Plant is not included in calculating the SO[2] allowances (see Section 34.01 herein), or (ii) the final Contract Year of the Initial Term is less than a full calendar year, then Sections 4.06 and 4.07 will be equitably adjusted by the parties. 4.07 SO[2] ALLOWANCE DUE PURCHASER. Beginning with calendar year 2000, if actual SO[2] emissions of the Power Plant are greater than {***} tons of SO[2] during any calendar year of the Initial Term, SELLER will provide 26 32 PURCHASER by January 20th of the following calendar year, with the number of allowances in excess of {***} required to enable PURCHASER to be in compliance with the applicable regulatory requirements for SO[2] allowances for the previous calendar year. If SELLER fails to provide PURCHASER with such allowances by January 20th, PURCHASER shall be permitted to purchase the allowances required for PURCHASER to be in compliance and SELLER shall be liable for the cost thereof, which shall be payable to PURCHASER immediately upon presentation of a statement of such costs by PURCHASER. In the event PURCHASER elects to (i) purchase coal from third parties pursuant to Section 3.02 or 8.01, or (ii) divert any of SELLER's coal from the Power Plant to other plants pursuant to Section 6.01, and as a result of such elections, the SO[2] emissions at the Power Plant are different from what such emissions would have been in the absence of such election(s), the amount of SO[2] allowances due SELLER or PURCHASER under Sections 4.06 and 4.07 shall be adjusted accordingly. 5.01 BILLING AND PAYMENT. An invoice shall be prepared by SELLER and a copy sent to PURCHASER within {***} days after the end of each Payment Period (as defined below) for all coal shipped to PURCHASER during the Payment Period. The payment periods ("Payment Periods") during the Initial Term of this Agreement shall be as follows: 27 33 PAYMENT PERIODS {***} - 7th of the month {***} - 14th of the month {***} - 21st of the month {***} - last day of the month Each invoice will indicate (i) the tons of coal shipped by SELLER during the Payment Period, as determined by SELLER's loaded weights established in accordance with Section 9.01, (ii) the then current Billing Price established pursuant to Sections 4.01, 4.02, and 4.03 hereof and (iii) the amount then due from PURCHASER (the "Periodic Coal Payment") determined by multiplying the tons of coal shipped during the Payment Period by the Billing Price. Within fifteen (15) days after the end of each Payment Period PURCHASER shall remit to SELLER or its designee one-hundred percent (100%) of the Periodic Coal Payment. Within fifteen (15) days after the end of each calendar month during the Initial Term, PURCHASER shall calculate the total amount due SELLER for coal shipped during the prior month, plus or minus any adjustments pursuant to the Calorific Value Adjustment specified in Section 4.04 and Appendix C and the Emissions Adjustment specified in Section 4.05. This total amount less all Periodic Coal Payments previously made for coal shipped during the Payment Periods of such prior month shall be forwarded by PURCHASER to SELLER within five (5) working days for any balance due from PURCHASER. Any such amount which is due from SELLER to PURCHASER as a result of an overpayment shall be credited toward PURCHASER's payment due for the next Shipment. 28 34 Invoices shall be sent to: Fuel Accounting Manager Louisiana Generating Baton Rouge, LA Payment shall be sent via wire transfer to the following account: Triton Coal Company c/o Bank of America Account No. 78-20151 ABA No. 071000039 5.02 THIRD PARTY ANNUAL AUDIT. PURCHASER has executed a Transportation Agreement for the transportation of coal hereunder during the Initial Term of this Agreement. Transportation Rates and certain other information in the Transportation Agreement must be held confidential pursuant to the terms of such Agreement. In order to verify the accuracy of Calorific Value Adjustments calculated pursuant to Section 4.04, SELLER may designate an independent third party to annually audit PURCHASER's computations of such adjustments; provided that (i) PURCHASER consents to such independent auditor, which consent shall not be unreasonably withheld; (ii) such auditor enters into a confidentiality agreement with SELLER and PURCHASER that is reasonably acceptable to PURCHASER and that shall provide that such auditor shall be bound by the confidentiality provisions of the Transportation Agreement; and (iii) the scope of such audit shall be limited to verifying the accuracy of Calorific Value Adjustments calculated pursuant to Section 4.04. The cost of such verification shall be borne by SELLER. 29 35 6.01 SHIPMENT. It is anticipated that coal sold hereunder shall be shipped by rail from the Designated Loading Point ultimately to be delivered to the Power Plant. PURCHASER's designation of plants to receive the coal may include any plants on or off the Louisiana Generating system in the event PURCHASER experiences operating problems or transportation problems. In addition, PURCHASER, may elect to have up to {***} tons per year of the coal sold by SELLER hereunder delivered to plants other than the Power Plant as designated by PURCHASER; provided, however, that no such coal shall be delivered to plants belonging to any of the three partners who comprise PURCHASER or any of their respective affiliates or subsidiaries. PURCHASER shall nominate the tons of coal to be shipped to other plants subject to SELLER's consent which shall not be unreasonably withheld. In addition, PURCHASER, at its sole option, may elect to have all or any part of the coal sold hereunder delivered to plants other than the Power Plant as designated by PURCHASER; provided, however, that all of the energy produced from such coal is received by PURCHASER. Any cost increases which may result from the transportation of coal from the Origin to destinations other than the Power Plant pursuant to this Section 6.01 shall be for PURCHASER's account. 6.02 RAIL SHIPMENTS. PURCHASER shall provide whatever rail transportation service is required for the loading of the coal to be provided by SELLER under this Agreement. SELLER shall provide at its expense Origin Loading Facilities sufficient for efficient and dependable loading of at least one hundred and twenty (120) Coal Car Unit Trains at the Coal Property and other Origins as mutually agreed to by PURCHASER and SELLER. SELLER agrees to provide Origin Loading Facilities capable of loading Unit Trains at an effective rate of a 30 36 minimum of {***} tons in {***} hours. SELLER shall load the Coal Cars in a timely manner that coincides with the loading times specified in the applicable Transportation Agreement. SELLER shall be prepared to operate the Origin Loading Facilities twenty-four (24) hours per day, seven days per week, if needed, in compliance with the Transportation Agreement applicable to deliveries under this Agreement to which SELLER agrees to be bound and, further, agrees to conduct its operation in compliance herewith and therewith. (A summary of the non-confidential terms of the applicable Transportation Agreement provisions is attached hereto as Appendix F). PURCHASER shall not make changes to the loading or operating provisions of the existing Transportation Agreement without the prior written consent of SELLER, which consent shall not be unreasonably withheld. Upon execution of an applicable tariff or rail contract that supplements or replaces the existing Transportation Agreement, Appendix F may be supplemented by attaching relevant portions of said tariff or rail contract hereto as a new Appendix F. SELLER represents and warrants that no agreement of SELLER providing for the joint use of surface facilities shall interfere with or impair SELLER's obligations as set forth in this Agreement. Shipping schedules shall be coordinated by PURCHASER's and SELLER's transportation coordinators in accordance with the quantities of coal to be delivered under this Agreement. 6.03 FREIGHT CHARGES, TITLE, AND RISK OF LOSS. Subject to the reimbursement provided by Sections 6.04 and 6.05, PURCHASER shall pay all freight and other charges imposed by Carriers with respect to the loading, transportation, transshipment and 31 37 unloading at destination of the coal provided under this Agreement. PURCHASER shall bear all risks associated with ownership of the coal including, but not limited to, the risk of loss of each Shipment after the Shipment has been properly loaded into Coal Cars at the Designated Loading Point in accordance with the terms hereof and title shall pass to PURCHASER at the Designated Loading Point once such loading has been completed; provided, however, if PURCHASER suffers an economic disadvantage as a result thereof, SELLER and PURCHASER agree to negotiate in good faith a basis for resolving PURCHASER's disadvantages. 6.04 LOADING COSTS CHARGEABLE TO SELLER. If SELLER fails to satisfy the loading requirements of the applicable Transportation Agreement and such failure is not excused pursuant to the force majeure provisions of the applicable Transportation Agreement, to which provisions SELLER agrees to be bound, SELLER shall pay any resulting Coal Car detention penalties or demurrage and shall pay any penalties or charges for any Coal Cars loaded in excess of capacity which is required by such Transportation Agreement. 6.05 EXCESS FREIGHT COSTS CHARGEABLE TO SELLER. If SELLER fails to Tender sufficient coal to satisfy the quantity requirements in accordance with Section 8.01 of this Agreement, and thereby fails to satisfy the Tonnage requirements of the applicable Transportation Agreement and such failure is not excused pursuant to the force majeure provisions (including environmental force majeure provisions and availability of rail equipment) of the applicable Transportation Agreement to which provisions SELLER agrees to be bound, SELLER shall pay any resulting freight or other charges which are incurred by PURCHASER under such Transportation Agreement over the amount of such charges otherwise payable. 32 38 SELLER shall also pay the per Ton Transportation Rate required to be paid by PURCHASER under the applicable Transportation Agreement for all Tons not loaded to the minimum capacity per Coal Car as specified in the Transportation Agreement to the extent such costs are incurred by PURCHASER. 6.06 PAYMENT OF EXCESS COSTS. Any payments required by Sections 6.04 and 6.05 above and Section 7.01 below shall be paid by SELLER within fourteen (14) working days after SELLER's receipt of a written statement from PURCHASER itemizing such charges. At PURCHASER's election, such charges may be credited against amounts owed by PURCHASER to SELLER hereunder. 7.01 SHIPPING NOTICE. Promptly after loading each Shipment (and in any event no later than the end of the next working day), SELLER shall electronically transfer to PURCHASER, in a format prepared by PURCHASER a notice of Shipment which shall include SELLER's name; train number; car numbers; Tonnage shipped; date of Shipment; and other such information as required by PURCHASER from time to time. NOTICES OF SHIPMENT SHALL BE SENT TO: Plant Manager, Big Cajun II Louisiana Generating and Production Support Analyst Fuel Department Louisiana Generating and Manager American Commercial Marine Service Company 33 39 Hall Street Terminal St. Louis, Missouri SELLER shall determine the short proximate analysis (moisture, ash, sulfur, sodium and Btu) of the coal contained in each Unit Train in accordance with American Society for Testing Materials ("ASTM") methods and procedures (see Appendix G, Coal Preparation and Analysis Laboratory Procedures) and shall electronically transfer such analysis to PURCHASER at the addresses specified above in a format provided by PURCHASER within twenty-four (24) hours of such Unit Train departing from the Origin. Should SELLER fail to provide such analysis of any Shipment as specified herein, PURCHASER may elect to delay unloading of the Shipment until such analysis is provided; and SELLER shall be liable for any demurrage and other costs occasioned by such delay. 8.01 QUANTITY REQUIREMENTS. Subject to Power Plant burn and inventory requirements and to the terms of Section 3.02, PURCHASER shall purchase from SELLER under the terms of this Agreement PURCHASER's estimated quarterly delivery requirements (the "Estimated Delivery Requirements") of coal required at the Power Plant per calendar quarter during the Initial Term of this Agreement. SELLER shall give PURCHASER preliminary written notice of Shipment Origins and expected coal quality specifications no later than sixty (60) days prior to the beginning of the Contract Year and final written notice of Shipment Origins and expected coal quality specifications no later than thirty (30) days prior to the beginning of such Contract Year, provided that SELLER shall have the right to modify the Shipment Origins (subject to Section 2.02) and expected coal quality specifications (subject to Section 10.01) by giving PURCHASER written notice no later than thirty (30) days prior to the beginning of the 34 40 calendar quarter or, in the event of a Force Majeure, as much notice as is commercially reasonable under the circumstances. PURCHASER shall give SELLER preliminary written notice of its Estimated Delivery Requirements no later than ninety (90) days prior to the beginning of the Contract Year and final written notice of Estimated Delivery Requirements no later than forty-five (45) days prior to the beginning of the Contract Year. PURCHASER shall have the right to increase the quarterly Tons shipped by up to twenty percent (20%) above the relevant Estimated Delivery Requirement specified in any final written notice by giving SELLER written notice no later than thirty (30) days prior to the beginning of the calendar quarter or, in the event of a Force Majeure, as much notice as is commercially reasonable under the circumstances; provided, however, that SELLER shall not be obligated to ship more than {***} Tons of coal to PURCHASER in any calendar month. In the event that PURCHASER elects to purchase a volume of coal in excess of {***} Tons of coal in any calendar month, SELLER shall have the right but not the obligation to supply such coal in accordance with the terms hereof provided that if it elects to supply such coal, SELLER must notify PURCHASER in writing within ten (10) days of receipt of PURCHASER's notice described above. If SELLER fails to notify PURCHASER within such ten (10) day period or if SELLER elects not to supply such excess coal, PURCHASER may purchase it elsewhere. 9.01 WEIGHING. The governing weight of coal sold and delivered hereunder shall be determined from SELLER's scale systems located at the Designated Loading Point. Said scale systems and methods of weighing shall be acceptable to PURCHASER and the Carrier, and shall be certified in accordance with the Association of American Railroads ("AAR") "Scale 35 41 Handbook". The regulations contained in the AAR "Scale Handbook" are based on National Institute of Standards and Technology Handbook 44, "Specifications, Tolerances, and other Technical Requirements for Weighing and Measuring Devices." All scales used to determine the governing weight of coal shall be tested and certified by the BN (or any successor Carrier) and the Wyoming Department of Agriculture on a semi-annual basis. If SELLER fails to establish weights in accordance with this Section 9.01 for ten (10) or fewer Coal Cars in any Unit Train, the weight of each of those Coal Cars shall be deemed to equal the average weight of the other Coal Cars comprising such Unit Train. If SELLER fails to establish weights in accordance with this Section 9.01 for eleven (11) or more Coal Cars in any Unit Train, the weight of each of the Coal Cars comprising such Unit Train shall be deemed to equal the average per Coal Car weight of the five (5) prior Unit Trains shipped by SELLER to PURCHASER. SELLER will determine and report a weight for each Shipment of coal hereunder. Subject to the provisions of the following two paragraphs, the aggregate weights determined by SELLER in accordance with the terms of this Agreement during any Payment Period shall be accepted as the quantity of coal sold and purchased during such period for which invoices are to be rendered and payments are to be made in accordance with Section 5.01. PURCHASER shall have the right to have a representative present at any and all times to observe determination of weights. If PURCHASER should at any time question the accuracy of the weights thus determined, PURCHASER shall so advise SELLER and SELLER shall permit the BN (or any successor Carrier) or the Wyoming Department of Agriculture, as appropriate, to test SELLER's scale systems or methods on a mutually agreeable schedule and at Seller's expense. 