Exhibit B-1
MESC COGENERATION DEVELOPMENT AGREEMENT
This MESC Cogeneration Development Agreement (the "Agreement") is made and
entered into as of the 9th day of February, 2000 by and among Southern Energy
Resources, Inc., a Delaware corporation ("SERI"), Southern Energy, Inc., a
Delaware corporation ("SEI"), Mobile Energy Services Company L.L.C., an Alabama
limited liability company ("MESC), and Mobile Energy Services Holdings, Inc., an
Alabama corporation ("MESH").
R E C I T A L S
A. Each of MESC and MESH is a debtor-in-possession under Chapter 11 of
the Bankruptcy Code in a case filed in U.S. Bankruptcy Court for the Southern
District of Alabama (the "Bankruptcy Court").
B. MESH is the owner of ninety-nine percent (99%) of the outstanding
ownership interests of MESC, and MESH is a wholly owned subsidiary of The
Southern Company, a Delaware corporation ("Southern").
C. SERI is a wholly owned subsidiary of SEI, which is a wholly owned
subsidiary of Southern.
D. SERI is the owner of one percent (1%) of the outstanding ownership
interests of MESC, and SERI operates and maintains MESC's energy complex,
located at Mobile, Alabama, pursuant to that certain Operations and Maintenance
Agreement, between SEI and MESC, dated December 12, 1994 (the "Existing O&M
Agreement").
E. MESC provides certain energy services to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Tissue
Company, a Pennsylvania corporation ("KCTC"), at the KCTC tissue mill located at
Mobile, Alabama pursuant to that certain Tissue Mill Energy Services Agreement
between MESC and KCTC, dated December 12, 1994, as amended (the "Existing Tissue
Mill ESA"), and at the KCTC pulp mill located at Mobile, Alabama pursuant to
that certain Pulp Mill Energy Services Agreement between MESC and KCTC, dated
December 12, 1994, as amended (the "Existing Pulp Mill ESA").
F. MESC also provides certain energy services to S. D. ▇▇▇▇▇▇ Alabama,
L.L.C., an Alabama limited liability company ("Sappi"), at the Sappi paper mill
located at Mobile, Alabama pursuant to that certain Paper Mill Energy Services
Agreement between MESC and Sappi, dated December 12, 1994, as amended (the
"Paper Mill ESA").
G. MESC, with the assistance of SERI and CIBC (as defined herein), is
in negotiations with KCTC regarding amendment of the Existing Tissue Mill ESA
and Existing Pulp Mill ESA pursuant to that certain Settlement Term Sheet, dated
August 18, 1999, among MESC, SERI, KCTC and other parties (the "Settlement Term
Sheet").
H. SERI, SEI, MESH and MESC (referred to herein individually as a
"Party" and collectively as the "Parties") desire to enter into this Agreement
in connection with the development, design, engineering, construction and
start-up (such activities collectively, the "Cogen Project") of a cogeneration
facility described more particularly on Exhibit A hereto (the "Cogen Facility")
for MESC or the Cogen Subsidiary (as defined herein) upon the terms and
conditions set forth herein.
NOW, THEREFOR, FOR AND IN CONSIDERATION OF THE MUTUAL COVENANTS AND
AGREEMENTS CONTAINED HEREIN, THE PARTIES HERETO HEREBY AGREE AS FOLLOWS:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the respective meanings
set forth below:
"Adjusted Budget" has the meaning set forth in Section 2.5.
"Adjusted Project Schedule" has the meaning set forth in Section 2.6.
"Affiliate" means, as to any Person (other than an individual), any
other Person (other than an individual) that, directly or indirectly through one
or more intermediaries, Controls, is Controlled by or is under common Control
with such Person.
"Agreement" has the meaning set forth in the opening paragraph of this
Agreement.
"Arbitration Notice" has the meaning set forth in Section 15.4.
"Bankruptcy Code" means title 11, United States Code (11 U.S.C.ss.101
et seq.), as amended.
"Bankruptcy Court" has the meaning set forth in the Recitals.
"Budget" means the Initial Budget as superseded from time to time by
the most recent Adjusted Budget.
"CIBC" means CIBC World Markets, Inc.
"Claims" has the meaning set forth in Section 16.3.
"Closing Date" means the earlier of (i) the date the SEI Cogen
Investment occurs, and (ii) the date the Non-SEI Equity Investment occurs.
"Cogen Development Advances" has the meaning set forth in Section 3.1.
"Cogen Facility" has the meaning set forth in the Recitals.
"Cogen Lender Consent" has the meaning set forth in Section 6.1.
"Cogen Project" has the meaning set forth in the Recitals.
"Cogen Project Financing" means long-term, non-recourse debt financing
provided by banks or other financial institutions to MESC or the Cogen
Subsidiary to fund fully the remainder of those costs of the development,
construction and installation of the Cogen Project not funded by the expected
equity investment of thirty million dollars ($30,000,000).
"Cogen Subsidiary" means a subsidiary of MESC formed in accordance with
Section 2.13 to develop the Cogen Project and/or to own the Cogen Facility.
"Collateral Agent" means Bankers Trust (Delaware), as collateral agent
under the Intercreditor and Collateral Agency Agreement, dated August 1, 1995,
among Bankers Trust (Delaware), MESC, MESH, and other parties.
"Commercially Operable" means the construction and testing of the Cogen
Facility is substantially complete and it is capable of producing electricity
for synchronization with, and delivery into, the transmission system of Alabama
Power Company.
"Committee" means the steering committee for MESC's secured creditors
as the members are set out in Exhibit B, as the same may be amended from time to
time by written notice from the Lender Representative.
"Comprehensive POR" means a Plan of Reorganization to be filed by MESC
with the support of the Committee (i) which upon approval would effectuate
binding agreements between MESC and KCTC, subject to customary closing
conditions, implementing the terms of the Settlement Term Sheet, as such terms
may be amended or modified with the agreement of the parties thereto, for those
material agreements described in the Settlement Term Sheet, including the Option
Agreement, the New KCTC ESA and the Settlement Agreement, (ii) providing for the
Southern Parties to be released from any claims related to MESC or MESH held by
creditors of MESC or MESH arising from or related to the items identified in the
Releases that are to be delivered to the Southern Parties pursuant to Section
11.1(a) of this Agreement; provided, however, that such releases will not cover
claims of fraud (other than claims of securities fraud under federal and state
securities laws and claims of fraudulent conveyance, fraudulent transfer or
wrongful dividends from MESH or distributions from MESC in each case under state
or federal law), and (iii) providing that any cancellation of indebtedness or
other transaction that would cause Southern to pay income taxes on the amount of
its excess loss account with respect to MESH occurs after MESC has received the
payment to be made by KCTC under the Settlement Term Sheet and the members of
MESC have recognized income as a result of such payment (unless Southern would
no longer have an ownership interest in MESC at the time such payment is to be
received), as such plan may be amended from time to time.
"Confirmation Order" means, with respect to MESC, a final
non-appealable order of the Bankruptcy Court approving a Plan of Reorganization
for MESC and, with respect to MESH, a final non-appealable order of the
Bankruptcy Court approving a Plan of Reorganization for MESH.
"Control" (including the terms "Controlling", "Controlled by" and
"under common Control with") of a Person (other than an individual) means the
power to direct or to cause the direction of the management and policies of such
Person, whether through the ownership of Voting Stock, by contract or otherwise.
"Development Costs" means all costs incurred by SERI, SEI or their
Affiliates pursuant to the performance of the obligations of SERI and SEI
hereunder, including personnel costs, allocated overheads (computed at a
multiple of ten percent (10%) of direct personnel costs), travel expenses,
equipment procurement costs, cancellation costs and other third party costs
incurred in accordance with this Agreement; provided, however, that the term
"Development Costs" shall only include SEI Turbine Costs incurred by SEI or its
Affiliates (x) in storing or shipping of the ▇▇ ▇▇▇▇▇ Turbine following its
delivery by GE and (y) after the transfer of the ▇▇ ▇▇▇▇▇ Turbine to MESC.
"Development Services" has the meaning set forth in Section 2.1.
"Dispute" has the meaning set forth in Section 15.1.
"Dispute Committee Representative" has the meaning set forth in Section
15.1.
"Dispute Initiation Date" has the meaning set forth in Section 15.1.
"Dispute Notice" has the meaning set forth in Section 15.1.
"Dispute Resolution Committee" has the meaning set forth in Section
15.1.
"EBITDA" for a particular period means with reference to the
consolidated financial statements of the Person, (a) income from continuing
operations before income taxes; plus (b) depreciation and amortization; plus (c)
the aggregate of the interest expense accrued during such period by such Person.
"EBITDA" shall not include the effect of (i) gains or losses on sales or
dispositions of assets of such Person; and (ii) non-recurring items to the
extent they do not affect cash.
"Effective Date" means the first date upon which each of the following
occurs or has occurred (i) the Bankruptcy Court approves this Agreement and the
Releases, (ii) the Releases are delivered to the Southern Parties, and (iii) the
Security Interests are authorized, granted and effectuated pursuant to an order
of the Bankruptcy Court approving such Security Interests.
"Energy Services Agreement" shall mean any of the Existing Tissue Mill
ESA, the Existing Pulp Mill ESA, or the Paper Mill ESA or all of such
agreements, as the context may indicate.
"EPC" means engineering, procurement and construction.
"EPC Agreement" means a turnkey fixed-price agreement between MESC or
the Cogen Subsidiary, as the case may be, and the EPC Contractor for EPC
services as described in Article II hereto.
"EPC Contractor" means the contractor selected to perform EPC services
for MESC or the Cogen Subsidiary, as the case may be, related to the Cogen
Project in accordance with Article II hereof.
"Equity Notice Date" shall be the earliest of (i) the date of the
Non-SEI Equity Investment, (ii) July 31, 2000 or (iii) any date MESC delivers to
SEI either the Non-SEI Equity Investment Notice or the SEI Cogen Investment
Notice.
"Equity Option Fee" means a fee of ten million dollars ($10,000,000)
payable by MESC to SEI in accordance with the terms hereof.
"Event of Default" has the meaning set forth in Section 14.1.
"Existing O&M Agreement" has the meaning set forth in the Recitals.
"Existing Pulp Mill ESA" has the meaning set forth in the Recitals.
"Existing Tissue Mill ESA" has the meaning set forth in the Recitals.
"Extension Conditions" has the meaning set forth in Section 9.2.
"Financing Services" means SERI's obligations as set forth in Section
2.7.
"Funding Termination" has the meaning set forth in Section 3.2.
"GAAP" means generally accepted accounting principles in the United
States of America, as in effect from time to time.
"GE" means General Electric Company and its Affiliates.
"▇▇ ▇▇▇▇▇ LTSA" means a long-term service agreement to be developed by
SEI and GE pursuant to which the terms of the GE Master LTSA that are applicable
to the ▇▇ ▇▇▇▇▇ Turbine will be set forth, which long term service agreement
shall be on terms materially no less favorable to SEI (and, in turn, MESC or the
Cogen Subsidiary as assignee) than the terms of the GE Master LTSA (insofar as
the GE Master LTSA relates to the GE Turbine), together with such changes as
have been approved by MESC and the Lender Representative. Until such separate
agreement is entered into by SEI and GE, the term ▇▇ ▇▇▇▇▇ LTSA shall mean the
terms of the GE Master LTSA that are applicable to the ▇▇ ▇▇▇▇▇ Turbine.
"▇▇ ▇▇▇▇▇ Turbine" means the GE 7FA turbine being manufactured by GE
for SEI and currently designated for delivery to SEI at Mobile, Alabama, or such
replacement GE 7FA turbine as SEI may designate in accordance with Section 4.4.
"▇▇ ▇▇▇▇▇ Turbine Contract" means a procurement contract between SEI
and GE to be developed by SEI and GE pursuant to which the terms of the GE
Master Turbine Contract that are applicable to the ▇▇ ▇▇▇▇▇ Turbine will be set
forth, which procurement contract shall be on terms materially no less favorable
to SEI (and, in turn, MESC or the Cogen Subsidiary as assignee) than the terms
of the GE Master Turbine Contract (insofar as the GE Master Turbine Contract
relates to the GE Turbine), together with such changes as have been approved by
MESC and the Lender Representative. Until such separate contract is executed by
GE and SEI, the term ▇▇ ▇▇▇▇▇ Turbine Contract shall mean the terms of the GE
Master Turbine Contract that are applicable to the ▇▇ ▇▇▇▇▇ Turbine.
"GE Master LTSA" means the long-term service agreement between GE and
SEI dated March 26, 1999, pursuant to which SEI has the right to direct GE to
perform long-term services for GE turbines at a number of SEI projects.
"GE Master Turbine Contract" means the contract between SEI and GE
pursuant to which SEI has the right to procure GE turbines for a number of SEI
projects.
"GE Turbine Costs" means any and all amounts payable to GE under the GE
Master Turbine Contract or the GE Master LTSA related to the ▇▇ ▇▇▇▇▇ Turbine or
under the ▇▇ ▇▇▇▇▇ Turbine Contract or the ▇▇ ▇▇▇▇▇ LTSA, plus all costs
incurred by SEI or its assignee in administering these contracts (as they relate
to the ▇▇ ▇▇▇▇▇ Turbine in the case of the GE Master Turbine Contract or the GE
Master LTSA), including any storage or shipping costs related to the ▇▇ ▇▇▇▇▇
Turbine.
"Indemnified Parties" has the meaning set forth in Section 16.1.
"Indemnifying Party" has the meaning set forth in Section 16.1.
"Initial Budget" means the initial budget for the Cogen Project
attached hereto as Exhibit C.
"Initial Project Schedule" means the initial project schedule for the
Cogen Project attached hereto as Exhibit D.
"Interest Rate" means the sum of (i) the London Interbank Offered Rate
(LIBOR) for one month deposits as reported in The Wall Street Journal on the
first business day of each month, plus (ii) two and one-half percent (2 1/2%)
per annum.
"IRR" has the meaning set forth in Section 9.1(b)(v)(A).
