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Exhibit 10.3    
    


 
  SUBSTITUTION, ASSUMPTION, AMENDMENT AND RELEASE AGREEMENT    
    


        THIS SUBSTITUTION, ASSUMPTION, AMENDMENT AND RELEASE AGREEMENT (this
"Agreement"), dated as of June 30, 2003, is entered into by and between DUKE CAPITAL CORPORATION,
a Delaware corporation ("Duke Capital"), UNITED AMERICAN ENERGY CORP., a Delaware corporation
("UAE"), DUKE/UAE REF-FUEL LLC, a Delaware corporation
("Duke/UAE"), AMERICAN REF-FUEL COMPANY LLC, a Delaware limited liability company formerly
known as Duke/UAE Holdings LLC ("ARC"), and MSW ENERGY HOLDINGS LLC
("MSW"). 


 
 

BACKGROUND STATEMENT    
    


        A.    Duke Capital, UAE, Duke/UAE and ARC are parties to that certain Equity Contribution Agreement, dated as of
April 30, 2001 (the "Equity Contribution Agreement"), pursuant to which each of Duke Capital and UAE (each, an "Equity
Provider") agreed to provide ARC, subject to the terms and conditions set forth therein, up to $50,000,000 in equity capital under certain circumstances. Capitalized terms used
but not defined herein shall have the meaning ascribed thereto in the Equity Contribution Agreement. 


        B.    Duke Energy Global Markets, Inc. ("Seller") and MSW are parties to
that certain Equity Purchase Agreement, dated as of March 19, 2003 (the "Equity Purchase Agreement"), pursuant to which Seller proposes to
indirectly transfer, subject to required regulatory approvals and the other terms and conditions set forth therein, its entire interest in Duke/UAE to MSW. 



        C.    Effective as of the Initial Closing (as defined in the Equity Purchase Agreement), the parties hereto desire to enter into
this Agreement to substitute MSW for Duke Capital under the Equity Contribution Agreement and release Duke Capital from any further liability in connection with the Equity Contribution Agreement. 


 
 

STATEMENT OF AGREEMENT    
    


        NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
the parties hereto agree as follows: 


        1.    Substitution; Assumption; Amendment.    Effective at the Initial Closing, MSW is hereby substituted for Duke
Capital as an Equity Provider in accordance with Section 2.5 of the Equity Contribution Agreement. Effective at the Initial Closing, MSW hereby assumes full responsibility and liability for,
and agrees to perform, all of the obligations of Duke Capital under, pursuant to, or arising out of the Equity Contribution Agreement, including, but not limited to the obligation to make Equity
Contributions on the terms of and subject to the conditions set forth therein. Effective at the Initial Closing, the Equity Contribution Agreement is hereby amended to (i) change each reference
to "Duke Capital" in the Equity Contribution Agreement to "MSW", (ii) delete the first paragraph of the Background Statement and insert in lieu thereof "Duke/UAE Holdings is a wholly owned
subsidiary of the Company, which in turn is owned 49.8% by MSW Energy Hudson LLC (a wholly owned subsidiary of MSW), 0.2% by Duke Energy Erie, LLC (an entity to be acquired by MSW) and 50% by UAE
Ref-Fuel LLC ("UAE Ref-Fuel"), a wholly owned subsidiary of UAE.", (iii) change each reference to "DEGAD" in the Equity Contribution Agreement to "MSW Energy Hudson LLC
and, following its acquisition by MSW, Duke Energy Erie LLC in accordance with their respective membership interests in the Company", (iv) delete the text of Section 4 of the Equity
Contribution Agreement in its entirety and insert in lieu thereof "4. [intentionally deleted]", (v) delete  Exhibit A of the Equity Contribution
Agreement in its entirety and insert in lieu thereof  Exhibit A attached to this Agreement, and (vi) delete Exhibit C of the Equity
Contribution Agreement in its entirety. 