36 42 If such tests show the scale systems devices to be in error, or if the scale systems otherwise are determined to be in error, SELLER will, at its expense, take appropriate steps to immediately adjust such scale systems to an accurate condition. If such tests show the scale systems devices to be accurate, PURCHASER shall pay the cost of such tests. If SELLER's scale systems or weighing methods are determined to be in error, an appropriate adjustment shall be made to the affected weights and related invoices and payments and shall be applied to the next Shipment. Such adjustments shall be made retroactively to a date that is midway between the date on which the scale systems or weighing methods were last certified and the date on which the weighing methods and scale systems were determined to be in error. 10.01 COAL SPECIFICATIONS. The coal sold by SELLER and purchased by PURCHASER hereunder shall be uniformly blended; and such blend shall be consistent from Coal Car to Coal Car; shall be two and one-half inches and under in size (2-1/2" x 0") as defined in the then-current ASTM Designation D-4749 Standard Test Method for "Performing Sieve Analysis and Designating Coal Size"; shall not contain greater than {***} particles less than one-quarter (1/4) inch in size (if, in PURCHASER's sole reasonable judgment, coal handling problems occur at the destination, and SELLER is reasonably able to correct such problems at the Origin, SELLER agrees to take reasonable corrective action acceptable to PURCHASER); shall have no intermediate sizes added or removed; shall not contain coal greater than three (3) inches in any dimension and shall be substantially free of bone, slate, shale, rock, dirt, clay, fireclay, pond fines, washer fines, washer refuse, plastic, rubber, iron, roots, wood, water, debris, refuse or other 37 43 waste materials identified as coming from the Origin or a washer or coal preparation facility (collectively "Extraneous Material"). Any Shipment that is not substantially free of such Extraneous Material will be rejected. SELLER shall only deliver run-of-mine coal product (or fully washed product) to PURCHASER; provided, however, SELLER may add minimal amounts of coal fines from the ENCOAL facility at the Buckskin Mine to Shipments hereunder. SELLER shall promptly reimburse PURCHASER for all damage to PURCHASER's equipment directly caused by any Extraneous Material loaded with the coal by SELLER, as well as for damages to PURCHASER's equipment caused by shipping coal failing to meet the specifications contained in this Section 10.01. Coal sold by SELLER and purchased by PURCHASER hereunder shall conform to the following analysis on an "as received" basis:
Expected Annual Weighted Avg. Suspension Limits Rejection Limits Specifications (Per Shipment) (Per Shipment) -------------- -------------- -------------- Max. Moisture (total), % {***} {***} {***} Max. Ash, % {***} {***} {***} Max. Sulfur Dioxide {***} {***} {***} lbs./MMBtu Min. Volatile Matter, % {***} {***} {***} Min. Ash Fusion Temp.,(degree)F {***} {***} {***} Softening (H=W) Reducing Atmosphere Min. Calorific Value, Btu/lb. {***} {***} {***} for the Buckskin Mine Min. Calorific Value, Btu/lb. {***} {***} {***} for all Origins other than the Buckskin Mine
38 44 The Expected Annual Weighted Average Specifications shown in the above table establish the minimum requirements for coal from all Origins other than the Buckskin Mine. 11.01 SAMPLING. SELLER shall provide at its expense at the Designated Loading Point a mechanical sampling system of the "cutting the full coal stream" type or other system acceptable to PURCHASER. The design and operation of the sampling system shall be in accordance with ASTM D-2234, "Standard Test Methods for Collection of a Gross Sample of Coal" and D-2013, "Standard Method of Preparing Coal Samples for Analysis." The mechanical sampling system shall be enclosed to minimize moisture loss and shall be designed for two stage of sample crushing to the No. 8 sieve size. SELLER shall submit design drawings and specifications for any new sampling system to PURCHASER for approval prior to installation. PURCHASER will not unreasonably withhold such approval. PURCHASER and SELLER shall use their best efforts to agree on a modification of procedures and equipment to incorporate improved methods developed in the future by the ASTM. SELLER shall collect representative samples using the mechanical sampling system as described above at the Designated Loading Point of each Shipment of coal sold hereunder. SELLER shall divide the final sample of No. 8 sieve size coal from the mechanical sampling system, at the Designated Loading Point, into at least four 1000 gram laboratory sample splits in accordance with ASTM Standard D-2013, "Standard Method of Preparing Coal Samples for Analysis," using an enclosed riffle to minimize moisture loss. SELLER shall send two laboratory samples to PURCHASER's Designated Laboratory (as defined in Section 11.02), and shall retain 39 45 two laboratory samples, one of which will be retained by SELLER for sixty (60) days from date of shipment as a reserve sample and the second of which will be analyzed by SELLER to meet its obligations under this Agreement. PURCHASER or PURCHASER's designated representative may observe any sampling or sample preparation performed by SELLER or SELLER's designated representative. In the event that SELLER's sampling system ceases to operate, SELLER shall immediately notify PURCHASER or PURCHASER's representative to determine a course of action to be taken. A weighted average analysis of the results for coal contained in the last ten (10) Unit Trains sampled may be used by mutual agreement between PURCHASER and SELLER for any Unit Train for which the samples required above are not collected. SELLER shall provide PURCHASER with documentation of test results of a dynamic bias test of the sampling system on a semi-annual basis, and shall conduct a stop belt test prior to January 1, 1998 and during the third Contract Year of the Initial Term of this Agreement unless the sampling system is significantly modified between the tests in year one and year four, in which case an additional stop belt test shall be performed at the completion of such modification. 11.02 ANALYSIS. PURCHASER's designated laboratory ("PURCHASER's Designated Laboratory") may be its laboratory, SELLER's laboratory as provided below, or a qualified independent coal testing laboratory which, in each case, shall analyze the laboratory samples sent by SELLER in accordance with Appendix G. In the event PURCHASER elects to employ such an independent 40 46 laboratory, SELLER shall not be liable for any costs incurred by PURCHASER except as herein provided. Prior to the Effective Date, PURCHASER shall inspect the laboratory located in SELLER's Buckskin Property and operated by a third party. At any time during the Initial Term hereof, PURCHASER shall have the right to inspect the Buckskin laboratory or such other laboratory as SELLER may designate as SELLER's laboratory. PURCHASER may propose to SELLER changes it deems necessary in the laboratory or analytical procedures. If SELLER makes the recommended changes to the laboratory and/or analytical procedures, PURCHASER will designate SELLER's laboratory as PURCHASER's Designated Laboratory. If PURCHASER can show the analytical procedures used by SELLER's laboratory fail to meet appropriate ASTM standards, including those described in Appendix G, or if SELLER changes the third party operator of SELLER's laboratory without obtaining PURCHASER's prior written consent, PURCHASER reserves the right to revoke the designation of SELLER's laboratory as PURCHASER's Designated Laboratory and to designate another laboratory as PURCHASER's Designated Laboratory. If PURCHASER so designates SELLER's laboratory as PURCHASER's Designated Laboratory, all costs will be for SELLER's account. Upon request of PURCHASER, the two laboratory samples sent to PURCHASER's Designated Laboratory shall be promptly analyzed in accordance with Appendix G and, except as provided in this Section 11.02, the results of such analysis shall govern under this Agreement. PURCHASER will cause the results of its Designated Laboratory's analysis to be provided to SELLER within twenty-four (24) hours of receipt of SELLER's samples. 41 47 Except as hereinafter provided in this Section 11.02, the analysis of PURCHASER's Designated Laboratory shall govern for all purposes under this Agreement. If a dispute arises between PURCHASER and SELLER over the results of the analyses performed by PURCHASER's Designated Laboratory, the reserve sample shall be sent to a qualified independent laboratory (selected jointly by PURCHASER and SELLER) (the "Referee Laboratory") which shall conduct a referee analysis in accordance with Appendix G. The cost of any such analysis shall be borne equally by PURCHASER and SELLER. The results of the Referee Laboratory's analysis will be determinate. With respect to a dispute pertaining to the calorific value of the coal, the analysis of PURCHASER's Designated Laboratory will be deemed to have been confirmed and no further adjustment in billing calculations will be made if the dry basis Btu content of the analysis of the Referee Laboratory differs from the analysis of PURCHASER's Designated Laboratory by no more than 100 Btu per pound. With respect to disputes involving other items of the analysis, the analysis of PURCHASER's Designated Laboratory will be deemed to have been confirmed and no other adjustment in billing calculations will be made if the difference between the analysis of the Referee Laboratory and the analysis of PURCHASER's Designated Laboratory is within the tolerances for reproduceability specified in the applicable ASTM Standards. In the event that a difference in any item of the analysis of PURCHASER's Designated Laboratory and that of the Referee Laboratory exceeds tolerances specified in the applicable ASTM Standards specified in Appendix G, the analysis of the Referee Laboratory will govern and appropriate adjustments in billing calculations will be made during the next Payment Period. 42 48 12.01 REJECTION OF COAL FOR COAL QUALITY DEFICIENCIES. In addition to and not as a limitation upon other rights of PURCHASER hereunder, PURCHASER shall have the right to refuse and reject any Shipment of coal under any one or more of the following circumstances: (a) the Shipment fails by analysis (including short proximate analysis as provided for in Section 7.01) to comply with any one or more of the Rejection Limits set forth in Section 10.01; (b) the Shipment contains coal that was or is being mined or produced from a seam or source other than the Coal Property described in Appendix A without securing the prior written approval of PURCHASER as provided in Section 2.02; (c) the Shipment fails in any manner to comply with any of the coal size specifications contained in Section 10.01 hereof or (d) when loaded at Origin, the Shipment is not substantially free of Extraneous Material. PURCHASER shall give prompt notice to SELLER of any such rejection of Shipments. Risk of loss shall shift from PURCHASER to SELLER upon delivery of such notice. After receipt of such notification, SELLER shall not resume Shipments from the particular Origin of the rejected Shipment until coal quality has been corrected or the Origin changed to PURCHASER's satisfaction. In the event that PURCHASER notifies SELLER that a Shipment has been rejected, SELLER may, at SELLER's expense, remove such Shipment from PURCHASER's facilities or from transportation equipment and shall reimburse PURCHASER for all transportation costs incurred by PURCHASER in connection with such Shipment. PURCHASER may deduct all such costs and expenses from any sum owed by PURCHASER to SELLER. If SELLER elects not to remove any such Shipment by giving prompt notice and PURCHASER is willing to purchase such 43 49 coal, the price applicable to such Shipment shall equal the applicable Billing Price pursuant to Sections 4.01; 4.02 and 4.03 less {***} per ton. SELLER and PURCHASER shall work together in good faith to expeditiously resolve any problems associated with rejection of a Shipment hereunder. 12.02 SUSPENSION OF SHIPMENTS FOR COAL QUALITY DEFICIENCIES. Subject to SELLER's substitution rights contained in Section 2.02, PURCHASER shall, in addition to the rights set forth above in Section 12.01, have the right to suspend Shipments from a particular Origin immediately, by giving notice to SELLER, under any one or more of the following circumstances: (a) any Shipment from such Origin fails by analysis (including short proximate analyses as provided for in Section 7.01) to comply with any one or more of the per Shipment suspension limit specifications set forth in Section 10.01; (b) any Shipment contains coal that was or is being mined or produced from a seam or source other than the Coal Property described in Exhibit A without securing the prior written approval of PURCHASER as provided in Section 2.02; or (c) when loaded at the Origin, any Shipment is not substantially free of Extraneous Material. Shipments in transit at the time of notification of suspension shall be accepted. The suspension of Shipments from any one Origin shall not affect SELLER's right to source Shipments hereunder from other Origins consistent with the terms of this Agreement. In addition, PURCHASER shall have the right to purchase coal from other sources during such period of suspension if total deliveries to PURCHASER are reduced. Four (4) or more suspensions in any 120 day period shall be deemed to be a material breach of this Agreement, for 44 50 which PURCHASER shall have the unilateral right, exercised in its sole discretion, to terminate this Agreement by giving notice of the termination to SELLER as provided in Section 13.01. In the event that PURCHASER suspends Shipments from a particular Origin, SELLER may resume Shipments from such Origin provided that SELLER (i) provides a written explanation of the cause of the quality variations and specifies remedial actions reasonably acceptable to PURCHASER which SELLER will undertake to ensure compliance with the coal quality specifications of Section 10.01 and (ii) after resumption of Shipments, the weighted average calorific content of the first twenty (20) Shipments of coal from such Origin must equal or exceed {***} Btu/lb., the sulfur dioxide content of each of these twenty (20) Shipments must be {***} pounds per MMBtu or less, the minimum volatile matter must be {***} or higher and the minimum ash fusion temperature must be {***} or higher. The twenty (20) Shipments shall be scheduled and sampled by such method as shall be reasonably acceptable to PURCHASER. All special handling costs, including (but not limited to) stockpile segregation, transportation routing, etc., associated with the test Shipments shall be borne by SELLER. If the analysis by PURCHASER shows the resumed Shipment(s) to be in compliance with the coal quality specifications specified above, deliveries shall be permitted to resume from this Origin. PURCHASER shall have the sole right to determine if SELLER shall be allowed to make up any Tonnage not delivered during the period Shipments were suspended. Any make-up Tonnage scheduled will be mutually agreed to on a reasonable basis. The price to be paid for any such make-up Tonnage is the price that would have been in effect at the time the coal was originally scheduled to be delivered under the terms of this Agreement. 