"KCTC" has the meaning set forth in the Recitals.
"KCTC Compromise Approval" has the meaning set forth in Section 2.9.
"Lender Representative" means (i) prior to the effectiveness of a Plan
of Reorganization for MESC, CIBC or such alternative representative as members
of the Committee holding at least two-thirds of the principal amount of the
Taxable Bonds and at least two-thirds of the principal amount of the Tax Exempt
Bonds may appoint by written notice to the Parties and (ii) from and after the
effectiveness of a Plan of Reorganization for MESC, such representative as
owners of at least two-thirds of the principal amount of the debt instruments
distributed in respect of the Taxable Bonds and at least two-thirds of the
principal amount of the debt instruments distributed in respect of the Tax
Exempt Bonds may appoint by written notice to the Parties.
"Losses" means any and all costs, expenses (including reasonable
attorney's fees), claims, demands, losses, liabilities, obligations,
deficiencies, actions, lawsuits, other proceedings, judgments, and awards.
"Master Operating Agreement" means that Amended and Restated Master
Operating Agreement dated July 13, 1995, among KCTC, MESC, and Sappi.
"Maximum Development Exposure Amount" has the meaning set forth in
Section 3.1(b).
"MESC" has the meaning set forth in the Recitals.
"MESC Transfer Obligations" has the meaning set forth in Section 7.2.
"MESH" has the meaning set forth in the Recitals.
"Mezzanine Debt" has the meaning set forth in Section 9.1(b)(v)(C).
"New KCTC ESA" means that certain energy services agreement to be
entered into by MESC and KCTC, pursuant to the terms of the Settlement Term
Sheet, pursuant to which MESC shall provide certain energy services to KCTC in
connection with KCTC's tissue mill, process water plant and waste water
treatment plant, each located in the vicinity of the Cogen Facility.
"New Pulp Mill" has the meaning set forth in Section 2.9.
"Non-SEI Equity Investment" has the meaning set forth in Section 8.2.
"Non-SEI Equity Investment Notice" has the meaning as set forth in
Section 8.2.
"No. 9 Carry-Over Amount" means, for any year, the amount by which the
No. 9 Reduction Amount for the preceding year, if any, exceeded the aggregate of
the scheduled interest and principal payments on debt senior to the Mezzanine
Debt (other than the Cogen Project Financing) for such preceding year.
"No. 9 Reduction Amount" means, (i) for any year in which Sappi
significantly reduces the operation of Sappi's number 9 paper machine from
levels in effect in 1999 and no No. 9 Carry-Over Amount exists, an amount equal
to the lesser of (x) fifty percent (50%) of the reduction in EBITDA suffered by
MESC due to such reduction taking into consideration any revenues and costs
related to efforts by MESC to mitigate the reduction in revenues from Sappi or
(y) fifty percent (50%) of the amount by which MESC's EBITDA for such year is
less than the EBITDA projected for MESC for such year, as set forth in the
projections referred to in Section 9.1(b)(v)(A); (ii) for any year in which a
No. 9 Carry-Over Amount exists and Sappi significantly reduces the operation of
Sappi's number 9 paper machine from levels in effect in 1999, an amount equal to
(A) the No. 9 Carry-Over Amount plus (B) the amount calculated under clause (i)
above; and (iii) for any year in which a No. 9 Carry-Over Amount exists and
Sappi does not significantly reduce the operation of Sappi's number 9 paper
machine from levels in effect in 1999, an amount equal to the No. 9 Carry-Over
Amount.
"O&M Agreement" has the meaning set forth in Section 10.1.
"Operating Services" has the meaning set forth in Section 10.1.
"Option Agreement" means that certain option agreement to be entered
into by MESC and KCTC, pursuant to the terms of the Settlement Term Sheet,
relating to KCTC's pulp mill assets located in the vicinity of the Cogen
Facility.
"Paper Mill ESA" has the meaning set forth in the Recitals.
"Party" or "Parties" has the meaning set forth in the Recitals.
"Permitted Variance" means a variance from the Budget for any year by
up to ten percent (10%) of any line item but not to exceed $2,000,000 in the
aggregate.
"Person" means any individual, company, corporation, firm, partnership,
joint venture, undertaking, association, organization, trust, state, agency of a
state or other legal entity (in each case, whether or not having separate legal
personality).
"Plan of Reorganization" means a plan of reorganization submitted to
the Bankruptcy Court pursuant to the Bankruptcy Code.
"Project Schedule" means the Initial Project Schedule as superseded
from time to time pursuant to Section 2.6 by the most recent Adjusted Project
Schedule.
"PUHCA" shall mean the Public Utility Holding Company Act of 1935, as
amended.
"Releases" means the releases, substantially in the form attached
hereto as Exhibit E, by MESC, MESH, the Taxable Bond Indenture Trustee, the Tax
Exempt Bond Trustee, the Collateral Agent for the Senior Debt and the holders of
the Senior Debt identified on Exhibit F, in favor of the Southern Parties.
"Requirement of Law" means, as to any Person, any constitution, decree,
judgment, legislation, order, ordinance, regulation, statute, treaty or other
legislative or judicial measure having the force of law, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Sappi" has the meaning set forth in the Recitals.
"SEC" shall mean the Securities and Exchange Commission.
"Security Agreements" means mortgages, other security agreements and
other similar agreements and consents, in form and substance reasonably
satisfactory to SEI and SERI, executed by MESC and the Cogen Subsidiary, as the
case may be, granting the Security Interests to SERI, SEI and, if appropriate,
SERI's Affiliates.
"Security Interests" shall mean a first priority lien on and security
interest in all real and personal property (including any leasehold and easement
interest in real property) of MESC and the Cogen Subsidiary, as the case may be,
senior to all obligations of MESC and the Cogen Subsidiary, as the case may be,
including any Senior Debt, authorized, granted and effectuated pursuant to (a)
during the period beginning on the date hereof and ending immediately prior to
the filing of the Confirmation Orders, an order of the Bankruptcy Court
approving such first priority lien and security interest, and (b) during the
period beginning immediately prior to the filing of the Confirmation Orders and
thereafter, the Security Agreement and the Senior Debt Intercreditor and
Subordination Agreement.
"SEI" has the meaning set forth in the Recitals.
"SEI Cogen Investment" has the meaning set forth in Section 8.2.
"SEI Cogen Investment Notice" has the meaning set forth in Section 8.2.
"SEI Equity Funding Conditions" has the meaning set forth in Section
9.1(b).
"SEI Turbine Cancellation Costs" means any amounts payable by SEI or
its Affiliates as a result of the cancellation of the ▇▇ ▇▇▇▇▇ Turbine Contract
or the ▇▇ ▇▇▇▇▇ LTSA.
"SEI Turbine Costs" means any and all GE Turbine Costs paid or payable
by SEI or its Affiliates.
"Senior Debt" means (i) prior to the effectiveness of a Plan of
Reorganization for MESC, the Working Capital Facility (if not terminated), the
Taxable Bonds and the Tax Exempt Bonds and (ii) from and after the effectiveness
of such Plan, the debt instruments distributed in respect of the Taxable Bonds
and the Tax Exempt Bonds.
"Senior Debt Intercreditor and Subordination Agreements" mean
intercreditor and subordination agreements and other similar agreements and
consents, in form and substance reasonably satisfactory to SEI and SERI,
executed by MESC, the Collateral Agent, the Taxable Bond Indenture Trustee, the
Tax-Exempt Bond Indenture Trustee and all other necessary parties to effectuate
the subordination of MESC's obligations (and, if created, the obligations of the
Cogen Subsidiary) to the holders of the Senior Debt (and their respective
successors and assigns) and the subordination of the liens and security
interests held by such parties to the obligations described in, and Security
Interests granted to, SEI and SERI pursuant to this Agreement. Such debt
subordination shall provide that the Senior Debt shall be subordinate to the
prior payment in full of all obligations of MESC (and, if created, the
obligations of the Cogen Subsidiary) now or hereafter existing under this
Agreement, including (i) the reimbursement of all Development Costs, (ii) the
repayment of all Cogen Development Advances made to MESC by SERI or an Affiliate
of SERI, (iii) the payment of the Equity Option Fee and GE Turbine Costs payable
hereunder and (iv) MESC's indemnification obligations hereunder.
"SERI" has the meaning set forth in the Recitals.
"SERI Funding Obligation" has the meaning set forth in Section 3.1(b).
"Settlement Agreement" means that certain settlement agreement to be
entered into by MESH, MESC and KCTC, pursuant to the terms of the Settlement
Term Sheet.
"Settlement Term Sheet" has the meaning set forth in the Recitals.
"Southern" has the meaning set forth in the Recitals.
"Southern Parties" has the meaning set forth in Section 11.1.
"Steering Committee" has the meaning set forth in Section 2.15(a).
"Steering Committee Member" has the meaning set forth in Section
2.15(a).
"Tax Allocation Agreement" means that certain Tax Allocation Agreement,
dated December 29, 1981, as amended, to which Southern, MESH and certain other
Affiliates of Southern are parties.
"Taxable Bond Indenture Trustee" means First Union National Bank,
successor by merger to First Union National Bank of Georgia, as Trustee, under
the Trust Indenture, dated as of August 1, 1995, as supplemented by the First
Supplemental Indenture, dated as of August 1, 1995, with Mobile Energy Services
Company, LLC and Mobile Energy Services Holdings, Inc.
"Taxable Bonds" means the $255,210,000 aggregate principal amount of
8.665% First Mortgage Bonds due 2017 issued by MESC.
"Tax Exempt Bond Indenture Trustee" means First Union National Bank,
successor by merger to First Union National Bank of Georgia, as Trustee, under
the Amended and Restated Trust Indenture, dated as of August 1, 1995, as
supplemented by the Second Supplemental Trust Indenture, with the Industrial
Development Board of the city of Mobile, Alabama.
"Tax Exempt Bonds" means the $85,000,000 principal amount of 6.95%
Solid Waste Revenue Refunding Bonds (Mobile Energy Services Company, L.L.C.
Project) Series 1995 due 2020 issued by the Industrial Development Board of the
City of Mobile, Alabama.
"Technical Dispute" has the meaning set forth in Section 15.3(a).
"Technical Dispute Notice" has the meaning set forth in Section 15.2.
"Technical Expert" has the meaning set forth in Section 15.3(a).
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person (other than an individual), the holders
of which are ordinarily, in the absence of contingencies, entitled to vote for
the election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of such
a contingency.
"Working Capital Facility" means the Revolving Credit Agreement, dated
as of August 1, 1995, among MESC, MESH, the lenders named therein and Banque
Paribas, as agent.
1.2 Interpretation. Unless the context otherwise requires, the
following rules shall apply to the interpretation of this Agreement:
(a) the singular number includes the plural number and vice versa;
(b) reference to any Person includes such Person's successors and
assigns but only if such successors and assigns are permitted by this Agreement,
and reference to a Person in a particular capacity excludes such Person in any
other capacity;
(c) reference to any gender includes the other gender;
(d) reference to any agreement (including this Agreement and the
Schedules and Exhibits hereto), document or instrument (i) means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof and, if applicable, the terms hereof; and (ii)
shall include all exhibits, schedules and other attachments thereto;
(e) reference to any Requirement of Law means such Requirement of Law
as amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time, including rules and regulations promulgated thereunder;
(f) unless the context indicates otherwise, reference to any Article,
Section, Schedule or Exhibit means such Article or Section hereof or Schedule or
Exhibit of this Agreement;
(g) "hereunder," "herein," "hereof," hereto" and words of similar
import shall be deemed references to this Agreement as a whole and not to any
particular provision, unless otherwise indicated;
(h) "including" (and with correlative meaning "include") means
including without limiting the generality of any description preceding such
term;
(i) unless the context clearly requires otherwise, "or" is not
exclusive;
(j) relative to the determination of any period of time, "from" means
"from and including" and "to" and "through" mean "to but excluding";
(k) unless otherwise indicated, references to "days" shall mean
calendar days and reference to a time of day means such time of day in Atlanta,
Georgia; and
(l) all accounting terms not specifically defined herein shall be
construed in accordance with GAAP, as consistently applied by the accounting
entity to which they refer.
1.3 Legal Representation. This Agreement was negotiated by the Parties
with the benefit of legal representation and any rule of construction or
interpretation requiring this Agreement to be construed or interpreted in any
respect against any Party shall not apply to any construction or interpretation
hereof.
ARTICLE II
DEVELOPMENT SERVICES TO BE PROVIDED BY SERI
AND ROLE OF STEERING COMMITTEE
2.1 Development Services. Commencing on the Effective Date, SERI shall
provide the Development Services in accordance with the terms of this Agreement.
The Development Services shall mean those services described in Sections 2.2
through 2.10 and related ancillary services reasonably necessary to develop the
Cogen Project in accordance with the terms hereof.
2.2 Procurement. SERI shall perform procurement activities for the
Cogen Project as follows, subject to the review and approval of the Steering
Committee, as specified in Section 2.15:
(a) SERI shall create bid packages and select a qualified EPC
Contractor.
(b) SERI shall negotiate a turnkey fixed price EPC Agreement
between MESC or the Cogen Subsidiary, as the case may be, and
the EPC Contractor. The EPC Agreement will contain market
provisions, including (i) representations and warranties, (ii)
provisions regulating change orders, (iii) provisions
addressing retention and withholding from amounts paid to the
EPC Contractor, (iv) provisions dealing with the EPC
Contractor's security supporting its performance (i.e.
performance bond or appropriate letter of credit), (v)
provisions allowing for review of progress of construction
prior to any periodic payment being made to the EPC
Contractor, (vi) provisions requiring payment by the EPC
Contractor of liquidated damages in the event of a failure to
complete the Cogen Project on a timely basis in accordance
with the requirements of the EPC Agreement, and (vii)
provisions specifying the nature, and amount, of insurance
coverage to be procured and maintained by the EPC Contractor
and subcontractors. It is the expectation of the Parties that
the EPC Agreement may not be effective until after the
issuance of the Confirmation Order and, as a result, SERI,
subject to review and approval by the Steering Committee, may
negotiate such interim arrangements with the EPC Contractor as
may be appropriate, such as engaging the EPC Contractor on a
time and materials basis, pursuant to which the cost of the
EPC Contractor's services prior to the issuance of the
Confirmation Order may be minimized.