        2.    Release of Duke Capital.    Effective at the Initial Closing, each of Duke/UAE, ARC, MSW and UAE does hereby for
itself and its successors and assigns, fully and unconditionally release and forever discharge Duke Capital and any parent, subsidiary, affiliate or related entity (and any officer, director, employee
or agent of any of the above) from any and all present and future (i) obligations and 








liabilities
under the Equity Contribution Agreement (including, without limitation, any obligation to make any Equity Contributions thereunder) and (ii) causes of action, suits, claims,
demands, liabilities, and obligations whatsoever, whether at law or in equity, arising from or related to the Equity Contribution Agreement. 



        3.    Letter of Credit.    MSW hereby confirms that its obligations under the Equity Contribution Agreement assumed
pursuant to this Agreement have been secured by a letter of credit meeting the requirements of Section 2.4 of the Equity Contribution Agreement in the form attached as  Exhibit B hereto,
executed originals of which have been delivered to the beneficiary thereunder. 


        4.    Notices.    Pursuant to Section 6.1 of the Equity Contribution Agreement, MSW hereby designates that
notices thereunder should be delivered to: 



	 	 	c/o Highstar Renewable Fuels LLC

175 Water Street

New York, New York 10038

Attention: Christopher H. Lee and Marc Baliotti

Telephone No. (212) 458-2338

Facsimile No. (212) 458-2222
	

 	
 	

c/o DLJ Merchant Banking III, Inc.

Eleven Madison Avenue, 16th Floor

New York, New York 10010

Attention: Ari Benacerraf

Telephone No. (212) 538-2255

Facsimile No. (646) 935-7190
	

With a copy to:	
 	

Bingham McCutchen LLP

150 Federal Street

Boston, Massachusetts 02110

Attention: Vincent M. Sacchetti

Telephone No. (617) 951-8563

Facsimile No. (617) 951-8736
	

 	
 	

Weil, Gotshal & Manges LLP

767 Fifth Avenue

New York, New York 10153-0119

Attention: David Blittner

Telephone No. (212) 310-8329

Facsimile No. (212) 310-8007






        5.    Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. 


        6.    Governing Law.    This Agreement, and any and all claims arising hereunder, shall be governed by, and construed
in accordance with the laws of the State of New York, without giving effect to principles of conflicts of laws. 



        7.    Binding Effect.    This Agreement shall be binding upon and shall inure to the benefit of the respective parties
and their assigns, transferees and successors. 


        8.    Further Assurances.    Subject to the terms and conditions of this Agreement, from time to time after the date
of this Agreement, each of the parties hereto will use all reasonable commercial efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws to consummate and make effective the transactions contemplated hereunder. 








        9.    Effective Date.    This Agreement shall be effective as of the day and year first above written. 


[signatures
to follow] 







        IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed in its respective name by its duly authorized
officer, all as of the date above first written. 



	 	 	DUKE CAPITAL CORPORATION
	

 	
 	

By:	

/s/  DAVID L. HAUSER      

	 	 	Title:	Vice President & Treasurer
	

 	
 	
UNITED AMERICAN ENERGY CORP.
	

 	
 	

By:	

/s/  DONALD T. KROM, JR.      

	 	 	Title:	Vice President, Secretary & Treasurer
	

 	
 	
DUKE/UAE REF-FUEL LLC
	

 	
 	

By:	

/s/  MARK W. ROMEFELT      

	 	 	Title:	Vice President & General Counsel
	

 	
 	
AMERICAN REF-FUEL COMPANY LLC
	

 	
 	

By:	

/s/  MICHAEL J. GRUPPUSO      

	 	 	Title:	Vice President, Chief Financial Officer
	

 	
 	
MSW ENERGY HOLDINGS LLC
	

 	
 	

By:	

/s/  MICHAEL J. MILLER      

	 	 	Title:	CEO







 
 

EXHIBIT A  
    
  CREDIT SUPPORT AGREEMENTS  
  


	1.
	American
REF-FUEL Company of Hempstead 



        (a)   Second
Amended and Restated Company Support Agreement, entered into as of April 30, 2001, by and between American Ref-Fuel Company of Hempstead and
American Ref-Fuel Company LLC. 