45 51 In the event of suspension of any Shipment(s) followed by termination of this Agreement, SELLER shall reimburse PURCHASER for any and all transportation costs associated with suspended Shipment(s) and/or termination which may be incurred by PURCHASER. PURCHASER's rights of suspension and termination are in addition to any other remedies provided by this Agreement or at law or in equity for SELLER's failure to deliver coal in compliance with this Agreement. 13.01 AUTOMATIC TERMINATION. In addition to the automatic termination rights set forth in Sections 12.01, 12.02, 15.01, 16.01 and 20.01, PURCHASER in each of (a), (b), or (c) below and SELLER in (c) below shall have the right to cancel the remaining Shipments to be delivered and to terminate this Agreement with no liability therefor except with respect to coal delivered prior to such termination by giving written notice to the other party, as provided in Section 26.01, under any one or more of the following circumstances: (a) any Shipment contains coal that was or is being mined or produced from a seam or source other than the Coal Property described in Appendix A without the prior written approval of PURCHASER as provided in Section 2.02; (b) the occurrence of four (4) or more suspensions in any 120 day period, as provided in Section 12.02 or (c) in the event that the other party engages in any fraudulent or illegal conduct in connection with its performance under this Agreement. 14.01 TERMINATION FOR UNREMEDIED DEFAULT. If either party fails to comply with any or all of its material obligations as set forth in this Agreement, the party not in default shall have the right to terminate this Agreement at any time by giving notice as provided in Section 26.01 of its intention to do so to the other party, which notice shall specify the default. 46 52 At the expiration of sixty (60) days after the date of such notice, unless the party in default shall have cured such default to the satisfaction of the non-defaulting party, the party not in default shall have the right, at its sole election, to terminate this Agreement immediately with no liability therefor except with respect to coal delivered prior to such termination; provided, however, that the failure of the parties to agree on a price adjustment shall not constitute grounds for termination of this Agreement under this Section 14.01. In addition to and not as a limitation upon other rights of PURCHASER or SELLER hereunder, either party may elect, at its sole option, to forego its right to terminate this Agreement upon the other party's default under this Agreement, as provided in Section 13.01 or this Section 14.01, and may require, in lieu of termination, the other party to perform its obligations according to the terms and conditions of this Agreement. 15.01 FORCE MAJEURE. "SELLER's Force Majeure" as used herein shall mean a cause reasonably beyond the control of SELLER which, wholly or in substantial part, directly or indirectly prevents SELLER from the mining, transporting, crushing, loading, or delivery of coal at the Coal Property or another Origin approved in accordance with Section 2.02. "PURCHASER's Force Majeure" as used herein shall mean a cause reasonably beyond the control of PURCHASER which, wholly or in substantial part, directly or indirectly prevents or restricts the delivery, unloading, storing or burning of coal or the production of electricity by PURCHASER at the Power Plant. Examples (without limitation) of Force Majeure are the following: acts of God; acts of the public enemy; insurrections; riots; strikes; labor disputes; work stoppages; fires; explosions; floods; electric power failures; breakdowns of or damage to 47 53 generating or preparation plants or mining equipment which materially impacts the mining process; interruptions to or contingencies of transportation, including but not limited to Force Majeure as defined in the Transportation Agreement; embargoes; and orders or acts of civil or military authority (including, without limitation, a city or county ordinance, an act of a state legislature or an act of the United States Congress); provided, however, for the purposes of this Agreement, Force Majeure shall not include, and neither party hereto shall be excused from performance because of the development or existence of economic conditions which may adversely affect the anticipated profitability of such party's activities hereunder, acts or omissions of such party which constitute mismanagement or fraud on the part of such party, or reduced productivity of labor employed by such party in its activity hereunder. If a PURCHASER's Force Majeure occurs and PURCHASER gives SELLER notice of such Force Majeure as provided in Section 26.01, the obligations and liabilities of PURCHASER and the corresponding obligations of SELLER shall be suspended to the extent made necessary by and during the continuance of such Force Majeure; provided, however, that PURCHASER shall use its commercially reasonable efforts to eliminate the disabling effects of such Force Majeure as soon as and to the extent possible (except PURCHASER may settle any of its own labor disputes, strikes, or terminate any of its own lockouts in its sole discretion). If a SELLER's Force Majeure occurs and SELLER gives PURCHASER notice of such Force Majeure as provided in Section 26.01, the obligations and liabilities of SELLER and the corresponding obligations of PURCHASER shall be suspended to the extent made necessary by and during the continuance of such Force Majeure; provided, however, that SELLER shall use its 48 54 commercially reasonable efforts to eliminate the disabling effects of such Force Majeure as soon as and to the extent possible (except that SELLER may settle any of its own labor disputes, strikes, or terminate any of its own lockouts in its sole discretion). In the event of a transportation or transloading or SELLER's Force Majeure, PURCHASER may purchase substitute coal from a third party or parties if Power Plant inventories are projected to fall below {***} days projected burn. In the event a Force Majeure causes a partial reduction in the total quantity of coal SELLER can deliver from all PURCHASER approved Origins, SELLER's available supply of coal from such Origins shall be apportioned in a reasonable manner among all of its customers having contracts for the purchase of coal from such Origins at the time of the occurrence of the Force Majeure event. It is agreed that in the event that any valid act, law, ordinance, rule or regulation of a municipality, county, state or the United States government, or final judicial decision, judgment or order, is adopted or passed after the Effective Date of this Agreement, which either (a) directly prohibits the mining contemplated hereunder or (b) directly or indirectly imposes significant burdens or restrictions upon the burning or use of coal by PURCHASER to the extent that PURCHASER is unable or would not be allowed to utilize the coal to be shipped hereunder feasibly and economically at the Power Plant or would be allowed to utilize such coal only after the installation or substantial renovation of plant equipment, then the existence and implementation of such act, law, ordinance, rule, regulation, decision, judgment or order shall constitute an event of permanent Force Majeure whereupon this Agreement may be terminated by the party so affected upon notice to the other party. Neither party shall have any further right or 49 55 obligation hereunder effective upon such termination except with respect to coal delivered prior to such termination. Notwithstanding the provisions of this Section 15.01, a party not claiming Force Majeure may terminate this Agreement upon notice to the other party and without liability to the other party whenever all of the following circumstances exist: (a) a condition of Force Majeure occurs which causes the mutual obligations to be suspended as provided above with respect to the total quantity of coal to be supplied; (b) such condition (alone or extended by other conditions of Force Majeure) continues so that the mutual obligations remain suspended for a period of six (6) consecutive months; and (c) at the end of said six (6) consecutive months or at any time thereafter, the party not claiming Force Majeure, in the exercise of its reasonable judgment, concludes that there is little likelihood of ending the condition(s) in the immediate future. The party not claiming Force Majeure may exercise such right of termination by giving ninety (90) days' notice, as provided in Section 26.01, of its intention to terminate to the other party. Neither party shall have any further right or obligation hereunder effective upon such termination except with respect to coal delivered prior to such termination. 16.01 CHANGES IN ENVIRONMENTAL RELATED REQUIREMENTS. The term "Environmental Related Requirement," as used in this Agreement, means the following: (a) any prohibition, restriction, or limitation related to the quality of coal which PURCHASER may burn, including any constituent specification, at its electric generating plants, or to the type or amount of emissions from any or all such plants; (b) any rule or requirement affecting the permissible means for complying with any such prohibition, restriction or limitation; or (c) any 50 56 imposition of a cost, fee, tax or other economic burden on PURCHASER relating to (i) the production of electricity (generally or by means of coal-fired steam electric generation), (ii) the quantity of coal purchased and/or burned by PURCHASER, (iii) any constituent specification of coal purchased by PURCHASER, or (iv) the type or amount of emissions from PURCHASER's electric generating plants. A change in Environmental Related Requirements shall be deemed to have occurred in any one or more of the following circumstances: (a) there is any increase or decrease in existing Environmental Related Requirements; (b) PURCHASER, in the exercise of its sole judgment, decides to change its strategy for compliance with any such existing Environmental Related Requirements; or (c) a new Environmental Related Requirement is imposed on PURCHASER as a result of any federal or state statute, local ordinance, administrative regulation or ruling, court order, or any revision in any interpretation or implementation thereof. In the event that it is recognized that a change in Environmental Related Requirements upon PURCHASER may occur even though stated as a restriction or limitation on, or requirement of, PURCHASER and its affiliates or some other group of utilities, so long as (i) such restriction or limitation appears to be likely and imminently applicable to PURCHASER, then SELLER and PURCHASER agree to negotiate in good faith to develop a mutually reasonable plan of mitigation. It is further recognized that any change in Environmental Related Requirements may affect PURCHASER in a general way and may not be directed at specific plants, fuels, fuel supplies or other operating conditions. In this event PURCHASER shall, in its sole discretion, determine its strategy for compliance, and whether PURCHASER's use of the 51 57 coal to be supplied hereunder has been adversely impacted. The provisions of this Section 16.01 are intended to provide rights in addition to the rights provided in Section 15.01. The price, specifications, quantity and destination of coal purchased hereunder are predicated on Environmental Related Requirements in effect as of the Trigger Date. In the event and whenever after such date, there is a change in Environmental Related Requirements, PURCHASER shall determine whether such change has had or may have an adverse impact on its use of the coal purchased hereunder. It is agreed that any change in Environmental Related Requirements which has one or more of the following effects shall be deemed to have an adverse impact on PURCHASER's use of the coal purchased hereunder, even though the statute, regulation, ruling or ordinance may allow PURCHASER a choice of options for complying with such changed Environmental Related Requirements (which choice may include the payment of a fee or tax in lieu of the installation of equipment, or utilization of coal of different constituent specifications, or the reduction in the overall use of coal by PURCHASER): (a) the change imposes a fee, tax, or other economic burden on PURCHASER relating to the constituent specifications of coal purchased by it or on the type or amount of emissions from PURCHASER's electric generating plants; (b) the change directly or indirectly prevents or restricts PURCHASER from utilizing the coal purchased hereunder in one or more of its electric generating plants; (c) the change requires PURCHASER to install equipment (such as flue gas desulfurization equipment or particulate removal equipment) at one or more of its electric generating plants in order to comply with such change; or (d) the change requires or permits PURCHASER to utilize coal of a quality (including, but not limited to, sulfur) different from that specified in Section 10.01. 52 58 If PURCHASER determines that a change in Environmental Related Requirements has had or may have an adverse impact on its use of the coal purchased hereunder, PURCHASER shall so notify SELLER as provided in Section 26.01. Upon receipt of such notice, SELLER shall have the right, at its option, to propose within thirty (30) days after receipt of such notice, any steps available to SELLER in its mining and processing of the coal, in the supply of substitute coal, in the change in the price of the coal, or other measure which would result in as low a delivered cost of coal at the Power Plant or to other power plants pursuant to Section 6.01 as PURCHASER could achieve by purchasing reasonably available substitute coal, taking into consideration any fees, taxes, costs, or other economic burdens imposed on the use of coal by PURCHASER. In the event PURCHASER, in its sole judgment, determines that SELLER cannot achieve this result, then PURCHASER may terminate this Agreement upon ninety (90) days' notice thereof as provided in Section 26.01. PURCHASER shall have the right to give such notice either before or after the effect of a change in Environmental Related Requirements. Neither party shall have any further right or obligation hereunder effective upon such termination except with respect to coal delivered prior to such termination. The parties hereto acknowledge that this Agreement is based on the assumption that the coal to be delivered hereunder will enable PURCHASER to comply with the provisions of the Clean Air Act Amendments of 1990, judicial and administrative interpretations thereof, and regulations to be promulgated thereunder as such interpretations and resolutions exist as of the Effective Date of this Agreement. If, at any time during the Initial Term of this Agreement, PURCHASER determines, in its sole judgment, that any operational or environmental compliance 53 59 problem at the Power Plant has resulted from the components or characteristics of SELLER's coal or the products of its combustion, including, but not limited to, nitrogen oxide emissions, or any other constituent or property of the coal not otherwise specified herein, SELLER and PURCHASER shall immediately enter into discussions in a good faith effort to resolve the problem. If such discussions fail to resolve such problem in a manner which, in PURCHASER's sole judgment, is reasonable and would not impose an unreasonable additional expense to PURCHASER, then PURCHASER shall have the right to terminate this Agreement by giving SELLER notice of PURCHASER's intention to do so as provided in Section 26.01. Neither party shall have any further right or obligation hereunder effective upon such termination except with respect to coal delivered prior to such termination. No expense contemplated by this Section 16.01 shall be deemed reasonable if it would result in a delivered price of coal hereunder in excess of the delivered price of competitive fuels or sources then available to PURCHASER. If, during the Initial Term of this Agreement, PURCHASER is required to meet certain NOx levels, then PURCHASER and SELLER agree to review NOx levels and identify appropriate mechanisms for establishing a value for NOx emissions by calculating any difference between SELLER's coal and the baseline coal used to establish initial compliance, i.e., Kennecott's Antelope Mine. 17.01 WARRANTIES. In addition to the warranties provided elsewhere in this Agreement, SELLER warrants that (i) no outside sales to others will diminish the production of coal to be supplied under this Agreement; (ii) only coal mined and produced from the Coal Property will be shipped to PURCHASER and (iii) no substitute coal will be shipped by SELLER 54 60 to PURCHASER without the prior approval of PURCHASER except as provided in Section 2.02 and Appendix A. 17.02 DISCLAIMER OF WARRANTIES. WITH THE EXCEPTION OF THOSE WARRANTIES EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER MAKES NO OTHER WARRANTIES WHATSOEVER, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Notwithstanding the foregoing, SELLER and PURCHASER agree that, to the extent the coal provided hereunder creates operational problems for PURCHASER, the parties shall negotiate in good faith to seek a prompt and mutually satisfactory resolution of such problems. 