(c) To the extent set forth in the EPC Agreement, SERI shall
review and approve all agreements between the EPC Contractor
and key vendors and subcontractors.
(d) SERI shall monitor the EPC Contractor during the construction
period, including (i) reviewing the progress of the
construction and approving/denying the EPC Contractor's
payment applications, (ii) maintaining the retention account
and any other construction accounts, (iii) enforcing the terms
of the EPC Agreement in the event of a default on the part of
the EPC Contractor, and (iv) overseeing the achievement of
substantial and final completion of the Cogen Project,
including all performance testing.
(e) SERI shall negotiate and arrange all other contracts necessary
to the development, design, engineering, construction, and
start-up of the Cogen Project (including the development of
the ▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA).
2.3 Insurance. Each of the Parties will, and will cause its
subsidiaries to, maintain such insurance or, in the case of SERI and SEI, self
insure, to such extent and against such risks as is customary with Persons in
the same or similar business. With respect to the ▇▇ ▇▇▇▇▇ Turbine, to the
extent not insured by GE as provided in the ▇▇ ▇▇▇▇▇ Turbine Contract, SEI or
its Affiliates will maintain insurance or self insure with respect thereto until
the transfer thereof to MESC or the Cogen Subsidiary, as the case may be. All
insurance policies with respect to coverage maintained by each Party to this
Agreement shall, where appropriate, waive any right of subrogation of the
insurer thereunder against any Party, the owners of any Existing Senior Debt at
any time during the term of this Agreement, the owners of any debt constituting
Cogen Project Financing, any trustee, collateral agent or other fiduciary on
behalf of any of such owners, and the Lender Representative, and the officers,
directors and employees of each of them, and any right of insurers to any
set-off or counterclaim or any other deduction, whether by attachment or
otherwise, in respect of any liability of any such person insured under such
policy.
2.4 Permitting. SERI shall prepare applications for and use
commercially reasonable efforts to obtain, or engage one or more contractors to
prepare applications for and use commercially reasonable efforts to obtain, in
each case in a timely manner, all necessary permits, licenses and consents
required by MESC in order to develop, construct and operate the Cogen Project.
SERI shall provide the Steering Committee periodic reports as to the progress of
such permit applications and shall prosecute with due diligence the permits to
be obtained.
2.5 Budget and Financial Reports.
(a) SERI may incur or arrange for MESC to incur expenses in
accordance with the Budget and may exceed the Budget by the
Permitted Variance without obtaining approval from the
Steering Committee. In the event SERI determines in its
reasonable judgment that a cost should be incurred in
connection with the Cogen Project that would exceed the Budget
by more than the Permitted Variance, SERI, shall by written
notice to the Steering Committee (which notice will include a
pro forma Adjusted Budget giving effect to such proposed
modification) promptly seek the approval of the Steering
Committee to modify the Budget to include such cost, provided
that SERI shall have the right to increase the Budget by the
amount of costs incurred as a result of actions taken by SERI
under Section 2.6 (c) or Section 3.2(b) without such prior
approvals. For the avoidance of doubt, the Parties hereby
acknowledge that, upon delivery by SERI to the Steering
Committee of such notice and accompanying pro forma Adjusted
Budget, SERI shall have no obligation to incur Development
Costs that would cause it to exceed the Budget by more than
the Permitted Variance until the Steering Committee has
approved SERI's proposed Adjusted Budget and agreed that such
cost should be incurred and will be reimbursed. Any Budget
modified in accordance with this Section 2.5 shall be an
"Adjusted Budget," and such Adjusted Budget shall be the
Budget for purposes of this Agreement. Any dispute among SERI,
MESC, and the Lender Representative regarding whether an
expense should be incurred that would be in excess of the
Budget by more than the Permitted Variance shall be deemed to
be a Technical Dispute to be resolved in accordance with
Article XV.
(b) SERI and SEI shall keep proper books of record and accounts
relating to the Cogen Project, in conformity with GAAP. SERI
and SEI shall, upon two (2) days prior written notice by MESC
and/or the Lender Representative, allow MESC and/or the Lender
Representative reasonable access to such books of record and
accounts and shall allow MESC and/or the Lender Representative
to make copies of the same.
2.6 Project Schedule.
(a) In the event SERI determines in its reasonable judgment that
the Project Schedule either (x) no longer accurately reflects
the timing of the development of the Cogen Project, or (y)
shall shortly cease to so accurately reflect, SERI, shall by
written notice to MESC and the Lender Representative, promptly
seek the approval of the Steering Committee (which approval
shall not be unreasonably withheld) to modify the Project
Schedule so that the Project Schedule shall accurately reflect
the historic and predicted development of the Cogen Project
(which notice shall include a proposed Amended Project
Schedule giving effect to such proposed modification);
provided that SERI shall, after giving prior or
concurrent written notice to MESC and the Lender
Representative, have the right to revise the Project Schedule
in accordance with Section 2.6(c) or Section 4.4. Any revision
to the Project Schedule made in accordance with Section 2.6 or
4.4 shall be an "Adjusted Project Schedule" and such Adjusted
Project Schedule shall be the Project Schedule for purposes of
this Agreement.
(b) On the tenth (10th) day of each calendar month (or the next
business day if such tenth (10th) day is not a business day),
SERI shall submit a written progress report to the Steering
Committee, informing the Steering Committee of all key Cogen
Project activities performed during the calendar month
immediately preceding the month during which such report is
given, and identifying the key activities expected to be
performed during the month in which such report is given.
However, any Steering Committee Member shall, upon five (5)
days prior written notice, be entitled to request a status
update at any time, whereupon SERI shall promptly furnish such
update to each Steering Committee Member, either verbally or
in written form, as requested. Any report submitted by SERI
pursuant to this Section 2.6(b) shall include an explanation,
if required, of any significant discrepancy between the
activities that the Project Schedule predicted would be
performed during the month in question and the extent of the
activities actually performed during such month.
(c) Each of MESC, with the consent of the Lender Representative,
and SERI shall, after giving prior or concurrent written
notice to the other Party and the Lender Representative, have
the right to defer all or a portion of the development of the
Cogen Project (other than, in the case of SERI, SERI's
obligations pursuant to Section 2.7) in order to minimize the
incurrence of Development Costs until the Cogen Project
Financing is arranged; provided, however, such deferment shall
not extend the occurrence of the Equity Notice Date beyond
July 31, 2000.
2.7 Financing Services. SERI shall exercise commercially reasonable
efforts to assist MESC or the Cogen Subsidiary in arranging for the Cogen
Project Financing, so that such Cogen Project Financing shall be available as
soon as practical after the Bankruptcy Court issues the Confirmation Order with
respect to MESC. SERI shall, in accordance with Section 2.15, (i) solicit
proposals from a selected number of banks and other financial institutions for
the Cogen Project Financing, (ii) select an appropriate lender or lenders, and
(iii) negotiate a term sheet and definitive agreements with such lender or
lenders for the Cogen Project Financing. SERI shall, in accordance with Section
2.15, also negotiate credit agreements, select advisors and perform or arrange
for the performance of such other services as may be necessary to assist MESC in
obtaining such Cogen Project Financing in accordance with the terms of this
Agreement.
2.8 Personnel. SERI shall provide such personnel as are necessary to
meet its obligations set forth in this Article II, including all associated
administrative assistance.
2.9 Additional Cooperation. SERI shall cooperate and assist MESC and
the Lender Representative in connection with all of the transactions and
negotiations relating to the restructuring of MESC, including negotiations with
KCTC and/or Sappi relating to (i) the development and construction of the Cogen
Project and the proposed new pulping operation (the "New Pulp Mill"), (ii) the
location of the Cogen Project, (iii) the obtaining of all rights of way and
easements necessary for the construction and operation of the proposed New Pulp
Mill and the Cogen Project, (iv) any necessary amendments of, or supplements to,
any Energy Services Agreement, the Master Operating Agreement or any other
agreement relating thereto, and (v) any common site services. The Parties will
use commercially reasonable efforts either (x) to cause the filing of a
Comprehensive POR with the Bankruptcy Court or (y) or to obtain the approval of
the Bankruptcy Court of a motion to compromise approving those material
agreements described in the Settlement Term Sheet, including the New KCTC ESA,
the Settlement Agreement (certain portions of which may not be approved until
the Confirmation Order for MESC), and the Option Agreement and authorizing MESC
to implement such transactions (the "KCTC Compromise Approval"), in either case
on or before February 29, 2000.
2.10 Appointment as Agent. Subject to Section 2.15, MESC hereby
appoints SERI as its agent (i) to execute in the name of MESC any and all
contracts, applications and other documents as SERI deems necessary or
appropriate in connection with the provisions of Development Services in
compliance with the terms of this Agreement and (ii) to represent MESC with
regard to the Cogen Project before governmental agencies (including in obtaining
any required permits or regulatory approvals), in dealing with the news media,
and in otherwise dealing with members of the public. SERI shall use commercially
reasonable efforts to have all contracts, applications and other documents
entered into with respect to the Cogen Project (other than the ▇▇ ▇▇▇▇▇ Turbine
Contract and the ▇▇ ▇▇▇▇▇ LTSA) entered into in the name of MESC; provided,
however, that SERI shall, subject to Section 2.15, have the option to enter into
such contracts in its own name if it determines it is not commercially
reasonable to do so as agent of MESC. If SERI enters into such contracts in its
own name, it shall use commercially reasonable efforts to include in such
contracts a right to assign such contracts to MESC. Notwithstanding the
foregoing, SERI shall not be obligated to enter into any agreement that would
impose obligations on SERI or its Affiliates that are not consistent with SERI's
obligations under this Agreement.
2.11 Term of Development Services. SERI shall continue its performance
of the Development Services through the date on which the Cogen Project is
Commercially Operable unless the Development Services are earlier terminated as
follows:
(a) SERI may, upon giving written notice to MESC, MESH and the Lender
Representative, terminate the Development Services:
(i) upon an Event of Default by MESC (or the Cogen
Subsidiary, if applicable);
(ii) in the event MESC's rights to the ▇▇ ▇▇▇▇▇ Turbine,
the ▇▇ ▇▇▇▇▇ Turbine Contract and ▇▇ ▇▇▇▇▇ LTSA are
terminated in accordance with the terms of this
Agreement;
(iii) upon sixty (60) days prior written notice to MESC,
MESH and the Lender Representative, if the Cogen
Project is not Commercially Operable by December 31,
2002 or by such later date as may be consented to in
writing by SERI;
(iv) in the event of a Non-SEI Equity Investment pursuant
to which a third party unaffiliated with the holders
of the Senior Debt becomes the equity investor in the
Cogen Project; or
(v) in the event that (x) the conditions precedent to the
making of the SEI Cogen Investment have not been
satisfied, and (y) the Non-SEI Equity Investment has
not occurred, on or before the date that is sixty
(60) days after the Equity Notice Date.
(b) MESC shall have the right to terminate the Development
Services at any time upon thirty (30) days prior written notice to SERI and SEI.
2.12 Obligations Upon Termination. In the event of any
termination of the Development Services pursuant to Section 2.11:
(a) all unreimbursed Development Costs and, subject to
Sections 4.3(g) and 4.5(e), the Equity Option Fee
shall be immediately due and payable by MESC;
(b) SEI's obligations to transfer the ▇▇ ▇▇▇▇▇ Turbine,
the ▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA
shall terminate; provided, however, that this clause
(b) shall not apply in the event of a termination of
the Development Services pursuant to clause (iv) of
Section 2.11(a) where MESC has satisfied the MESC
Transfer Obligations on or before the Closing Date;
provided, further, that if the ▇▇ ▇▇▇▇▇ Turbine, the
▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA have
already been transferred by SEI to MESC or the Cogen
Subsidiary, all unreimbursed SEI Turbine Costs shall
be immediately due and payable by MESC; and
(c) all contracts related to the Cogen Project with third
party vendors or service providers to which SERI,
SEI, or any Affiliate of SERI is a party shall either
be terminated, assumed by or assigned to MESC or the
Cogen Subsidiary in accordance with the terms set
forth in Section 7.2.
2.13 Formation of Cogen Subsidiary. If MESC and the Lender
Representative, with the approval of SERI (unless SEI and its Affiliates no
longer own any interest in MESC), agree to the formation of a Cogen Subsidiary
to own, in whole or in part, the Cogen Facility, MESC may assign its rights
under this Agreement to such Cogen Subsidiary and the Cogen Subsidiary shall
assume MESC's obligations hereunder and shall secure its obligations hereunder
as provided in Section 6.1 In such an event, (i) MESC shall not be released from
any obligations hereunder, (ii) MESC and the Cogen Subsidiary shall be jointly
and severally liable for all obligations of MESC and the Cogen Subsidiary
hereunder, and (iii) SEI and SERI shall continue to retain a security interest
in the assets of MESC in accordance with Section 6.1.
2.14 No Guarantee of Successful Development Notwithstanding any other
provision of this Agreement, none of SEI, SERI or their Affiliates guarantee the
successful development of the Cogen Project, the technical or financial
performance of the Cogen Facility, or the arrangement of the Cogen Project
Financing.
2.15 Steering Committee
(a) General. Each of (i) SERI and SEI, (ii) MESC and MESH and
(iii) the Lender Representative shall appoint one person (a
"Steering Committee Member") to be their representative on the
Cogen Project steering committee (the "Steering Committee").
All actions or decisions of the Steering Committee shall be
taken only with the unanimous consent of each of the Steering
Committee Members. Actions or decisions of the Steering
Committee shall not be countermanded independently by any
Party.