        (b)   Parent
Company Guaranty, entered into as of June 1, 2001, by American Ref-Fuel Company LLC in favor of The Chase Manhattan Bank (now known as JPMorgan
Chase Bank), as trustee. 


	2.
	American
Ref-Fuel Company of Essex County 




        (a)   Amended
and Restated Company Support Agreement, dated as of December 1, 1997 by and among American Ref-Fuel Company of Essex County, Browning-Ferris
Industries, Inc. and Duke Capital Corporation. 


	3.
	American
Ref-Fuel Company of Niagara, L.P. 



        (a)   Parent
Company Guaranty, entered into as of June 1, 2001, by American Ref-Fuel Company LLC, in favor of Manufacturers and Traders Trust Company. 


        (b)   Parent
Company Issuer Guaranty, entered into as of June 1, 2001, by American Ref-Fuel Company LLC in favor of the Niagara County Industrial
Development Authority. 


        (c)   Corporate
Guaranty Agreement entered into as of April 30, 2001, by American Ref-Fuel Company LLC in favor and for the benefit of Occidental Chemical
Corporation and Hooker Energy Corporation. 


	4.
	American
REF-FUEL Company of Southeastern Connecticut 



        (a)   Company
Support Agreement, entered into as of April 30, 2001, by and between American REF-Fuel Company of Southeastern Connecticut and American
Ref-Fuel Company LLC. 


        (b)   Parent
Undertaking, entered into as of April 30, 2001, by and between American REF-Fuel Company of Southeastern Connecticut and American
Ref-Fuel Company LLC. 


        (c)   Corporate
Guaranty Agreement, dated as of April 30, 2001, between American Ref-Fuel Company LLC and State Street Bank and Trust Company, as trustee. 


        (d)   Corporate
Guaranty Agreement, dated as of October 1, 2001, between American Ref-Fuel Company LLC and State Street Bank and Trust Company, as trustee
in connection with Corporate Credit Bonds (American Ref-Fuel Company LLC—I Series A). 



        (e)   Corporate
Credit Guaranty, dated as of October 1, 2001, between American Ref-Fuel Company LLC and State Street Bank and Trust Company, as trustee in
connection with Corporate Credit Bonds (American Ref-Fuel Company LLC—II Series A). 


	5.
	SEMASS
Partnership 



        (a)   Company
Support Agreement, entered into as of November 1, 2001, by and between American Ref-Fuel Operations of SEMASS, L.P. and American
Ref-Fuel Company LLC. 


        (b)   Contingent
Capital Loan Agreement, entered into as of November 1, 2001, by and between American Ref-Fuel Operations of SEMASS, L.P. and American
Ref-Fuel Company LLC. 


	6.
	American
Ref-Fuel Company of Delaware County, L.P. 



        (a)   Corporate
Guaranty Agreement I dated as of April 30, 2001 made by American Ref-Fuel Company LLC to and for the benefit of State Street Bank and Trust
Company (as successor to Fleet National Bank), as Owner Trustee. 








        (b)   Corporate
Guaranty Agreement II dated as of April 30, 2001 made by American Ref-Fuel Company LLC to and for the benefit of State Street Bank and Trust
Company (as successor to Fleet National Bank), as Owner Trustee. 


        (c)   Corporate
Guaranty Agreement III dated as of April 30, 2001 made by American Ref-Fuel Company LLC to and for the benefit of General Electric Capital
Corporation. 


        (d)   Corporate
Guaranty Agreement IV dated as of April 30, 2001 made by American Ref-Fuel Company LLC to and for the benefit of General Electric Capital
Corporation. 


        (e)   Corporate
Guarantee Agreement I entered into as of April 30, 2001, by American Ref-Fuel Company LLC, in favor of and for the benefit of
Viacom, Inc. 


        (f)    Corporate
Guarantee Agreement II entered into as of April 30, 2001, by American Ref-Fuel Company LLC, in favor of and for the benefit of
Viacom, Inc. 


        (g)   Indemnity
Letter dated April 16, 1998 from American Ref-Fuel Company of Delaware County, L.P. and Browning-Ferris Industries, Inc. to the
Delaware County Industrial Development Authority. 