18.01 INDEPENDENT CONTRACTOR. This Agreement is a contract for the sale and purchase of coal. The parties recognize and agree that neither party is an agent or employee of the other party nor any affiliate of the other party and that each party is independent of any managerial or other control or direction by the other party and is free to perform, by such means and in such manner as such party may choose, all work in pursuance of commitments hereunder. 19.01 BINDING EFFECT. This Agreement shall bind and inure to the benefit of the parties and their successors and assigns, as permitted under Section 20.01. 20.01 ASSIGNMENTS. Neither party may assign its rights under this Agreement without the non-assigning party's prior written approval. However, notwithstanding the above, PURCHASER may assign its rights, duties, obligations and interests in and to this Agreement to a subsidiary, affiliate or sister entity; provided, however, PURCHASER shall not be thereby 55 61 relieved of its responsibilities or obligations hereunder. Furthermore, notwithstanding the above, SELLER may assign its rights, duties, obligations and interests in and to this Agreement to a parent, subsidiary, affiliate or sister entity; provided, however, that SELLER shall not be thereby relieved of its responsibilities or obligations hereunder. This Agreement shall likewise apply to any successor or assignee of either PURCHASER or SELLER. Should the majority of stock or other ownership interests in either SELLER or PURCHASER be conveyed to an unaffiliated entity, and if the party whose stock or other ownership interests are being conveyed will not agree to guaranty the performance of its transferee hereunder, the party not conveying its interest shall have the option to immediately terminate this Agreement, should it determine, in its reasonable judgment, that the change in such ownership materially and adversely affects the other party's ability to perform under this Agreement, provided, however, that the parties agree that a transfer of stock or ownership interests between or among one or more of the existing owners of PURCHASER or its or their affiliates shall not be included in any determination as to whether there has been a transfer of a majority of the stock or ownership interests of PURCHASER. 21.01 RIGHT OF INSPECTION: ACCOUNTING. SELLER and PURCHASER shall preserve in an orderly manner the records supporting all charges and adjustments to the Billing Price and all other payments, adjustments and obligations hereunder and shall make such records available to the other party's accountants, auditors or other authorized representatives, who shall, after giving adequate notice, be afforded access to and be permitted to examine such records at all reasonable times during normal business hours. In the event, upon audit, it is 56 62 determined that adjustments in price were not properly made or were allowed to go into effect but were not properly calculated, adjustments shall be made promptly in billings hereunder for current coal deliveries to reflect the proper amounts of such adjustments; or if no billings are then due, payments reflecting the difference between the proper amounts determined by audit and the amounts paid shall be made. It is expressly understood and agreed that the provisions of this Section 21.01 shall survive the termination or expiration of this Agreement. 22.01 RIGHT OF INSPECTION: COAL PROPERTY. PURCHASER or its designated agent shall have the right at all times, at its sole risk and expense, to enter upon the Coal Property and/or other appropriate locations or Origins (including PURCHASER's Designated Laboratory), where such entry is announced, for any of the following purposes: (a) to inspect and examine the method, equipment and manner of mining, producing, storing, washing, blending, crushing, loading, unloading, transporting, sampling, weighing, analyzing, and other handling of coal to be sold and delivered under this Agreement; (b) to take samples of coal for PURCHASER's analyses (in taking such samples PURCHASER agrees not to materially impact SELLER's operations); or (c) in connection with any accounting, audit, or examination of SELLER's records. PURCHASER's representative shall check in with the appropriate personnel at the entrance to SELLER's facility or other location or Origin prior to entering onto such property. SELLER's representative will accompany PURCHASER's representative at the convenience of PURCHASER's representative and PURCHASER's representative will undergo reasonable safety training as required by SELLER but no more often than once each calendar year. PURCHASER's representative will also abide by SELLER's company rules and procedures. 57 63 No inspection by PURCHASER shall be deemed to be a waiver of any of PURCHASER's rights or relieve SELLER of any obligation under this Agreement. 22.02 RIGHT OF INSPECTION: PURCHASER'S LAB. SELLER or its designated agent shall have the right at all times, at its sole risk and expense, to enter PURCHASER's Designated Laboratory where such entry is announced to inspect and examine the method, equipment and manner of conducting analysis of coal to be sold and delivered under this Agreement. SELLER's representative shall check in with the appropriate personnel at PURCHASER's facility prior to entering onto PURCHASER's property. SELLER's representative will abide by PURCHASER's company rules and procedures. No inspection by SELLER shall be deemed to be a waiver of any of SELLER's rights or relieve PURCHASER of any obligation under this Agreement. 23.01 WAIVER. The failure of either party to insist on strict performance of any provision of this Agreement, or to take advantage of any right hereunder, shall not be construed as a waiver of such provision or right. Time is of the essence of this Agreement. 24.01 LIMITATION OF DAMAGES. Neither PURCHASER nor SELLER shall be liable hereunder to the other for consequential, special, exemplary or indirect damages. 25.01 DISPUTED MATTERS. If any dispute, disagreement, claim or controversy exists between SELLER and PURCHASER arising out of or relating to this Agreement (in each case, a "Disputed Matter") and such Disputed Matter is not resolved pursuant to a dispute resolution mechanism specifically provided for elsewhere in this Agreement, it shall be submitted to the following mediation process: 58 64 (a) Internal Mediation. Upon notice from either party to the other ("Internal Mediation Notice"), the Disputed Matter shall first be referred jointly to two designees, one of each of SELLER and of PURCHASER. If PURCHASER's and SELLER's designees do not agree upon a decision within twenty-one (21) days after the delivery of an Internal Mediation Notice, either party may give the other notice (an "Outside Mediation Notice") that the Disputed Matter shall be referred to outside mediation in accordance with subsection (b). (b) Outside Mediation. If either party delivers an Outside Mediation Notice to the other, the parties shall participate in a non-binding resolution procedure whereby each Party presents its case at a hearing (the "Hearing") before a panel consisting of three (3) individuals: (i) a senior executive or representative of SELLER, (ii) a senior executive or representative of PURCHASER, and (iii) a neutral adviser appointed by the first two executives or representatives. If such executives or representatives fail to agree upon such neutral adviser within seven (7) days after the date of the Outside Mediation Notice, either party may direct the American Arbitration Association to select such neutral adviser. The Hearing shall occur promptly after the appointment of the neutral adviser but no later than thirty (30) days after the date of the Outside Mediation Notice or such reasonable time thereafter (not to exceed fourteen (14) days) as may be necessary to accommodate the schedule of the neutral adviser. Each party may be represented at the Hearing by lawyers. If the outside mediation proceedings do not result in a resolution of 59 65 the Disputed Matter, the outside mediation proceeding shall be without prejudice to the legal position of any affected party. The parties shall each bear their respective costs incurred in connection with this procedure, except that the fees and expenses of the neutral adviser and the costs of the facility for the Hearing shall be allocated fifty percent (50%) to SELLER and fifty percent (50%) to PURCHASER. (c) Failure to Resolve Dispute. If the Disputed Matter is not resolved pursuant to subsection (a) or within sixty (60) days after the date of the Outside Mediation Notice, either Party may submit such Disputed Matter to binding arbitration in accordance with Section 25.02. 25.02 ARBITRATION. Upon written notice from one party to the other party in accordance with Section 25.01(c), the Disputed Matter shall be submitted to binding arbitration in accordance with this Section 25.02. Each such arbitration shall proceed in accordance with the then current rules of the American Arbitration Association insofar as such rules are not inconsistent with the provisions expressly set forth in this Agreement, and, unless the parties mutually agree otherwise, pursuant to the following procedures: (a) Notice of demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. (b) Such arbitration shall be conducted by a panel of three arbitrators appointed as follows: 60 66 (i) one (1) arbitrator (the "SELLER Appointee") shall be appointed by SELLER; (ii) one (1) arbitrator (the "PURCHASER Appointee") shall be appointed by PURCHASER; (iii) one (1) arbitrator (the "Independent Arbitrator") shall be selected by SELLER Appointee and PURCHASER Appointee. Each arbitrator shall be an attorney familiar with the electric utility and coal industries and unaffiliated with any Party and otherwise disinterested in the outcome of the arbitration. The SELLER Appointee and the PURCHASER Appointee shall be appointed within twenty-one (21) days after a Disputed Matter is submitted to arbitration; provided, however, if any Party fails to designate its appointee within such period, the American Arbitration Association shall appoint such appointee and shall be requested to appoint a person meeting the objective qualifications set forth in this paragraph. If the SELLER Appointee and PURCHASER Appointee are unable to agree upon an Independent Arbitrator within fourteen (14) days after the latter of such Appointees is appointed, then the American Arbitration Association shall appoint the Independent Arbitrator and shall be requested to appoint a person meeting the objective qualifications set forth in this paragraph. 61 67 (c) A determination by a majority of the panel of three arbitrators shall be binding. In making such determination the arbitrators shall be required to choose between the positions presented by PURCHASER and SELLER. (d) Reasonable discovery shall be allowed in the arbitration. (e) The Independent Arbitrator shall set the schedule for the arbitration, provided that the Independent Arbitrator shall set such schedule in a manner designed to complete the arbitration in as expeditious a manner as is reasonably practicable. (f) The arbitrators shall abide by the terms of this Agreement in resolving the dispute. (g) SELLER and PURCHASER shall be entitled to be represented at the arbitration by legal counsel and shall be entitled to adduce evidence. (h) The governing law shall be as specified in Section 30.01. (i) Unless otherwise agreed by the Parties to the dispute, all arbitration proceedings shall be held in New Orleans, Louisiana. (j) Each Party agrees to comply with any award made in such proceeding that has become final and to the entry of a judgment in accordance with applicable law in any court having jurisdiction thereof upon any award rendered in such proceeding that has become final. (k) The decision of the arbitrators shall be rendered in writing and within sixty (60) days of the final submissions of the Parties to the dispute in writing or in a hearing before the arbitrators. 62 68 (l) Each such arbitration award that has become final shall be conclusive and binding upon the Parties to the dispute and shall not be appealable, subject to the provisions of applicable law regarding the vacation, modification and correction of awards. (m) Attorneys' fees, costs and other out-of-pocket expenses may be awarded by the arbitrators in their discretion to the party that prevails in any such arbitration, provided that each party to the dispute shall pay its own expenses pending the awarding thereof to the party that prevails in any such arbitration. The foregoing agreement to arbitrate shall be specifically enforceable and, subject to the provisions of applicable law regarding the vacation, modification and correction of awards, the award rendered by the arbitrators shall be final and judgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. 25.03 EXCEPTIONS. Nothing in Section 25.01 or 25.02 shall limit the rights of either of the parties to seek in any court of competent jurisdiction: (a) legal or equitable relief in circumstances other than a Disputed Matter; (b) in any circumstances, such interim relief as may be needed to maintain the status quo, to prevent irreversible harm, or otherwise to protect the subject matter of the mediation and/or arbitration until the matter shall have been finally resolved; provided, however, any such interim relief ordered by a court shall not determine or prejudge the substantive issues to be decided by such mediation and/or arbitration; or 63 69 (c) the collection by either party, as liquidated debt, of any costs, charges or fees due from the other party under this Agreement. 26.01 NOTICES. With the exception of PURCHASER's invoices or shipping notices as required by Section 7.01, any notice, request, protest, consent, demand, report or statement given by one party to the other shall be in writing and deemed duly given when hand delivered to the person designated below, when it is transmitted by facsimile to the facsimile number below or seventy-two (72) hours after it is deposited in the United States mail, by certified mail, postage prepaid, and properly addressed as follows: (1) If the notice is to PURCHASER, to: Vice President, Fuel Louisiana Generating with copy to: Plant Manager, Big Cajun II Louisiana Generating (or to such other person or addresses as PURCHASER shall have designated in writing to SELLER). (2) If the notice is to SELLER, to: President Triton Coal Company 113 S. Gillette Avenue Suite 203 Gillette, WY 82716 and 64 70 President Franklin Coal Sales Company 50 Jerome Lane Fairview Heights, IL 62208 (or to such other person or address as SELLER shall have designated in writing to PURCHASER). Notwithstanding the foregoing, the parties agree that, if the exigencies of the circumstances so require, verbal notices that are directed to the official of the other party who is appropriate under the circumstances and that are promptly followed by a written notice delivered in accordance with the foregoing procedures shall be deemed to be duly given as of the giving of such verbal notice. 