(b) Steering Committee Members. Each Party's and the Lender
Representative's initial Steering Committee Member is set
forth on Exhibit G hereto. Each Party and the Lender
Representative may replace its Steering Committee Member upon
giving each other Party and the Lender Representative (if the
Lender Representative is not the Person giving such notice)
five (5) days prior written notice of such change. In
addition, each Steering Committee Member may designate (upon
at least one (1) days prior written notice) a substitute
representative to act in his/her stead. By nominating a
Steering Committee Member or designating a substitute
representative, each Party represents that the person so
nominated or designated by such Party has appropriate
authority to carry out the responsibilities of a Steering
Committee Member under this Agreement.
(c) Meetings. Subject to Section 2.15(d) below, the Steering
Committee will meet on not less than a bi-weekly basis to
review the strategy, progress and any significant issues that
have arisen in connection with the Cogen Project. Additional
meetings will be held on an ad hoc basis at the request of any
Party or the Lender Representative. All Steering Committee
meeting shall be held in Atlanta, Georgia, or at such other
location as Steering Committee Members may unanimously select.
(d) Written Consent in Lieu of Meeting. Any action or decision
that is required to, or which may, be taken by the Steering
Committee at a Steering Committee meeting may be taken without
a meeting if a consent thereto in writing, setting forth the
action or decision to be taken, is signed by all the Steering
Committee Members.
(e) Responsibilities of the Steering Committee. The Steering
Committee shall have the following rights and
responsibilities:
(i) Liaison. Provide a forum for discussions between
the Parties and the Committee at the management level with
respect to the development of the Cogen Project.
(ii) EPC Agreement. Review and approve (x) any bid
packages that SERI proposes to distribute to any potential EPC
Contractor, (y) any potential EPC Contractor that SERI proposes
be retained, and (z) the EPC Agreement and all associated
documentation. The Steering Committee shall also consult with
SERI as to the performance of SERI's monitoring responsibilities
pursuant to Section 2.2(d).
(iii) Project Budget. Except as otherwise provided in
this Agreement, review and approve any request by SERI for any
modification to the Budget, in accordance with the terms of
Section 2.5(a) hereof, which approval shall not be unreasonably
withheld. The Steering Committee shall also review (x) the books
of records and accounts maintained by SERI and SEI pursuant to
Section 2.5(b), and (y) any report delivered by SERI pursuant to
Section 5.1.
(iv) Project Schedule. Except as otherwise provided
in this Agreement, review and approve any request by SERI for any
modification of the Project Schedule, in accordance with the
terms of Section 2.6(a) hereof.
(v) Financing Services. Review and approve (x) any
solicitation materials that SERI proposes to distribute to any
potential lender that SERI proposes to solicit to provide the
Cogen Project Financing, (y) any potential lender that SERI
proposes be retained to provide the Cogen Project Financing, and
(z) the indenture, security documents and all other financing
documents required to be entered into in connection with the
Cogen Project Financing.
(vi) Certain Agreements, Bonds etc. Review and
approve all agreements, performance bonds, letters of credit,
guarantees, letters of intent, or commitment letters with a
potential value in excess of five hundred thousand dollars
($500,000) to be entered into by, or issued on behalf of, SEI,
SERI, or any Affiliate of SERI, as the case may be, in connection
with the Cogen Project.
(vii) Consultants. Review and approve any consultant
to be retained to provide material services in connection with
the Cogen Project.
(f) Failure to Reach Agreement. In the event that the Steering
Committee Members are unable to reach a unanimous decision as
to whether to act or refrain from acting in relation to a
particular matter, the meeting shall be adjourned and the
matter shall be resolved in accordance with the terms of
Article XV.
ARTICLE III
FUNDING OBLIGATIONS
3.1 Funding Obligations. Prior to the Closing Date the Parties
shall be responsible for the costs of the development of
the Cogen Project as follows:
(a) SEI, SERI, and their Affiliates shall initially incur all
Development Costs; provided that SEI, SERI, and their
Affiliates shall not be obligated to incur Development Costs
at any time that would cause the Maximum Development Exposure
Amount to exceed five million dollars ($5,000,000). On the
fifth (5th) day of each calendar month (or the next business
day if such fifth (5th) day is not a business day), SERI shall
submit an invoice to MESC (together with all supporting
documentation) and, subject to Section 5.1, MESC shall pay,
for all Development Costs incurred by SERI or its Affiliates
during the immediately preceding month; provided, however,
that, certain third party costs of SERI and its Affiliates for
services and equipment procurement may be deferred by MESC in
accordance with subsection (b) below.
(b) Until a Funding Termination occurs, SERI or its Affiliates
shall defer collection from MESC for, or advance to MESC the
funds to pay for (which advance shall be promptly applied by
MESC to such payment), Development Costs in the nature of
equipment procurement and other third party costs incurred by
SERI or its Affiliates or MESC or the Cogen Subsidiary in
developing the Cogen Project in accordance with this
Agreement, including costs incurred or any cancellation
charges owed in connection with the EPC Agreement and the heat
recovery steam generator contract (all such advances being
referred to herein as "Cogen Development Advances"); provided,
however, that SERI and its Affiliates shall not be obligated
to incur or be liable for an aggregate Maximum Development
Exposure Amount of more than five million dollars ($5,000,000)
at any time. As used herein, the term "Maximum Development
Exposure Amount" means, as of any date, the sum of (i) the
unreimbursed amount of (x) all Cogen Development Advances and
(y) SERI's and its Affiliates' actual Development Costs, and
(ii) cancellation costs (other than SEI Turbine Cancellation
Costs) for which SERI or its Affiliates would be liable under
any contracts entered into by SERI or its Affiliates with
third parties related to the Cogen Project if such contracts
were terminated as of such date. SERI's obligation to defer
recovery of Development Costs from or to (or have one or more
of its Affiliates to) advance funds to MESC under this Section
3.1(b) is referred to herein as the "SERI Funding Obligation."
The SERI Funding Obligation is contingent upon the issuance by
the Bankruptcy Court of an order acceptable in form and
substance to SERI and the Committee authorizing MESC to use,
if necessary to fund the Cogen Project after SERI has
fulfilled its SERI Funding Obligation, all cash generated
after January 1, 2000 in excess of its operating costs to pay
Development Costs or costs incurred by MESC related to the
Cogen Project and not to be distributed to the holders of the
Senior Debt.
3.2 Termination of Funding Obligation.
(a) The SERI Funding Obligation shall terminate (the "Funding
Termination") upon the earliest to occur of: (i) a termination
of Development Services in accordance with the terms hereof,
(ii) an Event of Default by MESC (or the Cogen Subsidiary, if
applicable), (iii) the Maximum Development Exposure Amount
equals or exceeds five million dollars ($5,000,000), (iv) the
date thirty (30) days after the Equity Notice Date, if MESC
has, on or prior to such date, given SEI the Non-SEI Equity
Investment Notice, in accordance with the terms hereof,
provided that such date shall be extended to the date sixty
(60) days after the Equity Notice Date, if one or more of the
Extension Conditions exists, (v) the date sixty (60) days
after the Equity Notice Date, if MESC has, on or prior to such
date, given SEI the SEI Equity Investment Notice, in
accordance with the terms hereof, (vi) the closing of the
Cogen Project Financing, (vii) February 29, 2000, in the event
that both (x) the Comprehensive POR is not filed with the
Bankruptcy Court and (y) the KCTC Compromise Approval is not
issued, in each case on or before February 29, 2000, for any
reason other than a breach by SEI or SERI or any of their
obligations hereunder, and (viii) the closing of the SEI Cogen
Investment or the Non-SEI Equity Investment.
(b) Without limiting any other right of SEI or SERI hereunder,
from and after a Funding Termination, SERI and its Affiliates
shall not be required to advance any funds or incur any
further Development Costs, and SERI may take such action as it
deems reasonable to minimize its liability for Development
Costs thereafter, including issuing a stop work order on any
contract related to the Cogen Project for which SERI or its
Affiliates are liable, deferring the performance of the EPC
Contractor (to the extent SERI or its Affiliates would be
liable for costs or other liability under the EPC Agreement)
and deferring the manufacture and installation of any
equipment to be supplied by a third party, including the ▇▇
▇▇▇▇▇ Turbine and the heat recovery steam generator.
ARTICLE IV
TURBINE PROCUREMENT AND LONG-TERM SERVICES AGREEMENT
4.1 ▇▇ ▇▇▇▇▇ Turbine Contract. SEI is a party to the GE Master Turbine
Contract, pursuant to which SEI has designated a GE turbine to be manufactured
and delivered to SEI in Mobile, Alabama or to a storage facility identified by
the Parties. Commencing on the Effective Date, SEI shall develop and negotiate
with GE to enter into a ▇▇ ▇▇▇▇▇ Turbine Contract which shall be assignable to
MESC or the Cogen Subsidiary, as the case may be, for the Cogen Facility.
4.2 GE Long-Term Services Agreement. SEI is a party to the GE Master
LTSA, pursuant to which SEI may direct GE to perform long term services for the
▇▇ ▇▇▇▇▇ Turbine. Commencing on the Effective Date, SEI shall develop and
negotiate with GE to enter into a ▇▇ ▇▇▇▇▇ LTSA which be assignable to MESC or
the Cogen Subsidiary, as the case may be, for the Cogen Facility.
4.3 Responsibilities of the Parties Relating to GE Turbine and LTSA.
The Parties shall have the following responsibilities and obligations regarding
the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and ▇▇ ▇▇▇▇▇ LTSA:
(a) Provided that all MESC Transfer Obligations are satisfied on
or before the Closing Date, SEI hereby agrees to assign or
delegate on the Closing Date to MESC or the Cogen Subsidiary,
as the case may be, the ▇▇ ▇▇▇▇▇ Turbine Contract and all
rights and obligations associated therewith.
(b) Provided that all MESC Transfer Obligations are satisfied on
or before the Closing Date, SEI hereby agrees to assign or
delegate on the Closing Date to MESC or the Cogen Subsidiary,
as the case may be, the ▇▇ ▇▇▇▇▇ LTSA and all rights and
obligations associated therewith.
(c) SEI shall be responsible for and pay all GE Turbine Costs
until the Closing Date, at which time MESC shall reimburse SEI
for all such GE Turbine Costs incurred by SEI through the
Closing Date and shall assume the obligation to pay all GE
Turbine Costs from and after the Closing Date and either (x)
obtain from GE a release of SEI from all obligations of SEI to
GE under the ▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA
or (y) indemnify SEI from and against any and all costs,
liability and expense arising from the ▇▇ ▇▇▇▇▇ Turbine, ▇▇
▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA and provide
security for such indemnity as provided in Section 6.1.
(d) SEI shall retain title to the ▇▇ ▇▇▇▇▇ Turbine until all of
SEI's rights with respect thereto are transferred to MESC on
the Closing Date.
(e) MESC and the Lender Representative may by written notice to
SEI delivered on or before February 29, 2000, terminate MESC's
rights to the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract
and ▇▇ ▇▇▇▇▇ LTSA.
(f) In the event of (i) a MESC Event of Default, (ii) failure of
MESC to satisfy the MESC Transfer Obligations within sixty
(60) days after the Equity Notice Date or (iii) the
termination of MESC's rights to the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇
▇▇▇▇▇ Turbine Contract and ▇▇ ▇▇▇▇▇ LTSA in accordance with
Section 4.3(e) or Section 4.5(e), any and all rights of MESC
with respect to the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine
Contract and the ▇▇ ▇▇▇▇▇ LTSA shall terminate, and MESC shall
not have any responsibility for any GE Turbine Costs.
(g) MESC shall pay SEI the Equity Option Fee, in accordance with
the terms hereof, at the earliest of (x) the Closing Date, (y)
the termination of Development Services by SERI or MESC, or
(z) the termination of this Agreement, in accordance with the
terms hereof; provided, however, that MESC shall not be
obligated to pay the Equity Option Fee if:
(i) this Agreement is terminated as a result of an Event
of Default by SEI or SERI;
(ii) SEI breaches its obligation to assign to MESC, or the
Cogen Subsidiary, SEI's rights to the ▇▇ ▇▇▇▇▇
Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇
▇▇▇▇▇ LTSA;
(iii) MESC's rights to the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇
Turbine Contract and ▇▇ ▇▇▇▇▇ LTSA are terminated in
accordance with Section 4.3(e) or Section 4.5(e); or
(iv) an SEI Cogen Investment is made;
provided that payment of the Equity Option Fee may be delayed by SEI until such
time as any approvals required under PUHCA for such Equity Option Fee, if any,
have been obtained.
4.4 Deferral of Scheduled Delivery Date. SEI may, in its sole
discretion, defer the delivery of the ▇▇ ▇▇▇▇▇ Turbine to the Cogen Project site
(either by deferring delivery by GE or by taking delivery from GE and placing
the ▇▇ ▇▇▇▇▇ Turbine in storage and deferring delivery to the Cogen Facility
site) until thirty (30) days after the Closing Date, provided that SEI shall,
prior to the originally scheduled delivery date (as specified in the then
current Project Schedule) have delivered to MESC and the Lender Representative a
proposed Adjusted Project Schedule giving effect to such deferral. SEI or SERI
shall advise MESC and the Lender Representative from time to time regarding any
change made by SEI in the scheduled delivery date for the ▇▇ ▇▇▇▇▇ Turbine and
the impacts on the Project Schedule and Project Budget related thereto. In the
event of a change in the Project Schedule, in accordance with the terms hereof,
that provides for a change in the delivery date to after December 31, 2000, SEI
shall have the right to have the GE turbine designated for delivery to the site
delivered to another SEI project and then designate another GE turbine for
delivery to the Cogen Project; provided that if such change would cause a change
of more than three (3) months in the date that the Cogen Project would be
expected to be Commercially Operable without any change in the GE turbine
(taking into account the changes in the Project Schedule that prompt a change in
the delivery date for the GE turbine), SEI may make such a change in the GE
turbine designated for delivery to the Cogen Facility site only with the written
consent of MESC and the Lender Representative, which consent shall not be
unreasonably withheld. MESC hereby acknowledges that such change in the GE
turbine designated for delivery to the Cogen Facility site may result in other
impacts to the Project Schedule and Project Budget which shall be reflected in
the proposed Adjusted Project Schedule and Adjusted Budget to be provided by
SEI.