        (h)   Indemnity
Letter to be entered into by American Ref-Fuel Company of Delaware Valley, L.P. Will replace (g) above. 







 
 

Exhibit B    
    


 
  FORM OF LETTER OF CREDIT    
    



	 	 	STANDBY LETTER OF CREDIT

    NO. SB105195

DATE OF ISSUE: JUNE 30, 2003
	

ISSUING BANK:

BAYERISCHE HYPO- UND VEREINSBANK

    AG, NEW YORK BRANCH

150 EAST 42ND STREET

NEW YORK, NY 10017	
 	

APPLICANT:

MSW ENERGY HOLDINGS LLC

C/O CSFB PRIVATE EQUITY

11 MADISON AVENUE, 16TH FLOOR

NEW YORK, NEW YORK 10010

ATTENTION: DANIEL CLARE

FACSIMILE NO. 646-935-7043
	

 	
 	

BENEFICIARY:

AMERICAN REF-FUEL COMPANY LLC

155 CHESTNUT RIDGE ROAD

MONTVALE, NJ 07645
	

 	
 	

AMOUNT/CURRENCY:

USD 50,000,000.00

FIFTY MILLION AND 00/100'S

    US DOLLARS
	

 	
 	

DATE AND PLACE OF EXPIRY:

STATED EXPIRATION DATE (AS

    DEFINED BELOW) IN NEW YORK,

    NEW YORK





        WE
HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER SB105195 IN YOUR FAVOR. 


        THIS
LETTER OF CREDIT IS AVAILABLE WITH BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH BY PAYMENT OF YOUR DRAFT(S) AT SIGHT DRAWN ON BAYERISCHE HYPO- UND
VEREINSBANK AG, NEW YORK BRANCH. 


        DRAFTS
MUST BE ACCOMPANIED BY: 



	1.
	THE
ORIGINAL LETTER OF CREDIT AND ALL AMENDMENTS THERETO, IF ANY; AND



	2.
	EITHER 



(A)    A
DATED STATEMENT ADDRESSED TO BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH PURPORTEDLY SIGNED BY AN AUTHORIZED OFFICER OF THE BENEFICIARY, PURPORTEDLY ON THE
BENEFICIARY'S LETTERHEAD READING AS FOLLOWS: 


QUOTE



MSW
ENERGY HOLDINGS LLC HAS NOT MADE ALL OR PART OF ANY EQUITY CONTRIBUTION REQUIRED PURSUANT TO SECTION 2.1(A) OF THE EQUITY CONTRIBUTION AGREEMENT DATED AS OF APRIL 30, 2001 AMONG MSW ENERGY
HOLDINGS LLC (AS SUCCESSOR TO DUKE CAPITAL CORPORATION), UNITED AMERICAN ENERGY CORP., DUKE/UAE REF-FUEL LLC AND AMERICAN
REF-FUEL COMPANY LLC (FORMERLY KNOWN AS DUKE/UAE HOLDINGS LLC). 


UNQUOTE 


OR 












QUOTE



THIS
LETTER OF CREDIT WILL EXPIRE IN 15 BUSINESS DAYS OR LESS AND MSW ENERGY HOLDINGS LLC (A) IS OBLIGATED TO PROVIDE A REPLACEMENT LETTER OF CREDIT IN ACCORDANCE WITH SECTION 2.4 OF THE EQUITY
CONTRIBUTION AGREEMENT DATED AS OF APRIL 30, 2001 AMONG MSW ENERGY HOLDINGS LLC (AS SUCCESSOR TO DUKE CAPITAL CORPORATION), UNITED AMERICAN ENERGY CORP., DUKE/UAE REF-FUEL LLC AND AMERICAN
REF-FUEL COMPANY LLC (FORMERLY KNOWN AS DUKE/UAE HOLDINGS LLC) AND (B) HAS NOT CAUSED A REPLACEMENT LETTER OF CREDIT TO BE DELIVERED. 