27.01 REMEDIES CUMULATIVE. Except as otherwise provided herein, remedies provided under this Agreement shall be cumulative and in addition to other remedies provided at law or in equity. 28.01 AGENT FOR PURCHASER. PURCHASER may designate an individual or entity to act for and on behalf of PURCHASER for the purpose of giving or receiving any notice, demand or request required or authorized by this Agreement, for the purpose of designating the quantity, size, destination and routing of Shipments to be made from time to time to PURCHASER hereunder, and for such other purposes as may from time to time be designated by PURCHASER. PURCHASER may change agent by giving notice thereof to SELLER as provided in Section 26.01. 29.01 CAPTIONS. The captions to sections hereof are for convenience only and shall not be considered in construing the intent of the parties. 65 71 30.01 APPLICABLE LAW. All questions concerning the execution, construction, performance, breach or enforcement of this Agreement shall be construed under the substantive laws of the State of Illinois and not just the Illinois laws regarding conflicts of laws. 31.01 COMPLIANCE WITH LAWS AND REGULATIONS. In connection with the performance of this Agreement, PURCHASER and SELLER agree to comply in all material respects with all applicable governmental laws and regulations. PURCHASER and SELLER each agree and warrant that it or its agent will acquire and maintain, in a timely manner, all licenses and permits required by governmental authorities to engage in the mining and selling of coal and the operation of a power plant and the sale of electricity and to otherwise perform their respective obligations under this Agreement. 32.01 ENTIRE AGREEMENT. This Agreement (including the Appendices attached hereto, which shall be deemed to be an integral part of this Agreement), contains the entire agreement between the parties; and there are no representations, understandings or agreements, oral or written, which are not included herein. This Agreement cannot be changed except by duly authorized representatives of both parties in writing. 33.01 CONFIDENTIAL AND PROPRIETARY INFORMATION. The terms and conditions (including, but not limited to, prices and mining plans) set forth in this Agreement are considered by both PURCHASER and SELLER to be confidential and proprietary information. Neither party shall disclose any such information to any third party without advance written consent of the other (which consent shall not be unreasonably withheld) except where such disclosure may be required by law, regulation or regulatory agencies having jurisdiction over 66 72 SELLER or PURCHASER or is required in connection with the assertion of a claim or defense in judicial or administrative proceedings involving the parties hereto, in which event the party intending to make such disclosure shall advise the other in advance and cooperate to the extent practicable to minimize the disclosure of any such information. Either party hereto shall be permitted to disclose any information contained herein to a prospective purchaser of the stock, ownership interests or assets of said party, to prospective lenders, to the independent auditors described in this Agreement and to the parties' own such auditors' or prospective purchasers' or lenders' legal and financial advisors in each case on a need to know basis provided that any such third party shall be bound by the provisions of this Section 33.01. For purposes of this Section 33.01, the term "third party" shall not include a parent, subsidiary, affiliate or sister corporation of either party hereto. 34.01 BIG CAJUN II, UNIT 3. Forty two percent (42%) of Unit 3 at the Power Plant is presently owned by GSU. PURCHASER anticipates that it will continue to operate the Power Plant pursuant to the current applicable Joint Ownership and Operating Agreement with GSU. In the event that PURCHASER does not perform as the agent for GSU at the Power Plant during the entire term of this Agreement, PURCHASER and SELLER shall promptly meet and amend the provisions of Sections 3.03, 4.06 and other provisions as appropriate to reflect such change. 67 73 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers duly authorized thereunto, on the date indicated by their signatures. PURCHASER LOUISIANA GENERATING, LLC BY: NRG ENERGY, INC. ATTEST: /s/ [illegible] By: /s/ Craig A. Matacynski Its: Member Date: 01 August, 97 BY: SOUTHERN ENERGY CAJUN, INC. ATTEST: /s/ [illegible] By: /s/ G.J. Kubick Its: Vice President Date: 8/11/97 BY: ZENERGY, INC. ATTEST: /s/ [illegible] By: /s/ Alan D. Williams Its: President Date: 8/18/97 SELLER TRITON COAL COMPANY ATTEST: /s/ [illegible] By: /s/ John C. Willson Its: President Date: 8/20/97 74 APPENDIX A COAL PROPERTY BUCKSKIN MINE - The Mining Area owned, leased or controlled by SELLER as described in the map attached as Appendix A-1. NORTH ROCHELLE MINE - The Mining Area owned, leased or controlled by SELLER as described in the map attached as Appendix A-2, including the North Roundup lease that is continguous to the North Rochelle Mine but is not currently owned, leased or controlled by SELLER. BLACK THUNDER MINE - located in Campbell County, Wyoming, operated by Thunder Basin Coal Company, a wholly-owned subsidiary of Atlantic Richfield Company. JACOB'S RANCH MINE - located in Campbell County, Wyoming, operated by Kerr McGee Coal Corporation. NORTH ANTELOPE MINE - located in Campbell County, Wyoming, operated by Powder River Coal Company, a subsidiary of Peabody Coal Company. ROCHELLE MINE - located in Campbell County, Wyoming, operated by Powder River Coal Company, a subsidiary of Peabody Coal Company. 75 APPENDIX A-1 BUCKSKIN MINE [see next page] 2 76 BUCKSKIN MINE APPENDIX A-1 [graph/map] 77 APPENDIX A-2 NORTH ROCHELLE MINE [see next page] 3 78 APPENDIX A-2 NORTH ROCHELLE MINE [graph/map] 79 APPENDIX B GOVERNMENTAL IMPOSITION WORKSHEET (REFERENCE SECTION 4.03)
PRICE COMPONENTS PER TON - ---------------- ------- PRICE BEFORE TAXES, ROYALTY, & RECLAMATION FEE {***} BLACK LUNG TAX (5) {***} GROSS PROCEEDS TAX (4) {***} SEVERANCE TAX (3) {***} RECLAMATION FEE (2) {***} LESS: 1.3% EXCESS MOISTURE {***} {***} PROPERTY TAX {***} FEDERAL ROYALTY (1) {***} ----- TOTAL {***}
NOTES: 1) The Federal Royalty Rate is {***}. 2) Lesser of {***} of the Total Price (less the Reclamation Fee itself) or {***} per ton with a reduction for excess moisture (assumed constant at {***}). * Direct Cost Ratio (DCR) of {***} used to determine effective Wyoming Tax. This rate is the 1996 rate for the Buckskin Mine (being used in 1997). 3) The Wyoming Severance Tax (WST) rate is {***}. WST = {***} [DCR {[Sales Price - (Recl + WST + CCGPT + BL + All Royalty)} * } + (Recl + WST + CCGPT + BL + Private Royalty)] 4) The Campbell County Gross Proceeds Tax (CCGPT) Rate is {***}. This is the 1995 rate, first published in September of 1996. The 1996 rate will be published in the fall of 1997. CCGPT = {***}[DCR{[Sales Price - (Recl + WST + CCGPT + BL + All Royalty)} + [(Recl + WST + CCGPT + BL + Private Royalty)] 5) Lesser of {***} of the Total Price (less the Black Lung Tax itself) or {***} per ton. 4 80 APPENDIX C CALORIFIC VALUE ADJUSTMENT (REFERENCE SECTION 4.04) An adjustment is to be made monthly to the Base Price applicable to coal received by PURCHASER hereunder as specified in Section 5.01 to reflect the actual "as received" calorific value of the coal compared to {***} Btu/lb. Determination of the monthly adjustment to the Base Price reflecting the Calorific Value Adjustment shall be made as follows: (NOTE: Figures used in the example below are purely hypothetical and are used only for illustrative purposes, also ( ) denotes a reduction in the Base Price.)
Example Example Example Case 1 Case 2 Case 3 {***} at a {***} {***} Specified Period at a Specified at a Specified CalorificValue of Period Calorific Period Calorific Btu/lb. Value of Btu/lb. Value of Btu/lb. ------- ---------------- ---------------- (a) Base Price (per ton) $3.240 $3.240 $3.240 (b) Transportation Rate per ton $14.750 $14.750 $14.750 (c) Purchaser's Total Delivered Cost per ton $17.990 $17.990 $17.990 (a+b) (d) Calorific Value as specified in Section 16.9000 16.9000 16.9000 10.01 in MMBtu/ton (e) Purchaser's Total Delivered Cost expressed 1.06450 1.06450 1.06450 in $/MMBtu (c/d) (f) Calorific Value of coal received during the 16.9000 17.2000 16.6000 specified period in MMBtu/ton (g) Price per ton to be paid for coal received {***} {***} {***} during the specified period {***} (h) Calorific Value Adjustment to Base Price {***} {***} {***} {***}
5 81 APPENDIX D EMISSIONS ALLOWANCE ADJUSTMENT (REFERENCE SECTION 4.05) Following is an example of the Emissions Allowance Adjustment to be made annually to the Base Price in accordance with Section 4.05. The price adjustment shall be rounded to the nearest one-tenth of a cent per ton. The figures used in the example are hypothetical and are used only for illustrative purposes. Example for January 2000; adjustment to be calculated by PURCHASER: Tons shipped by SELLER in January 2000 is 550,000 tons. Cantor-Fitzgerald Market Price Index for January 2000 is $129.68. Determination of actual price of SO2 Emissions Allowances for January 2000: P(C) = $158.00 (value for Calendar Year 2000) P(A) = $129.68 (for January) A(S) = {***}/ton (value for Calendar Year 2000) Adjustment = ([P(A) - P(C)] / P(C)) x A(S) Adjustment = [$129.68 - $158.00]/$158.00 x {***} Adjustment = {***} per ton Since P(A) is less than P(C), then the absolute value of the adjustment, or {***} per ton, shall be remitted by PURCHASER to SELLER. Amount paid to SELLER = {***} x 550,000.00 = {***}. NOTE: The Cantor-Fitzgerald Market Price Index for SO(2) allowance for the month is published in the prior month. In other words, the January 2000 Market Price Index will be published in December 1999. 6 82 APPENDIX E SO(2) ALLOWANCE DUE SELLER (REFERENCE SECTION 4.06) Following is an example of the SO(2) Allowance due SELLER to be calculated annually in accordance with Section 4.06. The figures used in the example are hypothetical and are used only for illustrative purposes: Example for Calendar Year 2000; if the Annual Plant Burn is LESS THAN 85,000,000MM Btu: Assume APB = 84,000,000MM Btu Assume APE = 36,000 tons SO(2) Actual Emissions in Calendar Year 2000 ADS = [{***} - 36,000 - {({***}-84,000,000) x {***}}] x {***} ADS = {***} ADS = {***} ADS = 4,905 Example for Calendar Year 2000; if the Annual Plant Burn is GREATER THAN 85,000,000MM Btu: Assume APB = 88,000,000MM Btu Assume APB = 37,500 tons SO(2) Actual Emissions in Calendar Year 2000 ADS = {***} ADS = {***} ADS = 4,205 7 83 APPENDIX F SUMMARY OF PERTINENT PROVISIONS OF THE COAL TRANSPORTATION AGREEMENT (A) PURCHASER is to provide a sufficient number of empty coal cars to assemble unit trains of {***} cars or more. (B) The Minimum Shipment Weight for coal cars shall be {***} tons for aluminum cars and {***} tons for steel cars. (C) Coal tendered with a shipment weight of less than the Minimum Shipment Weight shall be billed on the basis of the Minimum Shipment Weight. (D) The number of tons on which transportation charges are paid shall be counted toward meeting the Minimum Volume Commitment. (E) Each unit train shall contain no less than {***} coal cars unless cars have been damaged, destroyed or derailed by carriers and if carriers are unable to provide substitute cars, then the unit train shall be reduced by cars destroyed or damaged but not to less than 105 cars. (F) PURCHASER shall make the coal cars available for loading. BN shall furnish mine operator not less than four (4) hours advance notice of the arrival of railcars at origin. (G) PURCHASER and mine operator shall be responsible for loading of cars. BN shall provide locomotives and train crews to move trains through loading facilities at a controlled speed which will allow for full and uniform loading of each coal car. (H) Mine operator shall have four (4) hours free time to load each unit train. Free time shall start when locomotives have arrived at the loading point and the train crew has requested loading instructions and shall end when the mine operator has released the train. (I) Loading free time shall be extended when a Loading Disability occurs during a train's free time. (J) "Loading Disability" means any of the following events which result in the inability to load coal at Origin: (i) a cause directly attributable to BN; (ii) an act of God; (iii) a strike or other labor disturbance; (iv) a riot or other civil disturbance; 8 84 (v) unusual snow and/or ice accumulation sufficient to immobilize train operations and prevent loading of such train; (vi) governmental acts or regulations; or (vii) mechanical or electrical breakdown, explosion or fire, not reasonably within the control of PURCHASER or its mine operator, in a Loading Facility. "Loading Disability Time" means the period of time from which PURCHASER or the mine operator is prevented from loading the train at origin due to a Loading Disability. PURCHASER or the mine operator shall notify BN immediately by telephone (i) as to the time and nature of commencement of the Loading Disability and (ii) as to the time of termination of the Loading Disability. (K) If a train cannot be positioned on origin trackage due to any cause attributable to PURCHASER or if a train cannot be positioned on mine operator's trackage at origin due to any cause attributable to PURCHASER or its mine operator, that train shall be considered "Constructively Placed." A Constructively Placed train shall be held at the nearest available hold point as determined by BN. Immediately upon arrival of the train at the hold point, BN shall notify the mine operator or PURCHASER by radio, telephone, wire or other reasonable means, of the date and hour that hold time begins. Immediately upon departure of the train from the hold point, BN shall notify the mine operator or PURCHASER by radio, telephone, wire or other reasonable means, of the date and hour that the hold time ends. For purposes of computing the loading or unloading time of a Constructively Placed train: (i) the time elapsed while transporting a Constructively Placed train from the hold point to origin shall be excluded from loading free time; and (ii) if the train must reverse direction to reach the nearest available hold point, the time required for the train to return to the point of reverse direction shall be included in loading free time. (L) If, due to any cause attributable to BN, a train arrives at origin before another train has been released, the second and subsequent train(s) shall not be considered placed or Constructively Placed, and Loading Free Time for such train shall not commence until the locomotives have arrived at the Designated Loading Point on origin trackage and the crew has requested loading instructions. (M) The weight of the coal in the coal cars will be determined at origin by the mine operator. Carriers shall not be responsible for such weight determination. (N) If any unit train cannot be weighed due to a breakdown of scales, the lading weight per car of such train shall be determined by averaging the lading weight per car of the last five (5) trains of like equipment (i.e., aluminum or steel railcars) weighed at that origin prior to such breakdown. If fewer than five (5) trains under this Agreement were weighed at that origin prior to the breakdown, the weight per car shall be determined by averaging the 9 85 weight per car of the train(s) (of like equipment) under this Agreement weighed at that origin prior to the breakdown as well as the lading weight per car of train(s) under the Agreement first weighed at that origin after the scales are repaired, so as to comprise a five (5) weighted train average. (O) Unless PURCHASER is notified by BN that heavier weights are acceptable, if a loaded railcar is found by BN, as determined by weighing procedures set forth above, to weigh in excess of maximum gross weight on rail of 286,000 pounds for shipment in aluminum railcars, or 268,000 pounds for shipments in steel railcars (plus or minus one-half of one percent), BN may, at its discretion, switch said overloaded railcars and remove them from the train. PURCHASER or the mine operator shall then cause excess coal to be removed from the overloaded railcar, and BN shall replace such car into the train. 10 86 APPENDIX G COAL SAMPLE PREPARATION AND ANALYSES LABORATORY PROCEDURES Procedures to be utilized for coal sample preparation and analysis will be performed manually or by utilization of automated equipment which conforms with the referenced ASTM Standards. 1. Total Moisture in Coal (Air drying will be continued for ASTM D-3302 predetermined time necessary to achieve a loss in weight of no more than 0.1 percent per hour). 2. Preparing Coal Samples for Analysis ASTM D-2013 3. Moisture in the Analysis Sample of Coal ASTM D-3173 4. Ash in the Analysis Sample of Coal ASTM D-3174 5. Gross Calorific Value of Coal by the Adiabatic Bomb Calorimeter ASTM D-2015 or Gross Calorific Value of Coal by Microprocessor Controlled Isoperibol ASTMD-1989 Bomb Calorimeter 6. Total Sulfur in the Analysis Sample of Coal Using High Temperature ASTM D-4239 Tube Furnace Combustion Method 7. Volatile Matter in the Analysis Sample of Coal ASTM D-3175 8. Fusibility of Coal Ash ASTM D-1857 9. Grindability of Coal by the Hardgrove Grindability Machine Method (No. ASTM D-409 8 coal samples will be used for this analysis) 10. Fixed Carbon is a calculated value. Fixed Carbon is the resultant of ASTM D-5142 the summation of percentage moisture, ash and volatile or matter subtracted from 100. All percentages used in the ASTM D-3172 calculation must be on the same moisture basis. 11. Nitrogen in the Analysis Sample of Coal ASTM D-5373 or ASTM D-3179 12. Calculating Coal Analyses from As-Determined to Different Basis ASTM D-3180