4.5 Failure to File Comprehensive POR or Receive KCTC Compromise
Approval. In the event that both (x) the Comprehensive POR is not filed with the
Bankruptcy Court and (y) the KCTC Compromise Approval is not issued, in each
case, on or before February 29, 2000, for any reason other than the breach by
SERI or SEI of any of their obligations under this Agreement, the following
shall occur:
(a) All Development Costs paid by SEI, SERI or an Affiliate of
SERI that have not been previously reimbursed or Cogen
Development Advances made to MESC by SERI or an Affiliate of
SERI that have not been repaid shall be immediately due and
payable by MESC;
(b) MESC shall have the right, exercisable by the delivery of
written notice to SEI within ten (10) days after February 29,
2000, to retain its rights with respect to the ▇▇ ▇▇▇▇▇
Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA,
in which event (i) SEI shall continue to pay the GE Turbine
Costs until the Closing Date, and (ii) all other terms
contained in this Agreement relating to the transfer of the ▇▇
▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇
LTSA shall continue to apply (including MESC's right to
require SEI to transfer the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇
Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA in accordance with the
terms hereof).
(c) If MESC exercises its right to retain the rights to the ▇▇
▇▇▇▇▇ Turbine and ▇▇ ▇▇▇▇▇ LTSA in accordance with Section
4.5(b), SERI and its Affiliates, as appropriate, shall assign
and delegate to MESC and the Cogen Subsidiary and MESC and the
Cogen Subsidiary shall assume all rights and obligations under
all contracts with third parties to which SERI or any of its
Affiliates is a party relating to the Cogen Project, and MESC
shall either (x) obtain from each such third party a release
of SERI and its Affiliates from all obligations to such third
party under such contracts or (y) indemnify SERI and its
Affiliates for all such contractual obligations that are not
so released and provide security for such indemnity as
provided in Section 6.1.
(d) If MESC exercises its right to retain the rights to the ▇▇
▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and ▇▇ ▇▇▇▇▇ LTSA
in accordance with Section 4.5(b), MESC shall perform the MESC
Transfer Obligations set forth in Section 7.2 on or before the
Closing Date. If MESC fails to perform such MESC Transfer
Obligations on or before the Closing Date, (i) all rights of
MESC with respect to the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇
Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA shall terminate, and
(ii) SERI and its Affiliates may terminate any contract
relating to the Cogen Project and MESC shall reimburse SERI
and its Affiliates for any costs incurred by SERI and its
Affiliates under such contracts not previously reimbursed by
MESC, including any cancellation costs (other than SEI Turbine
Cancellation Costs) imposed as a result of such termination.
(e) If MESC fails to exercise in a timely manner its right under
Section 4.5(b) to retain rights to the ▇▇ ▇▇▇▇▇ Turbine, the
▇▇ ▇▇▇▇▇ Turbine Contract and ▇▇ ▇▇▇▇▇ LTSA, all rights and
obligations of MESC with respect to the ▇▇ ▇▇▇▇▇ Turbine, the
▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA shall
terminate and SEI may direct GE to deliver (or, if GE has
already delivered the ▇▇ ▇▇▇▇▇ Turbine, SEI may deliver) the
▇▇ ▇▇▇▇▇ Turbine for use at another location. In such an
event, (i) MESC shall not have any responsibility for any SEI
Turbine Costs, (ii) SERI and SEI may terminate this Agreement
and the O&M Agreement, (iii) MESC shall not owe SEI the Equity
Option Fee, and (iv) SERI and its Affiliates may terminate any
contract relating to the Cogen Project and MESC shall
reimburse SERI and its Affiliates for any costs incurred by
SERI and its Affiliates under such contracts not previously
reimbursed by MESC, including any cancellation costs (other
than SEI Turbine Cancellation Costs) imposed as a result of
such termination.
4.6 Resale of ▇▇ ▇▇▇▇▇ Turbine Prohibited. Except as part of a (i) sale
of all of MESC's or the Cogen Subsidiary's assets, or (ii) collateral assignment
or transfer to a secured lender of MESC or the Cogen Subsidiary pursuant to the
terms of the relevant security documents, neither MESC nor the Cogen Subsidiary
may assign, sell, or otherwise transfer the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇
Turbine Contract or the ▇▇ ▇▇▇▇▇ LTSA. The prohibitions on transfer of the ▇▇
▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract or the ▇▇ ▇▇▇▇▇ LTSA imposed by
this Section 4.6 shall survive the expiration or termination of this Agreement.
ARTICLE V
PAYMENTS; FEES AND INDEMNITIES
5.1 Invoice for Development Costs. SERI shall invoice MESC monthly for
all Development Costs payable by MESC in accordance with Section 3.1. Such
invoice shall separately identify those Development Costs for which payment may
be deferred under Section 3.1(b). Subject to Section 3.1(b), such invoice shall
be payable by MESC within twenty (20) days after receipt. Such statement shall
be adjusted from time to time by SERI based on its records. If in any calendar
month the amount of the Development Costs or the GE Turbine Costs incurred
during such month differ by more than the Permitted Variance from the amount of
the Development Costs or the GE Turbine Costs that the Project Budget predicted
would be incurred during such month, on the tenth (10th) day (or the next
business day if such tenth (10th) day is not a business day) of the calendar
month immediately following such month, SERI shall submit a written financial
report to the Steering Committee identifying in detail (x) the amount and nature
of all Development Costs and GE Turbine Costs so incurred (accompanied by
supporting documentation), and (y) explaining the discrepancies between such
costs and the costs that the Project Schedule predicted would be incurred during
the month in question.
5.2 Deferred Development Costs; Cogen Development Advances.
(a) SERI shall provide MESC on a monthly basis a statement of the
outstanding amount of the Development Costs and GE Turbine
Costs previously deferred by MESC and Cogen Development
Advances by SERI or its Affiliates pursuant to Section 3.1(b).
(b) MESC shall, on the earliest of (i) the Closing Date, (ii) the
termination of Development Services by SERI, or (iii) the
termination of this Agreement by SEI and SERI in accordance
with the terms hereof, pay SERI (or its Affiliates as
applicable) for (x) all Development Costs not previously
reimbursed by MESC, including Development Costs previously
deferred by MESC, and (y) all Cogen Development Advances by
SERI or its Affiliates pursuant to Section 3.1(b) not
previously repaid.
5.3 SEI Turbine Costs. Provided that all MESC Transfer Obligations are
satisfied on or before the Closing Date and SEI's rights and obligations with
respect to the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇
LTSA are assigned to MESC or the Cogen Subsidiary, MESC shall reimburse SEI for
all SEI Turbine Costs on or before the Closing Date.
5.4 Equity Option Fee. MESC shall pay SEI the Equity Option Fee in
accordance with Section 4.3(f).
5.5 Interest.
(a) Interest shall accrue at an annual rate equal to the Interest
Rate on (i) all Development Costs paid or incurred by SERI or
an Affiliate of SERI that are deferred by MESC pursuant to
Section 3.1(b), from the date payment would have been due from
MESC under the terms of this Agreement had such Development
Costs not been deferred until such Development Costs are
reimbursed by MESC, (ii) all Cogen Development Advances to
MESC by SERI or its Affiliates pursuant to Section 3.1(b),
from the date such advance was made until repaid by MESC, and
(iii) all GE Turbine Costs to be reimbursed by MESC under the
terms of this Agreement, from the date of the payment or
incurrence thereof by SEI or an Affiliate thereof until such
costs are reimbursed by MESC; provided that in each case such
interest shall accrue only to the extent permitted under
applicable Requirements of Law. Such interest shall be due and
payable on the date that such deferred Development Costs,
Cogen Development Advances, or GE Turbine Costs, as the case
may be, are due and payable by MESC pursuant to the terms of
this Agreement.
(b) In the event any amount due and payable under this Agreement
is not paid on the date due, such amount shall accrue interest
at the lower of (i) the Interest Rate plus two percent (2%)
per annum, or (ii) the maximum interest rate payable by law,
until paid in full; provided that such interest shall accrue
only to the extent permitted under applicable Requirements of
Law.
5.6 Indemnities. MESC shall indemnify SERI, SEI and SERI's Affiliates
from and against (i) subject to Section 3.1, any and all Development Costs,
including any costs incurred in connection with the cancellation of contractual
arrangements with third parties related to the Cogen Project (other than the ▇▇
▇▇▇▇▇ Turbine Contract or the ▇▇ ▇▇▇▇▇ LTSA) where such cancellation is in
accordance with the terms of this Agreement and (ii) following the assignment of
the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA to
MESC, any and all GE Turbine Costs.
ARTICLE VI
APPLICATION OF FUNDS AND SECURITY
6.1 Security Interest.
(a) As security for timely performance of all obligations of MESC
and the Cogen Subsidiary to SEI or SERI (and, if appropriate,
SERI's Affiliates) under this Agreement, including (i) the
reimbursement of all Development Costs, (ii) the repayment of
all Cogen Development Advances made to MESC by SERI or an
Affiliate of SERI, (iii) the payment of the Equity Option Fee
and GE Turbine Costs payable hereunder and (iv) MESC's
indemnification obligations hereunder, SERI and SEI shall be
granted the Security Interests. SERI and SEI shall subordinate
their respective Security Interests to the Cogen Project
Financing by entering into a consent to such subordination
(the "Cogen Lender Consent") in form and substance reasonably
satisfactory to SERI, SEI, MESC and the Lender Representative.
With respect to MESC's or the Cogen Subsidiary's indemnity
obligations hereunder, the Security Interests shall secure
only those indemnification claims asserted within two (2)
years after the later of (i) the Closing Date, or (ii) the
termination of Development Services.
(b) Each of MESC and the Cogen Subsidiary, as the case may be,
shall, on demand, (i) execute and deliver the Security
Agreements and the Senior Debt Intercreditor and Subordination
Agreements, (ii) use commercially reasonable efforts to cause
the Senior Debt Intercreditor and Subordination Agreements to
be executed and delivered by the Collateral Agent, the Taxable
Bond Indenture Trustee, the Tax-Exempt Bond Indenture Trustee
and all other necessary parties to effectuate the
subordination of MESC's obligations (and, if created, the
obligations of the Cogen Subsidiary) to the holders of the
Senior Debt (and their respective successors and assigns) and
the subordination of the liens and security interests held by
such parties to the obligations described in, and Security
Interests granted to, SEI and SERI pursuant to this Agreement,
and (iii) do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments,
notices of assignment, transfers, agreements and assurances as
SEI and SERI shall, from time to time, reasonably require for
better assuring, conveying, assigning, transferring and
confirming unto SEI and SERI the property and rights to be
mortgaged or assigned pursuant to the Security Interests
granted in accordance with the terms hereof, or intended now
or hereafter so to be, or that MESC and Cogen Subsidiary, as
the case may be, may be or may hereafter become bound to
convey, mortgage or assign to SEI and SERI pursuant to the
Security Agreements and the Senior Debt Intercreditor and
Subordination Agreements, or for carrying out the intention or
facilitating the performance of the terms hereof. 6.2
Application of Funds. Prior to SERI or SEI realizing upon any
collateral security granted by MESC or the Cogen Subsidiary,
as the case may be, pursuant to Section 6.1, SERI and SEI
shall look to MESC or the Cogen Subsidiary, as the case may
be, for payment of any sums due to SERI or SEI, as the case
may be, from MESC or the Cogen Subsidiary, as the case may be,
first from the proceeds then available from (i) cash held by
MESC or the Cogen Subsidiary, as the case may be, (ii) any
payment from KCTC to be received pursuant to the Settlement
Term Sheet, (iii) investment proceeds from any equity
investors in the Cogen Project, and (iv) the proceeds from any
Cogen Project Financing; provided, however, if MESC or the
Cogen Subsidiary, as the case may be, fails to pay such sums
upon demand therefor, SEI and SERI may proceed at their
election to realize upon their collateral pursuant to the
Security Agreements or applicable law.
ARTICLE VII
MESC OBLIGATIONS AND TRANSFER CONDITIONS
7.1 Conditions to Transfer. As a condition to SEI's obligation to
transfer the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and ▇▇ ▇▇▇▇▇ LTSA
to MESC on the Closing Date or any time prior thereto, MESC shall satisfy the
MESC Transfer Obligations.
7.2 MESC Transfer Obligations. As used herein, the "MESC
Transfer Obligations" are:
(a) MESC shall reimburse SEI for all GE Turbine Costs paid or
incurred by SEI through the date on which the transfer is to
be made, together with accrued but unpaid interest.
(b) Whether or not SEI or its Affiliate is an equity investor in
the Cogen Project, all of SEI's contractual rights and
obligations under the ▇▇ ▇▇▇▇▇ Turbine Contract and the ▇▇
▇▇▇▇▇ LTSA shall be assigned to or assumed by MESC, and MESC
shall either (x) obtain from GE a release of SEI from all
obligations to GE under the ▇▇ ▇▇▇▇▇ Turbine Contract and the
▇▇ ▇▇▇▇▇ LTSA or (y) indemnify SEI from and against any and
all costs, liability and expense arising from the ▇▇ ▇▇▇▇▇
Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA and provide security
for such indemnity as provided in Section 6.1.
(c) MESC shall pay SEI the Equity Option Fee, unless SEI is the
equity investor in the Cogen Project.
(d) MESC shall reimburse SERI (or its Affiliates as applicable)
for (i) all unreimbursed Development Costs, including all
Developments Costs previously deferred by MESC under Section
3.1(b), and (ii) all unpaid Cogen Development Advances by SERI
its Affiliates pursuant to Section 3.1(b), in each case
together with accrued but unpaid interest.