UNQUOTE 


OR 


(B)    A
DATED STATEMENT ADDRESSED TO BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH STATING THAT IT IS MADE ON BEHALF OF THE BENEFICIARY, PURPORTEDLY SIGNED BY AN
AUTHORIZED OFFICER OF UNITED AMERICAN ENERGY CORP., PURPORTEDLY ON UNITED AMERICAN ENERGY CORP.'S LETTERHEAD READING AS FOLLOWS: 


QUOTE



THIS
LETTER OF CREDIT WILL EXPIRE IN 15 BUSINESS DAYS OR LESS AND MSW ENERGY HOLDINGS LLC (A) IS OBLIGATED TO PROVIDE A REPLACEMENT LETTER OF CREDIT IN ACCORDANCE WITH SECTION 2.4 OF THE EQUITY
CONTRIBUTION AGREEMENT DATED AS OF APRIL 30, 2001 AMONG MSW ENERGY HOLDINGS LLC (AS SUCCESSOR TO DUKE CAPITAL CORPORATION), UNITED AMERICAN ENERGY CORP., DUKE/UAE REF-FUEL LLC AND AMERICAN
REF-FUEL
COMPANY LLC (FORMERLY KNOWN AS DUKE/UAE HOLDINGS LLC) AND (B) HAS NOT CAUSED A REPLACEMENT LETTER OF CREDIT TO BE DELIVERED. 


UNQUOTE





THIS
LETTER OF CREDIT IS EFFECTIVE IMMEDIATELY AND EXPIRES AT THE CLOSE OF BUSINESS AT OUR OFFICE IN NEW YORK, NEW YORK ON JUNE 30, 2004 (THE "STATED EXPIRATION DATE") BUT SUCH STATED
EXPIRATION DATE SHALL BE AUTOMATICALLY EXTENDED FOR A PERIOD OF ONE (1) YEAR EFFECTIVE UPON THE STATED EXPIRATION DATE AND EACH ANNUAL ANNIVERSARY OF THE STATED EXPIRATION DATE (EACH SUCH
ANNUAL ANNIVERSARY DATE BEING REFERRED TO HEREIN AS THE "NEW STATED EXPIRATION DATE") UNLESS AT LEAST NINETY (90) DAYS PRIOR TO THE STATED EXPIRATION DATE OR ANY SUCH NEW STATED EXPIRATION
DATE, WE DELIVER WRITTEN NOTICE TO THE BENEFICIARY AND THE APPLICANT BY REPUTABLE OVERNIGHT COURIER SERVICES AT THE ABOVE ADDRESSES, THAT THIS LETTER OF CREDIT SHALL NOT BE EXTENDED BEYOND THE STATED
EXPIRATION DATE OR THE NEW STATED EXPIRATION DATE, AS THE CASE MAY BE. 


PARTIAL
DRAWINGS: ALLOWED 


DRAFT(S)
MUST STATE "DRAWN UNDER BAYERISCHE HYPO- UND VEREINSBANK AG, NEW YORK BRANCH STANDBY LETTER OF CREDIT NUMBER SB105195 DATED JUNE 30, 2003.' 


DRAFT(S)
AND DOCUMENTS SHALL BE PRESENTED AT OUR OFFICES AT 150 EAST 42ND STREET, NEW YORK, NY 10017. 


COMMUNICATIONS
WITH RESPECT TO THIS LETTER OF CREDIT SHALL BE IN WRITING AND SHALL BE ADDRESSED TO US AT 150 EAST 42ND STREET NEW YORK, NY 10017, SPECIFICALLY REFERRING TO THE NUMBER OF THIS LETTER OF
CREDIT. 










THIS
LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), THE INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500. AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. 



	

 	
 	


	 	 	AUTHORIZED SIGNATURE











QuickLinks



Exhibit 10.3


SUBSTITUTION, ASSUMPTION, AMENDMENT AND RELEASE AGREEMENT

BACKGROUND STATEMENT

STATEMENT OF AGREEMENT

EXHIBIT A CREDIT SUPPORT AGREEMENTS


Exhibit B

FORM OF LETTER OF CREDIT