11 EX-12.1 37 y57012ex12-1.txt CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES 1 Exhibit 12.1 NRG South Central Generating LLC Consolidated Ratio of Earnings to Fixed Charges
For the Period March 30, 2000 (Inception) to June 30, 2000 ---------------- (In thousands) Earnings: Income before taxes $ 5,597 Add: Fixed Charges 18,861 ------- 24,458 ------- Fixed Charges: Interest expense 18,758 Amortization of debt costs 103 ------- $18,861 ------- Ratio of earnings to fixed charges 1.30
EX-21.1 38 y57012ex21-1.txt SUBSIDIARIES OF NRG SOUTH CENTRAL GENERATING LLC 1 EXHIBIT 21.1 SUBSIDIARIES OF NRG SOUTH CENTRAL GENERATING LLC NRG Sterlington Power LLC Louisiana Generating LLC NRG New Roads Holdings LLC Big Cajun I Peaking Power LLC *Each 100% owned. EX-23.1 39 y57012ex23-1.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on Form S-4 of NRG South Central Generating LLC of our reports dated October 17, 2000 relating to the financial statements of NRG South Central Generating LLC and Louisiana Generating LLC and of our report dated March 7, 2000 relating to the financial statements of Cajun Electric (Cajun Facilities), which appear in such Registration Statement. We also consent to the reference to us under the headings "Experts" in such Registration Statement. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Minneapolis, Minnesota October 30, 2000 EX-25.1 40 y57012ex25-1.txt FORM T-1 1 Exhibit 25.1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) THE CHASE MANHATTAN BANK (Exact name of trustee as specified in its charter) NEW YORK 13-4994650 (State of incorporation (I.R.S. employer if not a national bank) identification No.) 270 PARK AVENUE NEW YORK, NEW YORK 10017 (Address of principal executive offices) (Zip Code) William H. McDavid General Counsel 270 Park Avenue New York, New York 10017 Tel: (212) 270-2611 (Name, address and telephone number of agent for service) NRG SOUTH CENTRAL GENERATING LLC (Exact name of obligor as specified in its charter) DELAWARE 41-1963217 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 901 MARQUETTE AVENUE, SUITE 2300 MINNEAPOLIS, MN 55402 (612) 373-5300 (Address of principal executive offices) (Zip Code) $500,000,000 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016 $300,000,000 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024 (Title of the indenture securities) 2 GENERAL Item 1. General Information. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, State House, Albany, New York 12110. Board of Governors of the Federal Reserve System, Washington, D.C., 20551 Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, New York Federal Deposit Insurance Corporation, Washington, D.C., 20429. (b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. -2- 3 Item 16. List of Exhibits List below all exhibits filed as a part of this Statement of Eligibility. 1. A copy of the Articles of Association of the Trustee as now in effect, including the Organization Certificate and the Certificates of Amendment dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982, February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1 filed in connection with Registration Statement No. 333-06249, which is incorporated by reference). 2. A copy of the Certificate of Authority of the Trustee to Commence Business (see Exhibit 2 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 3. None, authorization to exercise corporate trust powers being contained in the documents identified above as Exhibits 1 and 2. 4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed in connection with Registration Statement No. 333-76439, which is incorporated by reference). 5. Not applicable. 6. The consent of the Trustee required by Section 321(b) of the Act (see Exhibit 6 to Form T-1 filed in connection with Registration Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in connection with the merger of Chemical Bank and The Chase Manhattan Bank (National Association), Chemical Bank, the surviving corporation, was renamed The Chase Manhattan Bank). 7. A copy of the latest report of condition of the Trustee, published pursuant to law or the requirements of its supervising or examining authority. 8. Not applicable. 9. Not applicable. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, The Chase Manhattan Bank, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York and State of New York, on the 17th day of October, 2000. THE CHASE MANHATTAN BANK By /s/ Annette M. Marsula ----------------------------------------- Annette M. Marsula, Vice President -3- 4 Exhibit 7 to Form T-1 Bank Call Notice RESERVE DISTRICT NO. 2 CONSOLIDATED REPORT OF CONDITION OF The Chase Manhattan Bank of 270 Park Avenue, New York, New York 10017 and Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business June 30, 2000, in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS ASSETS IN MILLIONS Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ................................ $ 15,412 Interest-bearing balances ........................ 4,593 Securities: .......................................... Held to maturity securities............................ 613 Available for sale securities.......................... 57,372 Federal funds sold and securities purchased under agreements to resell ............................. 29,490 Loans and lease financing receivables: Loans and leases, net of unearned income ......... $142,368 Less: Allowance for loan and lease losses ........ 2,227 Less: Allocated transfer risk reserve ............ 0 -------- Loans and leases, net of unearned income, allowance, and reserve ............................ 140,141 Trading Assets ......................................... 48,079 Premises and fixed assets (including capitalized leases)............................................ 3,447 Other real estate owned ................................ 27 Investments in unconsolidated subsidiaries and associated companies............................... 259 Customers' liability to this bank on acceptances outstanding ....................................... 676 Intangible assets ...................................... 3,994 Other assets ........................................... 16,373 -------- TOTAL ASSETS ........................................... $320,476 ========
-4- 5
LIABILITIES Deposits In domestic offices ............................... $103,433 Noninterest-bearing ............................... $42,054 Interest-bearing .................................. 61,379 In foreign offices, Edge and Agreement subsidiaries and IBF's ............................ 92,486 Noninterest-bearing .................................... $ 5,683 Interest-bearing .................................. 86,803 Federal funds purchased and securities sold under agree- ments to repurchase .................................... 49,016 Demand notes issued to the U.S. Treasury ............... 750 Trading liabilities .................................... 32,878 Other borrowed money (includes mortgage indebtedness and obligations under capitalized leases): With a remaining maturity of one year or less ...... 4,298 With a remaining maturity of more than one year through three years............................ 0 With a remaining maturity of more than three years.. 97 Bank's liability on acceptances executed and outstanding 676 Subordinated notes and debentures ...................... 5,430 Other liabilities ...................................... 12,129 TOTAL LIABILITIES ...................................... 301,193 EQUITY CAPITAL Perpetual preferred stock and related surplus 0 Common stock ........................................... 1,211 Surplus (exclude all surplus related to preferred stock) 11,066 Undivided profits and capital reserves ................. 8,165 Net unrealized holding gains (losses) on available-for-sale securities ....................... (1,175) Accumulated net gains (losses) on cash flow hedges...... 0 Cumulative foreign currency translation adjustments .... 16 TOTAL EQUITY CAPITAL ................................... 19,283 -------- TOTAL LIABILITIES AND EQUITY CAPITAL ................... $320,476 ========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named bank, do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true to the best of my knowledge and belief. JOSEPH L. SCLAFANI We, the undersigned directors, attest to the correctness of the Report of Condition (including the supporting schedules) for this report date and declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the appropriate Federal regulatory authority and is true and correct. WILLIAM B. HARRISON, JR.) JOHN R. STAFFORD )DIRECTORS M. ANTHONY BURNS ) -5- EX-27.1 41 y57012ex27-1.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the June 30, 2000 Financial Statements of NRG South Central Generating, LLC and is qualified in its entirety by reference to such financial statements. 0001124468 NRG SOUTH CENTRAL GENERATING LLC 1000 OTHER DEC-31-2000 MAR-30-2000 JUN-30-2000 10,319 0 35,869 0 37,425 84,473 1,043,039 6,696 1,142,158 87,569 776,250 0 0 1 274,163 1,142,158 88,536 88,536 55,637 64,305 (227) 0 18,861 5,597 0 0 0 0 0 5,597 0 0
EX-27.2 42 y57012ex27-2.txt FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the June 30, 2000 Financial Statements of Louisiana Generating LLC and is qualified in its entirety by reference to such financial statements. 0001126955 LOUISIANA GENERATING LLC 1000 OTHER DEC-31-2000 MAR-30-2000 JUN-30-2000 10,319 0 35,869 0 37,425 84,473 1,017,465 6,571 1,111,333 94,789 776,250 0 0 1 236,118 1,111,333 88,536 88,536 55,637 63,965 (56) 0 18,861 5,766 0 0 0 0 0 5,766 0 0
EX-99.1 43 y57012ex99-1.txt FORM OF LETTER OF TRANSMITTAL 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL NRG SOUTH CENTRAL GENERATING LLC OFFER FOR ALL OUTSTANDING 8.962% SERIES A SENIOR SECURED BONDS DUE 2016 AND 9.479% SERIES B SENIOR SECURED BONDS DUE 2024 IN EXCHANGE FOR 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016 AND 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024 THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO THE PROSPECTUS, DATED [ ], 2000 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ], 2000, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. The Exchange Agent for the Exchange Offer is: THE CHASE MANHATTAN BANK By Mail, Hand Delivery or Overnight Courier: The Chase Manhattan Bank 55 Water Street, Room 234 New York, New York 10041 Attention: Carlos Esteves -- Confidential By Facsimile Transmission: (for Eligible Institutions Only) 212-638-7380 Confirm by Telephone: 212-638-0828 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY OF THIS LETTER OF TRANSMITTAL. The undersigned acknowledges that he or she has received and reviewed the Prospectus, dated [ ], 2000 (the "Prospectus"), of NRG South Central Generating LLC, a Delaware limited liability company (the "Issuer") and this Letter of Transmittal (the "Letter of Transmittal" or the "Letter"), which together constitute the Issuer's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to: (i) $500,000,000 of the Issuer's 8.962% Series A-1 Senior Secured Bonds due 2016 and (ii) $300,000,000 of the Issuer's 9.479% Series B-1 Senior Secured Bonds due 2024, all of which have been registered under the Securities Act of 1933, as amended (the "New Bonds"), for a like principal amount, in the aggregate, of the Issuer's issued and outstanding 8.962% Series A Senior Secured Bonds due 2016 and 9.479% Series B Senior Secured Bonds due 2024 (the "Old Bonds") from the registered holders thereof. For each Old Bond accepted for exchange, the holder of such Old Bond will receive a New Bond having a principal amount equal to that of the surrendered Old Bond. The New Bonds will bear interest from the most recent date to which interest has been paid. Accordingly, registered holders of New Bonds on the relevant record date for the first interest 2 payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid. Old Bonds accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Old Bonds whose Old Bonds are accepted for exchange will not receive any payment in respect of accrued interest on such Old Bonds otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. This Letter is to be completed by a holder of Old Bonds either if certificates for such Old Bonds are to be forwarded herewith or if a tender is to be made by book-entry transfer to the account maintained by The Chase Manhattan Bank, as Exchange Agent for the Exchange Offer (the "Exchange Agent"), at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer -- Book-Entry Transfers" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation (as defined below), which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter and that the Issuer may enforce this Letter against such participant. Holders of Old Bonds whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Old Bonds into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Old Bonds according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1. 2 3 DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. List below the Old Bonds to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Old Bonds should be listed on a separate signed schedule affixed hereto. - ------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF OLD BONDS - ------------------------------------------------------------------------------------------------------------------ 3 NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) 1 (PLEASE FILL IN, IF BLANK) PRINCIPAL CERTIFICATE AMOUNT NUMBER(S)* TENDERED** 2 AGGREGATE PRINCIPAL AMOUNT OF OLD BOND(S) - ------------------------------------------------------------------------------------------------------------------ ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- TOTAL - ------------------------------------------------------------------------------------------------------------------ * Need not be completed if Old Bonds are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Bonds represented by the Old Bonds indicated in column 2. See Instruction 2. Old Bonds tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1. - ------------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED OLD BONDS ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution ------------------------------------------------------------ Account Number --------------------------------- Transaction Code Number --------------------------------- By crediting the Old Bonds to the Exchange Agent's account at the Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting to the Exchange Agent a computer-generated Agent's Message in which the holder of the Old Bonds acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, the Letter, the participant in the Book-Entry Transfer Facility confirms on behalf of itself and the beneficial owners of such Old Bonds all provisions of this Letter (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter to the Exchange Agent. [ ] CHECK HERE IF TENDERED OLD BONDS ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered holder(s) ------------------------------------------------------------ Window Ticket Number (if any) ------------------------------------------------------------ Date of Execution of Notice of Guaranteed Delivery ------------------------------------------------------------ Name of Institution Which Guaranteed Delivery ------------------------------------------------------------ IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING: Account Number ------------------------------------------------------------ Transaction Code Number ------------------------------------------------------------ Name of Tendering Institution ------------------------------------------------------------ [ ] CHECK HERE IF TENDERED OLD BONDS ARE ENCLOSED HEREWITH.