(e) Whether or not SEI or its Affiliate is an equity investor in
the Cogen Project, MESC shall assume all of SERI's, and, where
appropriate, all of SERI's Affiliates',contractual obligations
under each contract with a third party to which SERI, or any
of its Affiliates, is a party relating to the Cogen Project,
and either (x) obtain from each such third party a release of
SERI and its Affiliates from all obligations to such third
party under such contract or (y) indemnify SERI and its
Affiliates for all such contractual obligations and provide
security for such indemnity as provided in Section 6.1. If
MESC fails to comply with the foregoing with respect to any
third-party contract, SERI or its Affiliate, as the case may
be, may terminate such contract and MESC shall reimburse SERI
or its Affiliate, as the case may be, for any cancellation
costs (other than SEI Turbine Cancellation Costs) imposed as a
result of such termination.
ARTICLE VIII
EQUITY FUNDING
8.1 Equity Investment in Cogen Project. At any time until and including
the Equity Notice Date, MESC shall have the right, with the concurrence of the
Lender Representative, to structure a Non-SEI Equity Investment.
8.2 Equity Notice Date. MESC shall have until and including the Equity
Notice Date to provide SEI with either (i) a written notice (the "Non-SEI Equity
Investment Notice") stating that MESC will invest or arrange for a third party
or group of holders of Senior Debt to invest equity in the Cogen Project (the
"Non-SEI Equity Investment"), or (ii) a written notice (the "SEI Cogen
Investment Notice") (x) stating that the SEI Equity Funding Conditions have been
met and that, subject to the satisfaction of the Extension Conditions, MESC is
requiring SEI to make an equity investment of up to thirty million dollars
($30,000,000) (the "SEI Cogen Investment"), and (y) specifying the date on which
the closing of the SEI Cogen Investment will be made. If MESC fails to give to
SEI either the Non-SEI Equity Investment Notice or the SEI Cogen Investment
Notice on or before the Equity Notice Date, SERI and SEI shall have the right to
terminate this Agreement effective upon written notice to MESC.
8.3 Deferral of Closing. MESC shall arrange for the Closing Date to
occur promptly after the Equity Notice Date; provided, however, MESC may defer
the Closing Date for up to sixty (60) days after the Equity Notice Date to the
extent necessary to satisfy the Extension Conditions. If MESC delivers either
the Non-SEI Equity Investment Notice or the SEI Cogen Investment Notice to SEI
and the Closing Date does not occur within sixty (60) days after the Equity
Notice Date for reasons other than an Event of Default by SERI or SEI, then SEI
shall have no further obligation to make the SEI Cogen Investment (in the case
where MESC delivered the SEI Cogen Investment Notice to SEI) and SEI and SERI
may terminate this Agreement effective upon written notice to MESC.
ARTICLE IX
SEI EQUITY INVESTMENT IN COGEN PROJECT
9.1 SEI Cogen Investment. At any time on or before the Equity Notice
Date, and provided (i) MESC has not given SERI the Non-SEI Equity Investment
Notice and (ii) the Equity Funding Conditions have been satisfied and remain
satisfied, MESC shall have the right to give SEI the SEI Cogen Investment Notice
and to require SEI to make the SEI Cogen Investment in accordance with the
following:
(a) Subject to Section 8.3 and Section 9.2, and provided the
Equity Funding Conditions remain satisfied, the closing of the
SEI Cogen Investment shall occur on the date specified by MESC
in the SEI Cogen Investment Notice for making the SEI Cogen
Investment and, beginning on such date, SEI or an Affiliate
thereof will from time to time provide the equity required to
be invested in MESC or a subsidiary of MESC to fund the equity
component of the capital required for the Cogen Project up to
a maximum of thirty million dollars ($30,000,000).
(b) The "Equity Funding Conditions" are:
(i) A third party (A) has acquired KCTC's pulp mill
assets under the Option Agreement, or (B) is
obligated under a definitive agreement (other than
the Option Agreement) to acquire, subject to
customary closing conditions, KCTC's pulp mill assets
under that certain Option Agreement described in the
Settlement Term Sheet and either (x) MESC has
provided evidence satisfactory to SEI in its
commercially reasonable judgment that such third
party has thirty million dollars ($30,000,000)
available to fund the cash equity required for a new
pulping operation based upon the pulp mill assets to
be acquired from KCTC or (y) such third party is
otherwise reasonably acceptable to SEI.
(ii) KCTC and MESC have entered into a revised energy
services agreement for the provision of steam
processing and electricity by MESC to KCTC's
facilities in Mobile, Alabama consistent with the
terms set out in the Settlement Term Sheet or
otherwise reasonably acceptable to SEI, which
agreement has become effective.
(iii) A financial restructuring of MESC and MESH has
occurred or will occur upon the entry of Confirmation
Orders by the Bankruptcy Court for MESC and MESH
under which (x) any cancellation of indebtedness of
MESC or MESH or other transaction that would trigger
payment by Southern of taxes on the amount of its
excess loss account related to its investment in MESH
did not occur or will not occur until after the
payment to be made by KCTC under the terms outlined
in the Settlement Term Sheet has been received by
MESC and the members of MESC have recognized income
as a result of such payment and (y) upon the closing
of the SEI Cogen Investment any taxable income or tax
losses attributed to MESC's members for that year
would be allocated based on the proration method and
MESC would distribute to its members (and MESH would
dividend to Southern) amounts adequate to pay any
income tax owed by such members based upon MESC's
operations in that year.
(iv) MESC and the Cogen Subsidiary, if applicable, shall
have provided SEI, SERI and, if appropriate, SERI's
Affiliates, the security specified in Section 6.1.
(v) SEI's investment of equity in the cogeneration
project would meet the following return criteria:
(A) The after-tax cash return on the amount
invested by SEI or its Affiliates in the
Cogen Project (i.e., the internal rate of
return) (such return, the "SEI IRR") will be
greater than or equal to sixteen percent
(16%) (excluding the benefits of any
reduction in taxes owed by Southern on its
excess loss account related to its
investment in MESH, but considering future
tax benefits generated by MESC's operations)
based on a thirty (30) year cash flow
projection at the member level (excluding
terminal value), which projection shall be
made using a model and assumptions
satisfactory to SEI in its reasonable
judgment that takes into account expected
business risks, regulatory risks and
environmental risks.
(B) Separately taking into account reasonable
down-side sensitivities related to revenues,
costs, market electricity prices, gross
margin (revenue minus fuel costs), interest
rates, construction costs, and demands for
steam and electricity from KCTC and Sappi,
in each case the net present value of the
investment made by SEI or its Affiliates in
the Cogen Project calculated using a
discount rate of ten percent (10%) will not
be negative.
(C) At least one half of the SEI IRR would be
earned through debt service on secured debt
having a ten year maturity issued to SEI or
its Affiliates (such debt, the "Mezzanine
Debt") that would be subordinate only to the
Cogen Project Financing and an amount of
restructured debt for MESC sized so that
under each sensitivity analysis referred to
in Section 9.1(b)(v)(B) MESC would have
sufficient cash flow in each year to pay any
principal and interest due on the Mezzanine
Debt for that year.
(D) Concurrent with repayment of the Mezzanine
Debt, the SEI IRR will be projected (as
described above) to be greater than or equal
to eleven percent (11%) based on a
combination of returns attributable to the
debt service payments on the Mezzanine Debt
and cumulative dividends.
(E) The investment is accretive to book earnings
of Southern, based on projections (as
described above) at the time of the
investment.
(F) The internal rate of return crossover, or
the point in time at which the SEI IRR
surpasses a zero percent (0%) cumulative
return, should occur no later than the sixth
anniversary of the Closing Date, based on
projections (as described above) at the time
of the investment.
(G) The members of MESC should not, at any time
following the Cogen Project becoming
Commercially Operable, have negative net
income or negative after tax cash flows
based on projections (as described above) at
the time of the investment.
(H) For any year in which a No. 9 Reduction
Amount exists, (i) the interest payable on
any debt senior to the Mezzanine Debt (other
than the Cogen Project Financing) in such
year shall be reduced by the No. 9 Reduction
Amount and (ii) to the extent that the No. 9
Reduction Amount for such year exceeds the
interest to be paid on such debt in such
year, principal to be paid on such debt in
such year (including principal amounts
previously deferred) shall be deferred until
the following year in an amount equal to
such excess.
(vi) Following SEI's investment of equity in the Cogen
Project (A) Southern shall retain ownership of at
least eighty one percent (81%) of MESH and fifty one
percent (51%) of MESC, (B) Southern would retain
control of MESH and MESC, and (C) MESH will be the
sole manager of MESC.
9.2 SEI's Right to Defer Making Investment. SEI may defer making the
SEI Cogen Investment until (w) the conditions set forth in Section 18 of the
Settlement Agreement have been satisfied or waived and the Settlement Agreement
and the agreements described therein have become fully effective, (x) any
required approvals from the SEC under the PUHCA have been obtained, (y) the
Cogen Project Financing is in place and (z) the Bankruptcy Court issues
Confirmation Orders with respect to MESC and MESH that have become effective and
remain in effect (the conditions set forth in (w), (x), (y) and (z), the
"Extension Conditions"). If the Extension Conditions are not satisfied within
sixty (60) days after the Equity Notice Date, SEI and SERI may terminate this
Agreement, in which case (i) MESC shall reimburse SERI and SEI for all
Development Costs and Cogen Development Advances that have not been paid or
reimbursed by MESC or the Cogen Subsidiary (other than the SEI Turbine Costs),
(ii) MESC shall pay SEI the Equity Option Fee, (iii) SEI's obligations to
transfer the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and ▇▇ ▇▇▇▇▇ LTSA
shall terminate and (iv) all contracts related to the Cogen Project shall either
be terminated by SERI and its Affiliate or assigned to or assumed by MESC in
accordance with the terms set forth in 7.2(e).
9.3 Waiver of Equity Option Fee. In the event that the SEI Cogen
Investment is made, SEI shall not be entitled to the Equity Option Fee.
9.4 Transfer of Interests in MESC and MESH. In the event of a Non-SEI
Equity Investment, if it has not already done so, SEI or its Affiliates shall
transfer title to the stock of MESH and the member interests in MESC (i) as
directed by MESC and the Lender Representative in accordance with the terms
hereof; provided that if (A) any cancellation of indebtedness of MESC or MESH or
other transaction that would trigger liability by Southern for taxes on the
amount of its excess loss account related to MESH occurs before MESC receives
the payment to be made by KCTC under the terms outlined in the Settlement Term
Sheet on a basis that causes the members of MESC to recognize income as a result
of such payment or (B) the income recognized by MESC's members owned by Southern
as a result of MESC's receipt of the payment from KCTC exceeds the amount of
Southern's excess loss account with respect to its investment in MESH, then MESC
shall pay to Southern an amount equal to any federal and state income tax owed
by members of MESC owned by Southern for the year in which such transfer occurs,
or (ii) as specified in the Confirmation Orders applicable to MESC and MESH. The
timing of such transfer will be made as jointly determined by the Parties taking
into account the effect of such timing on all the Parties or as determined by
the Bankruptcy Court. Any such transfer shall also be subject to the receipt of
all applicable regulatory consents and approvals.
ARTICLE X
O&M SERVICES AND OTHER SERVICES
10.1 O&M Services. SERI shall agree to operate the Cogen Project (the
"Operating Services") pursuant to a Cogeneration Facility Operations and
Maintenance Agreement between SERI and MESC substantially in the form attached
as Exhibit H (the "O&M Agreement"). SERI and MESC shall enter into the O&M
Agreement upon SERI's execution of this Agreement and the O&M Agreement shall
become effective on the Effective Date.
10.2 Term of O&M Agreement. The term of the O&M Agreement shall be
three years from the date of its execution, unless terminated earlier in
accordance with its terms or the terms of this Agreement.
10.3 Assignment of O&M Agreement. Subject to the consent of KCTC and
Sappi, if any such consent is required, SERI will have the right to assign its
rights and delegate its obligations under the O&M Agreement to another Person
(i) approved by MESC, which approval shall not be unreasonably withheld, or (ii)
having recognized experience and capability in operating power generation
facilities similar to, or of greater size and complexity than, the Cogen
Project, in accordance with customary prudent operating standards. Upon such
assignment and delegation, SERI shall be released by MESC for any obligations
under the O&M Agreement arising thereafter.
ARTICLE XI
RELEASES
11.1 Releases.
(a) Upon execution of this Agreement, MESC shall deliver to SERI,
SEI and Southern (collectively, the "Southern Parties") the
executed Releases. The Releases shall be effective upon
delivery; provided, however, if SEI acknowledges in writing
that it has breached (or is found in a final, non-appealable
determination to have breached) its obligation under Section
4.3 or Section 4.5(b) to assign its rights to the ▇▇ ▇▇▇▇▇
Turbine, the ▇▇ ▇▇▇▇▇ Turbine Contract and ▇▇ ▇▇▇▇▇ LTSA to
MESC or the Cogen Subsidiary, the Releases shall be nullified
and shall be of no force and effect. Notwithstanding the
foregoing, and in the event that any Person granting a Release
contends that SEI has breached its obligations under Section
4.3 or Section 4.5(b), nothing herein or in the Releases shall
be construed as preventing such Person from filing suit or
taking such other steps as may be necessary for the limited
purpose of avoiding the expiration of any applicable period of
limitation prescribed by law, contract or otherwise while a
determination is made whether SEI has breached such
obligations, and such Person's rights to do so shall be fully
preserved. In the event such a suit or other proceeding is
commenced, and if SEI has not acknowledged in writing that it
has breached its obligation under Section 4.3 or Section 4.5
(b) (and SEI has not been found in a final, non-appealable
determination to have breached such obligations), then the
parties agree that such suit or other proceeding shall be
stayed until a final, binding determination has been made
pursuant to the dispute resolution procedure set out in
Article XV with respect to the claim that SEI has breached its
obligations under Section 4.3 or Section 4.5(b), which
determination shall be binding on the Person commencing the
suit or other proceeding.