3 4 [ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ------------------------------------------------------------ Address: ------------------------------------------------------------
If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Bonds. If the undersigned is a broker-dealer that will receive New Bonds for its own account in exchange for Old Bonds that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act of 1933, as amended, in connection with any resale of such New Bonds; however, by so acknowledging and by delivering such a prospectus the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended. If the undersigned is a broker-dealer that will receive New Bonds, it represents that the Old Bonds to be exchanged for the New Bonds were acquired as a result of market-making activities or other trading activities. 4 5 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Issuer the aggregate principal amount of Old Bonds indicated above. Subject to, and effective upon, the acceptance for exchange of the Old Bonds tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Issuer all right, title and interest in and to such Old Bonds as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigned's true and lawful agent and attorney-in-fact with respect to such tendered Old Bonds, with full power of substitution, among other things, to cause the Old Bonds to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Old Bonds, and to acquire New Bonds issuable upon the exchange of such tendered Old Bonds, and that, when the same are accepted for exchange, the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Issuer. The undersigned hereby further represents that any New Bonds acquired in exchange for Old Bonds tendered hereby will have been acquired in the ordinary course of business of the person receiving such New Bonds, whether or not such person is the undersigned, that neither the holder of such Old Bonds nor such other person has any arrangement or understanding with any person to participate in the distribution of such New Bonds and that neither the holder of such Old Bonds nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Issuer. The undersigned acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the New Bonds issued pursuant to the Exchange Offer in exchange for the Old Bonds may be offered for resale, resold and otherwise transferred by holders or other persons receiving the New Bonds thereof (other than any such holder or other person that is an "affiliate" of the Issuer within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Bonds are acquired in the ordinary course of business of the person receiving such New Bonds, whether or not such person is the holder, and neither the holder nor such other person has any arrangement or understanding with any person to participate in the distribution of such New Bonds. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Bonds and has no arrangement or understanding to participate in a distribution of New Bonds. If any holder is an affiliate of the Issuer, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the New Bonds to be acquired pursuant to the Exchange Offer, such holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive New Bonds for its own account in exchange for Old Bonds, it represents that the Old Bonds to be exchanged for the New Bonds were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Bonds; however, by so acknowledging and by delivering a prospectus meeting the requirements of the Securities Act, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Issuer to be necessary or desirable to complete the sale, assignment and transfer of the Old Bonds tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer -- Withdrawal Rights" section of the Prospectus. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the New Bonds (and, if applicable, substitute certificates representing Old Bonds for any Old Bonds not exchanged) in the name of 5 6 the undersigned or, in the case of a book-entry delivery of Old Bonds, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the New Bonds (and, if applicable, substitute certificates representing Old Bonds for any Old Bonds not exchanged) to the undersigned at the address shown above in the box entitled "Description of Old Bonds." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD BONDS" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD BONDS AS SET FORTH IN SUCH BOX ABOVE. 6 7 - ------------------------------------------------------------ SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Old Bonds not exchanged and/or New Bonds are to be issued in the name of someone other than the person or persons whose signature(s) appear(s) on this Letter above, or if Old Bonds delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue: New Bonds and/or Old Bonds to: Name(s) ------------------------------------------------ (PLEASE TYPE OR PRINT) ----------------------------------------------------------- (PLEASE TYPE OR PRINT) Address ------------------------------------------------- ----------------------------------------------------------- (ZIP CODE) (COMPLETE SUBSTITUTE FORM W-9) Credit unexchanged Old Bonds delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. ----------------------------------------------------------- (BOOK-ENTRY TRANSFER FACILITY ACCOUNT NUMBER, IF APPLICABLE) - ------------------------------------------------------------ - ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 3 AND 4) To be completed ONLY if certificates for Old Bonds not exchanged and/or New Bonds are to be sent to someone other than the person or persons whose signature(s) appear(s) on this Letter above or to such person or persons at an address other than shown in the box entitled "Description of Old Bonds" on this Letter above. Mail: New Bonds and/or Old Bonds to: Name(s) ------------------------------------------------ (PLEASE TYPE OR PRINT) ----------------------------------------------------------- (PLEASE TYPE OR PRINT) Address ------------------------------------------------- ----------------------------------------------------------- (ZIP CODE) - ------------------------------------------------------------ IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD BONDS OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. 7 8 (TO BE COMPLETED BY ALL TENDERING HOLDERS) (COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE) Dated: - ------------------------ , 2000 X - ----------------------------------------------------------------------------- , 2000 X - ----------------------------------------------------------------------------- , 2000 SIGNATURE(S) OF OWNER DATE Area Code and Telephone Number: - -------------------------------------------------------------------------------- This Letter must be signed by the registered Holder(s) as the name(s) appear(s) on the certificate(s) for the Old Bonds hereby tendered or on a security position, on listing or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE TYPE OR PRINT) Capacity: - -------------------------------------------------------------------------------- Address: - -------------------------------------------------------------------------------- (INCLUDING ZIP CODE) SIGNATURE GUARANTEE (IF REQUIRED BY INSTRUCTION 3) Signature(s) Guaranteed by an Eligible Institution: ---------------------------------------------------------------- (AUTHORIZED SIGNATURE) - -------------------------------------------------------------------------------- (TITLE) - -------------------------------------------------------------------------------- (NAME AND FIRM) Dated: - ------------------------ , 2000 8 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE 8.962% SERIES A SENIOR SECURED BONDS DUE 2016 AND 9.479% SERIES B SENIOR SECURED BONDS DUE 2024 OF NRG SOUTH CENTRAL GENERATING LLC IN EXCHANGE FOR THE 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016 AND 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024 THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED 1. DELIVERY OF THIS LETTER AND BONDS; GUARANTEED DELIVERY PROCEDURES. This Letter is to be completed by holders of Old Bonds either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer -- Book-Entry Transfers" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal and that the Issuer may enforce the Letter of Transmittal against such participant. Certificates for all physically tendered Old Bonds, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof or Agent's Message in lieu thereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Old Bonds tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Old Bonds are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Old Bonds pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to 5:00 p.m., New York City time, on the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Issuer (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Bonds and the amount of Old Bonds tendered, stating that the tender is being made thereby and guaranteeing that within three (3) New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Old Bonds, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Old Bonds, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and all other documents required by this Letter, are received by the Exchange Agent within three (3) NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. An "Eligible Institution" is a firm which is a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program. The method of delivery of this Letter, the Old Bonds and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Old Bonds are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 9 10 5:00 p.m., New York City time, on the Expiration Date. No Letters of Transmittal or Old Bonds should be sent directly to the Issuer. See "The Exchange Offer" section of the Prospectus. 2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If less than all of the Old Bonds evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Old Bonds to be tendered in the box above entitled "Description of Old Bonds -- Principal Amount Tendered." A reissued certificate representing the balance of nontendered Old Bonds will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. ALL OF THE OLD BONDS DELIVERED TO THE EXCHANGE AGENT WILL BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. 3. SIGNATURES ON THIS LETTER; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter is signed by the holder of the Old Bonds tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates or on the Book-Entry Transfer Facility's security position listing as the holder of such Old Bonds without any change whatsoever. If any tendered Old Bonds are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Old Bonds are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Old Bonds specified herein and tendered hereby, no endorsements of certificates or written instrument or instruments of transfer or exchange are required. If, however, the Old Bonds are registered in the name of a person other than a signer of the Letter, the Old Bonds surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by the Issuer in its sole discretion, duly executed by the registered national securities exchange with the signature thereon guaranteed by an Eligible Institution. If this Letter is signed by a person or persons other than the registered holder or holders of Old Bonds, such Old Bonds must be endorsed or accompanied by appropriate powers of attorney, in either case signed exactly as the name or names of the registered holder or holders that appear on the Old Bonds. If this Letter or any Old Bonds or powers of attorneys are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Issuer, proper evidence satisfactory to the Issuer of their authority to so act must be submitted with the Letter. Endorsements on certificates for Old Bonds or signatures on powers of attorneys required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Old Bonds are tendered: (i) by a registered holder of Old Bonds (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Old Bonds) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the account of an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS Tendering holders of Old Bonds should indicate in the applicable box the name and address to which New Bonds issued pursuant to the Exchange Offer and or substitute certificates evidencing Old Bonds not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Holders tendering Old Bonds by book-entry transfer may request that Old Bonds not exchanged be credited to such account maintained at the 10 11 Book-Entry Transfer Facility as such holder may designate hereon. If no such instructions are given, such Old Bonds not exchanged will be returned to the name and address of the person signing this Letter. 5. TAXPAYER IDENTIFICATION NUMBER. Federal income tax law generally requires that a tendering holder whose Old Bonds are accepted for exchange must provide the Issuer (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Issuer is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, delivery to such tendering holder of New Bonds may be subject to backup withholding in an amount equal to 31% of all reportable payments made after the exchange. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Old Bonds (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering holder of Old Bonds must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that (i) the holder is exempt from backup withholding, or (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the tendering holder of Old Bonds is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Exchange Agent a completed Form W-8, Certificate of Foreign Status. If the Old Bonds are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this box and writing "applied for" on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. Checking this box also requires that the holder complete the Certificate of Awaiting Taxpayer Identification Number form attached to the Substitute Form W-9. If such holder does not provide its TIN to the Exchange Agent within 60 days, backup withholding will begin and continue until such holder furnishes its TIN to the Exchange Agent. The information requested above should be directed to the Exchange Agent at the following address: Delivery To: The Chase Manhattan Bank, Exchange Agent THE CHASE MANHATTAN BANK By Mail, Hand Delivery or Overnight Courier: The Chase Manhattan Bank 55 Water Street, Room 234 New York, New York 10041 Attention: Carlos Esteves -- Confidential By Facsimile Transmission: (for Eligible Institutions Only) 212-638-7380 Confirm by Telephone: 212-638-0828 6. TRANSFER TAXES. Holders who tender their Old Bonds for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Bonds are to be delivered to, or are to be issued in the name of, any person other than the 11 12 registered holder of the Old Bonds tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Bonds in connection with the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Old Bonds specified in this Letter. 7. WAIVER OF CONDITIONS. The Issuer reserves the absolute right to waive any defects or irregularities or conditions of the Exchange Offer as to any particular Old Bond either before or after the Expiration Date (including the right to waive the ineligibility of any holder who seeks to tender Old Bonds in the Exchange Offer). 8. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Old Bonds, by execution of this Letter or an Agent's Message in lieu thereof, shall waive any right to receive notice of the acceptance of their Old Bonds for exchange. Neither the Issuer, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Old Bonds nor shall any of them. 9. MUTILATED, LOST, STOLEN OR DESTROYED OLD BONDS. Any holder whose Old Bonds have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. WITHDRAWAL RIGHTS Tenders of Old Bonds may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must: (i) specify the name of the person having tendered the Old Bonds to be withdrawn (the "Depositor"), (ii) identify the Old Bonds to be withdrawn (including the principal amount of such Old Bonds), and (iii) (where certificates for Old Bonds have been transmitted) specify the name in which such Old Bonds are registered, if different from that of the Depositor. If certificates for Old Bonds have been delivered or otherwise identified to the Exchange Agent, then prior to the release of such certificates the Depositor must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such Depositor is an Eligible Institution. If Old Bonds have been tendered pursuant to the procedure for book-entry transfer set forth in "The Exchange Offer -- Book-Entry Transfers" section of the Prospectus, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Bonds and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Issuer, whose determination shall be final and binding on all parties. Any Old Bonds so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no New Bonds will be issued with respect thereto unless the Old Bonds so withdrawn are validly retendered. Any Old Bonds that have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Bonds tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set forth in "The Exchange Offer -- Book-Entry Transfers" section of the Prospectus, such Old Bonds will be credited to an account maintained with the Book-Entry Transfer Facility for the Old Bonds) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Bonds may be retendered by following the procedures described above at any time on or prior to 5:00 p.m., New York City time, on the Expiration Date. 12 13 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above. 13 14 TO BE COMPLETED BY ALL TENDERING HOLDERS (SEE INSTRUCTION 5) - ---------------------------------------------------------------------------------------------------------------------------------- PAYOR'S NAME: THE CHASE MANHATTAN BANK - ---------------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND FORM W-9 CERTIFY BY SIGNING AND DATING BELOW. TIN: ------------------------ DEPARTMENT OF THE Social Security Number TREASURY INTERNAL or Employer REVENUE SERVICE Identification Number ------------------------------------------------------------------------------------------------- PAYOR'S REQUEST FOR PART 2 -- TIN Applied For [ ] TAXPAYER IDENTIFICATION Payor's Request For Taxpayer Identification Number ("TIN") and Certification NUMBER ("TIN") AND ---------------------------------------------------------------------------------------------- CERTIFICATION CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT: (1) the number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) (2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. - ---------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Signature Date ________________ , 2000 - ---------------------------------------------------------------------------------------------------------------------------------- You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. - ----------------------------------------------------------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. Signature: Date:______________ 14 EX-99.2 44 y57012ex99-2.txt FORM OF NOTICE OF GUARANTEED DELIVERY 1 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016 AND 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024 OF NRG SOUTH CENTRAL GENERATING LLC This form or one substantially equivalent hereto must be used to accept the Exchange Offer of NRG South Central Generating LLC (the "Issuer) made pursuant to the Prospectus, dated [ ], 2000 (the "Prospectus"), if certificates for the outstanding 8.962% Series A Senior Secured Bonds due 2016 and 9.479% Series B Senior Secured Bonds due 2024 of the Issuer (the "Old Bonds") are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach The Chase Manhattan Bank, as exchange agent (the "Exchange Agent") prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent as set forth below. Capitalized terms not defined herein are defined in the Prospectus. Delivery To: THE CHASE MANHATTAN BANK, EXCHANGE AGENT By Mail, Hand Delivery or Overnight Courier: The Chase Manhattan Bank 55 Water Street, Room 234 New York, New York 10041 Attention: Carlos Esteves -- Confidential By Facsimile Transmission: (for Eligible Institutions Only) 212-638-7380 Confirm by Telephone: 212-638-0828 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. 2 Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus, the undersigned hereby tenders to the Issuer the principal amount of Old Bonds set forth below pursuant to the guaranteed delivery procedure described in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the Prospectus. Principal Amount of Old Bonds Tendered: $ -----------------* Certificate Nos. (if available): ------------------------------------------------------------------------------- ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ $ ------------------------------------------------------------------------------ TOTAL PRINCIPAL AMOUNT REPRESENTED BY OLD BONDS CERTIFICATE(S): If Old Bonds will be delivered by book-entry transfer to The Depository Trust Company, provide account number. Account Number: ------------------------------------------------------------------------------ ----------------- * Must be in denominations of principal amount of $1,000 and any integral multiple thereof. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. PLEASE SIGN HERE X ---------------------------------------------------- X ---------------------------------------------------- Signature(s) of Owner(s) or Authorized Signatory ----------------------------------------------------- ----------------------------------------------------- Date Area Code and Telephone Number: ------------------------------------------------------------------------- Must be signed by the Holder(s) of Old Bonds as their name(s) appear(s) on certificates for Old Bonds or on a security position listing, or by person(s) authorized to become registered Holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. PLEASE PRINT NAME(S) AND ADDRESS(ES) Name(s): ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ Capacity: ------------------------------------------------------------------------------ Address(es): ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ ------------------------------------------------------------------------------ 2 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, an Eligible Institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchanges Medallion Program, hereby guarantees that the certificates for all physically tendered Old Bonds, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, within three (3) New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. The undersigned acknowledges that it must deliver the Letter of Transmittal and the Old Bonds tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in a financial loss to the undersigned. Name of Firm: -------------------------------------- --------------------------------------------- AUTHORIZED SIGNATURE Address: Title: - --------------------------------------------- --------------------------------------------- (PLEASE TYPE OR PRINT) - --------------------------------------------- Dated: ------------------ , 2000 ZIP CODE Area Code and Telephone Number: - ----------------------------------------------------------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR OLD BONDS WITH THIS FORM. CERTIFICATES FOR OLD BONDS SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. 3 EX-99.3 45 y57012ex99-3.txt BROKER DEALER LETTER 1 EXHIBIT 99.3 NRG SOUTH CENTRAL GENERATING LLC OFFER FOR ALL OUTSTANDING 8.962% SERIES A SENIOR SECURED BONDS DUE 2016 AND 9.479% SERIES B SENIOR SECURED BONDS DUE 2024 IN EXCHANGE FOR 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016 AND 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024 THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: NRG South Central Generating LLC (the "Issuer") is offering, upon and subject to the terms and conditions set forth in the prospectus dated [ ], 2000 (the "Prospectus"), and the enclosed letters of transmittal (the "Letters of Transmittal"), to exchange (the "Exchange Offer") their 8.962% Series A-1 Senior Secured Bonds due 2016 and 9.479% Series B-1 Senior Secured Bonds due 2024, all of which have been registered under the Securities Act of 1933, as amended, for their outstanding 8.962% Series A Senior Secured Bonds due 2016 and 9.479% Series B Senior Secured Bonds due 2024 (the "Old Bonds"). The Exchange Offer is being made in order to satisfy certain obligations of the Issuer contained in the exchange and registration rights agreement in respect of the Old Bonds, dated March 30, 2000, by and among the Issuer and the guarantors and initial purchasers referred to therein. We are requesting that you contact your clients for whom you hold Old Bonds regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Old Bonds registered in your name or in the name of your nominee, or who hold Old Bonds registered in their own names, we are enclosing the following documents: 1. Prospectus dated [ ], 2000; 2. A Letter of Transmittal relating to the Old Bonds for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery relating to the Old Bonds which is to be used to accept the Exchange Offer if certificates for Old Bonds are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Old Bonds registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; and 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ], 2000, UNLESS EXTENDED BY THE ISSUER (THE "EXPIRATION DATE"). OLD BONDS TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal relating to the Old Bonds (or facsimile thereof or Agent's Message in lieu thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Old Bonds, or a timely confirmation of a book-entry transfer of such Old Bonds, should be 2 delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letters of Transmittal and the Prospectus. If a registered holder of Old Bonds desires to tender, but such Old Bonds are not immediately available, or time will not permit such holder's Old Bonds or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer -- Guaranteed Delivery Procedures." The Issuer will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Old Bonds held by them as nominee or in a fiduciary capacity. The Issuer will not make any payments to brokers, dealers, or others soliciting acceptances of the Exchange Offer. The Holders will not be obligated to pay or cause to be paid all stock transfer taxes applicable to the exchange of Old Bonds pursuant to the Exchange Offer. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to The Chase Manhattan Bank, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, NRG South Central Generating LLC NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures 2 EX-99.4 46 y57012ex99-4.txt CLIENT LETTER 1 EXHIBIT 99.4 NRG SOUTH CENTRAL GENERATING LLC OFFER FOR ALL OUTSTANDING 8.962% SERIES A SENIOR SECURED BONDS DUE 2016 AND 9.479% SERIES B SENIOR SECURED BONDS DUE 2024 IN EXCHANGE FOR 8.962% SERIES A-1 SENIOR SECURED BONDS DUE 2016 AND 9.479% SERIES B-1 SENIOR SECURED BONDS DUE 2024 THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED To Our Clients: Enclosed for your consideration is a prospectus dated [ ], 2000 (the "Prospectus"), and the related letters of transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of NRG South Central Generating LLC (the "Issuer") to exchange their 8.962% Series A-1 Senior Secured Bonds due 2016 and 9.479% Series B-1 Senior Secured Bonds due 2024, all of which have been registered under the Securities Act of 1933, as amended, for their outstanding 8.962% Series A Senior Secured Bonds due 2016 and 9.479% Series B Senior Secured Bonds due 2024 (the "Old Bonds"), upon the terms and subject to the conditions described in the Prospectus and the Letters of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Issuer contained in the registration rights agreement in respect of the Old Bonds, dated March 30, 2000, by and among the Issuer, the guarantors referred to therein and the initial purchasers referred to therein. This material is being forwarded to you as the beneficial owner of the Old Bonds held by us for your account but not registered in your name. A tender of such Old Bonds may only be made by us as the holder of record and pursuant to your instructions. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Old Bonds held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letters of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Old Bonds on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on [ ], 2000 (the "Expiration Date"), unless extended by the Issuer. Any Old Bonds tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Old Bonds. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer -- Certain Conditions to the Exchange Offer." 3. Subject to the terms and conditions in the Prospectus and the Letters of Transmittal, any transfer taxes incident to the transfer of Old Bonds from the Holder to the Issuer will be paid by the Issuer. 4. The Exchange Offer expires at 5:00 p.m., New York City time, on [ ], 2000, unless extended by the Issuer. If you wish to have us tender your Old Bonds, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. The Letters of Transmittal are furnished to you for information only and may not be used directly by you to tender Old Bonds. 2 INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by NRG South Central Generating LLC with respect to their Old Bonds. This will instruct you to tender the Old Bonds held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. The undersigned expressly agrees to be bound by the enclosed Letter of Transmittal and that such Letter of Transmittal may be enforced against the undersigned. Please tender the Old Bonds held by you for my account as indicated below:
AGGREGATE PRINCIPAL AMOUNT OF OLD BONDS --------------------------------------- 8.962% Series A Senior Secured Bonds due 2016............... $ ---------------------------------- 9.479% Series B Senior Secured Bonds due 2024............... $ ---------------------------------- [ ] Please do not tender any Old Bonds held by you for my account. Dated: -------------------------, 2000 ------------------------------------ SIGNATURE(S) ------------------------------------ ------------------------------------ PLEASE PRINT NAME(S) HERE ------------------------------------ ------------------------------------ ADDRESS(ES) ------------------------------------ AREA CODE AND TELEPHONE NUMBER ------------------------------------ TAX IDENTIFICATION OR SOCIAL SECURITY NO(S).
None of the Old Bonds held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Old Bonds held by us for your account. -----END PRIVACY-ENHANCED MESSAGE-----