(b) If the Committee and its members do not support the inclusion
in the Plan of Reorganization for MESC and the Plan of
Reorganization for MESH of releases of the Southern Parties
referred to in clause (ii) of the definition of "Comprehensive
POR" in Section 1.1, SERI and SEI may terminate this Agreement
upon written notice to MESC and MESH; provided, however, that
the Parties understand and agree that neither the confirmation
of a Plan of Reorganization for MESC or a Plan of
Reorganization for MESH, nor the effectiveness of the O&M
Agreement or this Agreement, shall be conditioned upon the
approval of such releases by the Bankruptcy Court as part of
the Confirmation Order (or as part of either of such Plans),
and the Plan of Reorganization for MESC and the Plan of
Reorganization for MESH approved by the Confirmation Order,
the O&M Agreement and this Agreement shall be effective even
if such releases are not approved by the Bankruptcy Court as
part of the Confirmation Order (or as part of either of such
Plans).
11.2 Southern Parties' Representation and Warranty. Each of SEI and
SERI hereby represents and warrants to MESC and MESH that, except as set forth
on Exhibit I hereto, (i) none of the Southern Parties owes any amounts to MESC
and/or MESH, and (ii) there are no guaranties provided by any Southern Party to
MESC and MESH. The Parties agree that the amounts owed to MESH under the Tax
Allocation Agreement with respect to tax benefits generated by MESH for 1998 (as
shown Exhibit I) are not being released pursuant to the terms of this Agreement
or the Releases. The Parties further agree that such amounts may be held by
Southern until the entry of a Confirmation Order with respect to the Plan of
Reorganization for MESH and that the disposition of such amounts, and the
resolution of claims by Southern or its Affiliates with respect to income taxes
paid by Southern or its Affiliates (other than MESH or MESC) for income taxes
owed with respect to taxable income of MESH in 1999 and 2000, shall be
determined in the Plan of Reorganization or through order of the Bankruptcy
Court.
ARTICLE XII
LIMITATION OF LIABILITY
12.1 Limitation of Liability. The aggregate liability of SEI, SERI, and
any Affiliates of SERI for all damages of any type to MESC or the Bondholders
arising from SEI's or SERI's (or SERI's Affiliates') performance or failure to
perform their respective obligations under this Agreement, the O&M Agreement, or
any other agreement contemplated by this Agreement to which SEI, SERI or an
Affiliate of SERI, as the case may be, is or shall become a party shall be
limited to nine million dollars ($9,000,000); provided, however, that where
under applicable law MESC or the Bondholders are entitled to recover
consequential, indirect, or incidental damages for any such performance or
failure to perform by SEI, SERI or an Affiliate of SERI, the aggregate liability
of SEI, SERI and any Affiliate of SERI for such consequential, indirect or
incidental damages shall be limited to four million five hundred thousand
dollars ($4,500,000). Such limitations shall not apply to direct damages
incurred by MESC or the Bondholders as a result of the gross negligence or
willful misconduct of SEI, SERI, or any Affiliate of SERI. In no event shall
SEI, SERI or any Affiliate of SERI be liable for any special or punitive
damages.
ARTICLE XIII
COOPERATION AND SUPPORT
13.1 Cooperation and Support. The Parties agree to cooperate and
support all actions necessary to obtain Bankruptcy Court approval of this
Agreement and the Releases.
13.2 Regulatory Consents. Each of MESC, SEI and SERI agrees to use
their commercially reasonable efforts to obtain, in a timely manner, all
applicable regulatory consents and approvals required in order to enter into and
carry out the transactions contemplated hereby, and shall consult with the
Lender Representative as to the strategy to be used in obtaining such approvals.
ARTICLE XIV
DEFAULT
14.1 Event of Default. With respect to a Party, it shall be an
"Event of Default" if any of the following events shall
occur and be continuing:
(a) such Party shall fail to pay in full (i) any amounts owed under
3.1(a) and 5.1 within fifteen (15) days after the same becomes due and payable
or (ii) any amount owed hereunder (other than amounts referred to in clause (i))
when the same becomes due and payable;
(b) with respect to MESC, MESH and Cogen Subsidiary, such Party shall
fail to perform or comply with (i) any term of Sections 6.1 and 11.1 on its part
to be performed or observed and (ii) any other material term, covenant or
agreement contained in this Agreement on its part to be performed or observed
and, in the case of clause (ii), such failure shall remain unremedied for thirty
(30) days after notice thereof;
(c) with respect to SERI and SEI, such Party shall fail to perform or
comply with any other material term, covenant or agreement contained in this
Agreement on its part to be performed or observed and such failure shall remain
unremedied for thirty (30) days after notice thereof;
(d) with respect to MESC, MESH and Cogen Subsidiary, if the Releases
shall for any reason cease to be valid and enforceable or if MESC, MESH, Cogen
Subsidiary or any holder of Senior Debt that has executed a Release shall
challenge the validity or enforceability of the Releases; or
(e) with respect to MESC, MESH and Cogen Subsidiary, if a Security
Interest shall for any reason cease to be valid and enforceable or if MESC,
MESH, Cogen Subsidiary or any holder of Senior Debt that has executed a Release
shall challenge the validity or enforceability of the Security Interests.
Any Event of Default which has been waived by all the Parties hereto
shall not be considered to be continuing from and after the time as of which
such waiver has become effective.
14.2 Remedies.
(a) Upon the occurrence of an Event of Default by MESH, MESC, or the
Cogen Subsidiary (if applicable), SEI and SERI may (i) terminate this Agreement;
(ii) obtain specific performance of the obligations of MESC, MESH and the Cogen
Subsidiary hereunder by way of an arbitration proceeding conducted in accordance
with the arbitration provisions set forth in Article XV hereof (the Parties
hereto hereby stipulating that the arbitrator appointed pursuant to said Article
XV shall have the power and authority to grant a request for specific
performance in such arbitration proceeding where such arbitrator considers
specific performance to be an appropriate remedy under applicable law or
applicable equitable principles); or (iii) subject to the arbitration provisions
set forth in Article XV hereof, pursue any and all other remedies available at
law or in equity.
(b) Upon the occurrence of an Event of Default by SEI or SERI, MESH and
MESC may (i) terminate this Agreement; (ii) obtain specific performance of the
obligations of SERI and SEI hereunder by way of an arbitration proceeding
conducted in accordance with the arbitration provisions set forth in Article XV
hereof (the Parties hereto hereby stipulating that the arbitrator appointed
pursuant to said Article XV shall have the power and authority to grant a
request for specific performance in such arbitration proceeding where such
arbitrator considers specific performance to be an appropriate remedy under
applicable law or applicable equitable principles); or (iii) subject to Article
XII and the arbitration provisions set forth in Article XV hereof, pursue any
and all other remedies available at law or in equity.
ARTICLE XV
DISPUTE RESOLUTION
15.1 Dispute Resolution Committee. In the event of a (i) dispute,
controversy or claim (x) among any of the Parties, or (y) between any Party and
the Lender Representative (with respect to disputes involving rights granted
herein to the Committee or the Lender Representative) respecting any of the
terms and conditions of this Agreement or the performance, or failure to
perform, by any Party, and (ii) failure by the Steering Committee to reach a
unanimous decision as to whether to act or refrain from acting in relation to a
particular matter (any such dispute, controversy, claim or deadlock, a
"Dispute"), any Party or the Lender Representative may deliver to the other
Parties hereto and the Lender Representative (if the Lender Representative is
not the Person delivering such notice) a notice specifying the nature of the
Dispute in question (the "Dispute Notice") no later than six (6) months after
such Party or the Lender Representative becomes aware of the facts underlying
the dispute, controversy or claim. Each Party and the Lender Representative
shall within two (2) business days of its receipt of the Dispute Notice appoint
one of its officers (the "Dispute Committee Representative") to represent it in
resolving such dispute. The Person issuing the Dispute Notice shall in that
notice designate one of its officers to act as its Dispute Committee
Representative. The Dispute Committee Representatives for SEI and SERI or for
MESH and MESC may be the same individual. The Dispute Committee Representatives
(collectively, the "Dispute Resolution Committee") shall within five (5) days of
the date on which the Dispute Notice was delivered to the last of the Parties or
the Lender Representative to receive the Dispute Notice (such date, the "Dispute
Initiation Date") confer together in person or by phone at a mutually agreed
time at least once in an attempt to resolve the matter. No decisions shall be
taken by the Dispute Resolution Committee without the unanimous consent of all
Dispute Committee Representatives.
15.2 Mediation. If the Dispute identified in the Dispute Notice
provided for in Section 15.1 has not been resolved within ten (10) days of the
Dispute Initiation Date, any Party or the Lender Representative may thereafter
refer the Dispute to non-binding mediation under the commercial mediation rules
of the American Arbitration Association by written notice to the other Parties
and the Lender Representative (if the Lender Representative is not the Person
giving such notice); provided, however, that the mediation shall not commence
until five (5) days after the last non-initiating Person receives such notice.
If the Parties and the Lender Representative have not resolved the Dispute
through mediation or other means within thirty (30) days of the Dispute
Initiation Date, then any Party or the Lender Representative may thereafter
invoke the dispute resolution procedures set out in either Section 15.3 by
written notice (such notice, the "Technical Dispute Notice") or Section 15.4 by
an Arbitration Notice, as appropriate, in either case to the other Parties and
the Lender Representative (if the Lender Representative is not the Person giving
such notice).
15.3 Technical Disputes.
(a) In the event that a Dispute that is deemed a Technical Dispute
under the terms of this Agreement or that the Parties and the
Lender Representative (with respect to disputes involving
rights granted herein to the Committee) mutually agree in
writing is a dispute of a technical nature (in either case a
"Technical Dispute") cannot be resolved under the procedures
specified in Section 15.1 and Section 15.2, then the Parties
and the Lender Representative shall, no later than ten (10)
days after the delivery of the Technical Dispute Notice,
unanimously appoint a technical expert (the "Technical
Expert"), to resolve such Technical Dispute.
(b) If the Parties and the Lender Representative are unable to
agree to the appointment of the Technical Expert, then each
Party and the Committee shall within ten (10) days of their
receipt of the Technical Dispute Notice choose an expert and
those experts shall choose the Technical Expert jointly. If
those experts cannot agree upon the Technical Expert within
five (5) days, then the dispute shall be resolved through the
procedures set out in Section 15.4 with the Technical Dispute
Notice being treated as an Arbitration Notice delivered at the
end of such five (5) day period. Once the Technical Expert is
appointed:
(i) the Technical Expert shall promptly (x) fix a
reasonable time and place for receiving
representations, submissions, or information from the
Parties and the Lender Representative, and (y) issue
directions to the Parties and the Lender
Representative for the proper conduct of any hearing;
(ii) the Parties and the Lender Representative shall
provide the Technical Expert with all evidence and
information (including, without limitation, the
production of documentation and witnesses) within
their respective possession or control as the
Technical Expert may consider necessary for resolving
the Technical Dispute or that, in the opinion of the
providing Party or Lender Representative, is relevant
to and bears upon the matter to be determined;
(iii) each Party and the Lender Representative may utilize
such lawyers, consultants, and advisers as it feels
appropriate to present their respective cases,
provided, that the Parties and the Lender
Representative shall cooperate and seek to narrow and
limit the issues to be determined;
(iv) the Technical Expert shall render his decision with
full reasons within thirty (30) days after the date
of his appointment;
(v) the determination of the Technical Expert shall,
except in the event of fraud, be final and binding
upon the Parties and the Lender Representative; and
(vi) each Party and the Lender Representative shall bear
the costs and expenses of all lawyers, consultants,
advisers, witnesses, and employees retained by it in
any Technical Dispute referred to a Technical Expert,
and the costs and expenses of the Technical Expert
shall be shared equally by the Parties.
15.4 Binding Arbitration.
(a) With regard to any Dispute not resolved under the procedures
specified in Section 15.1, Section 15.2, or Section 15.3 (in
each case within the time limits set for such resolution in
such Section), or in the event that any Party or the Lender
Representative will not participate in such procedures, any
Party or the Lender Representative may elect to have the
dispute resolved by binding arbitration by providing the other
Parties and the Lender Representative (if the Lender
Representative is not the Person providing such notice) with a
notice setting forth in detail the nature of the Dispute in
question (an "Arbitration Notice") no later than six (6)
months after the delivery of the Dispute Notice under Section
15.1. Such arbitration shall be conducted before a single
arbitrator agreed upon by the Parties and the Lender
Representative. If the Parties and the Lender Representative
are unable to agree upon a single arbitrator within ten (10)
days of the delivery of the Arbitration Notice to the last
Person to receive it among the Parties and the Lender
Representative, the arbitration shall be conducted before an
arbitrator to be selected by the Parties and the Lender
Representative from a list of eleven (11) names provided by
the American Arbitration Association. On the fifth day after
all of the Parties and the Lender Representative have received
the list of names from the American Arbitration Association,
the Parties and the Lender Representative shall meet in person
or confer by phone and alternately strike names (with the
Lender Representative striking first and the Parties then
proceeding alphabetically) until one Person's name is left,
who shall be the arbitrator, unless such Person does not meet
the qualifications set out in Section 15.4(b) or is unable to
serve, in which case the Person whose name was the last name
stricken from the list of potential arbitrators shall be
selected as the arbitrator instead. If that Person is also
disqualified or unable to serve, then a new list of eleven
(11) names shall be obtained from the American Arbitration
Association and the process repeated. The arbitration shall be
conducted in accordance with the commercial arbitration rules
of the American Arbitration Association but the arbitration
will not be administered by the American Arbitration
Association. The arbitrator shall render his determination in
writing and shall provide an explanation of the rationale
underlying his determination, including references to any
relevant provisions of this Agreement. The arbitration shall
be governed by the United States Arbitration Act, 9 U.S.C.
Section 1 et seq., and judgment upon the award rendered by the
arbitrator may be recognized and enforced by any court having
jurisdiction thereof. All decisions of the arbitrator shall be
final and binding upon the Parties and the Committee.
(b) The arbitrator shall be competent by virtue of education and
experience in the particular subject matter of the Dispute and
shall not have had any financial interest directly or
indirectly in or any contractual relationship with any Party,
the Lender Representative or any senior creditor of MESC or
MESH within the prior three years or have been an officer,
director or employee of any Person having such a financial
interest or contractual relationship.
(c) The arbitrator shall have jurisdiction or authority only to
interpret or determine compliance with the provisions of this
Agreement in so far as shall be necessary to the determination
of issues properly appealed to the arbitrator. The arbitrator
shall not have any jurisdiction or authority to add to,
detract from, or alter in any way the provisions of this
Agreement. The arbitrator is not empowered to award punitive
damages.
(d) The Parties shall equally share the cost of the fee or
honorarium of the arbitrator and any service charges or other
charges required by the American Arbitration Association. Each
Party and the Lender Representative shall pay their own costs
and expenses (including, without limitation, legal fees,
stenographic costs and other hearing-related expenses, such as
travel and lodging).
15.5 Deadlines. All deadlines specified in this Article XV may be
extended by mutual agreement of the Parties and the Lender Representative.
15.6 Exclusive Procedure. The procedures specified in this Article XV
shall be the sole and exclusive procedure for the resolution of disputes among
the Parties and the Lender Representative (with respect to disputes involving
rights granted herein to the Committee or the Lender Representative) arising out
of or relating to this Agreement; provided, however, that a Party or the Lender
Representative (with respect to disputes involving rights granted herein to the
Committee or the Lender Representative) may seek a preliminary injunction or
other preliminary judicial relief from a court if in its judgment such action is
necessary to avoid irreparable damage. Despite such action the Parties and the
Lender Representative (with respect to disputes involving rights granted herein
to the Committee or the Lender Representative) will continue to participate in
good faith in the procedures specified in this Article XV.
15.7 Survival of Procedure. This Article XV shall survive the
termination of this Agreement and shall operate to resolve any Dispute arising
out of or relating to this Agreement subsequent to the termination of this
Agreement.
15.8 Continuation of Performance During Disputes. Unless this Agreement
is terminated in accordance with its terms, in the event of, and during the
continuation of, a Dispute, each Party agrees to proceed diligently with the
performance of all of its contractual obligations hereunder, including, without
limitation, the payment of all sums required to be paid under this Agreement and
not in dispute, provided, however, that SERI and its Affiliates will have no
obligation to incur Development Costs or advance funds to MESC during the
pendency of a Dispute, notwithstanding this Section 15.8, in the event SERI
determines in its reasonable judgment that a Funding Termination has occurred.
ARTICLE XVI
INDEMNIFICATION
16.1 Indemnification. Each Party (the "Indemnifying Party") agrees to
indemnify, defend and hold harmless each other Party, its Affiliates (other than
the Indemnifying Party, if applicable), and its and their respective officers,
directors, agents, employees, and representatives (collectively, the
"Indemnified Parties") from and against any Losses incurred by or assessed
against an Indemnified Party due to or resulting from personal injury, bodily
injury, death or property damage suffered by a third party with respect to or
arising out of the negligence or willful misconduct of the Indemnifying Party,
its Affiliates (other than any Affiliate that is an Indemnified Party with
respect to such Indemnifying Party) or any of their officers, directors, agents,
employees, contractors, guests or representatives.
16.2 Joint Liability. In the event that any Losses arise, directly or
indirectly, in whole or in part, out of the joint or concurrent negligence of an
Indemnified Party or its Affiliates (other than the Indemnifying Party, if
applicable) and an Indemnifying Party or its Affiliates (other than any
Affiliate that is an Indemnified Party with respect to such Indemnifying Party),
or their respective officers, directors, employees, agents, contractors, guests
or representatives, each party's liability therefore shall be limited to such
party's proportionate degree of fault.
16.3 Cooperation Regarding Claims. If an Indemnified Party shall
receive notice or have knowledge of any claim, demand, action, suit or
proceeding that may result in a claim by such party against an Indemnifying
Party for indemnification pursuant to this Article 16, (collectively, "Claims"),
such Indemnified Party shall, as promptly as is reasonably possible, give the
Indemnifying Party notice of such Claim, including (i) a reasonably detailed
description of the facts and circumstances relating to such Claim, (ii) a
reasonably detailed description of the basis for its potential claim for
indemnification with respect thereto, and (iii) a complete copy of all notices,
pleadings and other papers related thereto; provided that failure promptly to
give such notice or to provide such information and documents shall not relieve
the Indemnifying Party of any indemnification obligation it may have under this
Article 16 unless such failure shall materially diminish the ability of the
Indemnifying Party to respond to or to defend the party failing to give such
notice against such Claim. The Indemnified Party and the Indemnifying Party
shall consult and cooperate with each other regarding the response to and the
defense of any Claim and the Indemnifying Party shall, upon its acknowledgment
in writing of its obligation to indemnify the party seeking indemnification, be
entitled to and shall assume the defense or represent the interests of the party
seeking indemnification in respect of such Claim, which shall include the right
to select and direct legal counsel and other consultants to appear in
proceedings on behalf of such party and to propose, accept or reject offers of
settlement, all at its sole cost; provided that no such settlement shall be made
without the written consent of the relevant Indemnified Party, such consent not
to be unreasonably withheld; provided further, that if any such settlement is
reasonably likely to materially and adversely affect such Indemnified Party's
business operations other than as a result of money damages or other money
payments, then, notwithstanding the foregoing, such Indemnified Party shall be
entitled to withhold its consent to such settlement, to take control of the
defense and investigation of such Claim, to employ and engage attorneys of its
own choice to handle and defend the same and to compromise or settle such Claim,
all at the Indemnifying Party's cost, risk and expense; and provided further
that if the Claim is settled without the Indemnifying Party's consent, the
Indemnified Party shall be deemed to have waived all rights hereunder against
the Indemnifying Party for damages arising out of such Claim. Nothing herein
shall prevent an Indemnified Party from retaining its own counsel and
participating in its own defense at its own cost and expense. The Parties shall
cooperate with each other in any notifications to insurers.
16.4 No Release of Insurers. The provisions of this Article 16 shall
not be construed so as to relieve any insurer of its obligation to pay any
insurance proceeds in accordance with the terms and conditions of valid and
collectible insurance policies.
16.5 Representatives. No officer, director, agent, employee or other
individual representative of an Indemnifying Party shall be personally liable
for the obligation of such Indemnifying Party to indemnify for any Losses under
the provisions contained in this Article 16. Nothing herein shall relieve any
Party of any liability to make any payment expressly required to be made by such
Party pursuant to this Agreement.
16.6 Effect on Other Remedies or Limitations on Liability. The
indemnity provided by this Article 16 is not intended to supersede, override or
limit any express remedy or limitation of liability provided in this Agreement.
16.7 Survival of Indemnities. The provisions of this Article 16 shall
survive the expiration of this Agreement, or any earlier termination thereof.
ARTICLE XVII
TERM AND TERMINATION
17.1 Term. The term of this Agreement shall commence on the Effective
Date and shall terminate on January 1, 2003, unless sooner terminated in
accordance with the terms of this Agreement.
17.2 Survival. The provisions of this Agreement providing the Parties
with rights, remedies, and obligations the exercise of which reasonably requires
survival of the termination or expiration of this Agreement, including those
provisions expressly stating that they will survive expiration or termination,
shall remain in effect notwithstanding any such termination or expiration of
this Agreement for a period of time reasonable to effectuate such rights,
remedies and obligations.
ARTICLE XVIII
NOTICES
18.1 Notices. All notices, requests and demands to or upon the
respective Parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand or
by nationally recognized overnight courier, when delivered, or (b) in the case
of delivery by facsimile transmission, when sent and receipt has been confirmed,
addressed as follows or to such other address as may be hereafter provided by
the respective Parties hereto or the Lender Representative in a notice made in
accordance with this Article XVIII:
SERI and SEI: c/o Southern Energy Resources, Inc.,
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
MESC and MESH: c/o Mobile Energy Services Company, LLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Lender Representative: CIBC World Markets, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
ARTICLE XIX
MISCELLANEOUS
19.1 Entire Agreement. This Agreement and any agreement, document or
instrument attached hereto or referenced herein integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral
negotiations and prior understandings, proposals and writings with respect to
the subject matter hereof.
19.2 Amendments, Etc. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by a Party therefrom, shall in any event
be effective unless the same shall be in writing and signed by or on behalf of
each of the Parties and the Lender Representative (with respect to rights
granted herein to the Committee), and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
19.3 No Waiver . No failure on the part of any Party to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.
19.4 Binding Effect and Third Party Beneficiaries. This Agreement shall
become effective when it shall have been executed by each Party and upon the
occurrence of the Effective Date and thereafter shall be binding upon and inure
to the benefit of the Parties and their respective successors and assigns.
19.5 Assignment. Except as expressly set forth herein, none of the
Parties shall have the right to assign its rights hereunder or any interest
herein without the prior written consent of each of the other Parties; provided
that each of SERI and SEI hereby consents to the assignment, at any time, by
MESC of its right and interests under this Agreement (including, without
limitation, its rights to and interests in the ▇▇ ▇▇▇▇▇ Turbine, the ▇▇ ▇▇▇▇▇
Turbine Contract and the ▇▇ ▇▇▇▇▇ LTSA) to the holders of the Senior Debt and/or
the lenders who are providing the Cogen Project Financing, in each case as
collateral security for MESC's obligations to such parties relating to such
debt; provided, further, that, except to the extent provided in the Cogen Lender
Consent entered into pursuant to Section 6.1(a), any such collateral assignment
shall not, in any way, limit, modify or otherwise affect the rights or remedies
of SERI and SEI hereunder against MESC and MESH or otherwise, including any
rights of termination hereunder.
19.6 Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, provided that any
conflict of laws rule of the State of New York that would require reference to
the laws of any other state shall be disregarded.
19.7 No Partnership. No party to this Agreement is in any way or for
any purpose, by reason of this Agreement or the transactions contemplated
herein, a partner, joint venturer, employer or employee of any other party.
19.8 Captions. The captions to sections throughout this Agreement are
intended solely to facilitate reading and reference to all sections and
provisions of this Agreement. Such captions shall not affect the meaning or
interpretation of this Agreement.
19.9 Severability. Any provision of this Agreement that shall be found
to be prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
thereof. In the event any provision of this Agreement is so held invalid, the
Parties shall promptly renegotiate in good faith new provisions to restore this
Agreement as nearly as possible to its original intent and effect. To the extent
permitted by applicable law, the Parties hereto hereby waive any provision of
law that renders any provision hereof prohibited or unenforceable in any
respect.
19.10 Decision-Making . Except where this Agreement expressly provides
for a different standard, whenever this Agreement provides for a determination,
decision, permission, consent or approval of a Party or the Lender
Representative, the Party or Lender Representative shall promptly make such
determination, decision, grant or withholding of permission, consent or approval
in a commercially reasonable manner and without unreasonable delay. Any denial
of consent required to be made in a commercially reasonable manner shall include
in reasonable detail the reason for denial or aspect of the request that was not
acceptable.
19.11 No Recourse to Affiliates. This Agreement is solely and
exclusively among SEI, SERI, MESC, MESH and, if applicable, Cogen Subsidiary,
and any obligations created herein shall be the sole obligations of the Parties
hereto. No Party shall have recourse to any parent, subsidiary, partner, joint
venturer, affiliate, director or officer of any other Party for performance of
said obligations unless the obligations are assumed in writing by the Person
against whom recourse is sought.
19.12 Execution in Counterparts. This Agreement may be executed in two
or more counterparts, any of which need not contain the signatures of more than
one Party, but all such counterparts taken together shall constitute one and the
same Agreement. Any signature page of any such counterpart, or any facsimile
transmission thereof, may be attached or appended to any other counterpart to
complete a fully executed counterpart of this Agreement, and any facsimile
transmission of any signature of a Party shall be deemed an original and shall
bind such Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed by their respective duly authorized officers as of the date and
year first above written.
SOUTHERN ENERGY RESOURCES, INC.
By:
-----------------------------------------
Its:
----------------------------------------
SOUTHERN ENERGY, INC.
By:
-----------------------------------------
Its:
----------------------------------------
MOBILE ENERGY SERVICES COMPANY, LLC
By:
-----------------------------------------
Its:
----------------------------------------
MOBILE ENERGY SERVICES HOLDING, INC.
By:
-----------------------------------------
Its:
----------------------------------------
Exhibit A
The Cogen Project will consist of the addition of a new combustion
turbine-generator (CTG) and heat recovery steam generator (HRSG) system to the
existing power complex for the purpose of supplementing the production of
process steam and the generation of electrical power.
The new CTG/HRSG addition will produce approximately 600,000 MMBTU/hour steam
for the 1325-psig header and the 50-psig header. Electrical power will be
produced primarily for sale at wholesale. The new CT will be a General Electric
Model 7241 (7FA) combustion turbine with a nominal rating of 170 MW (gross). The
new heat recovery steam generator will be a two pressure level design with a
supplemental burner.
Exhibit B
1. CS First Boston
2. Franklin Advisers, Inc.
3. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇, LLP
4. Pan American Life Insurance Company
5. ▇▇▇ ▇▇▇▇▇▇ Investment Advisory Corp.
6. First Union National Bank as Trustee for the Taxable Bonds and the Tax-Exempt
Bonds(ex-officio)
Exhibit C
Attached as Exhibit A to Joint Motion of Debtors and Bondholder Steering
Committee for Approval: (1) of Out of Ordinary Course
Business Transaction; (2) to Obtain Secured and Unsecured Credit and (3) to
Compromise Claims with The Southern Company and Related
Entities Pursuant to Bankruptcy Codess.ss.363 and 364 and Bankruptcy Rule 9019,
filed on December 31, 1999, in connection with In Re:
Mobile Energy Services Company, L.L.C., Debtor, Case No. ▇▇-▇▇▇▇▇, and In Re:
Mobile Energy Services Holdings, Inc., ▇▇▇▇▇▇, ▇▇▇▇ ▇▇. ▇▇-▇▇▇▇▇ (▇▇▇▇▇▇ ▇▇▇▇▇▇
Bankruptcy Court, Southern District of Alabama)
Exhibit D
[NEEDS TO BE PROVIDED]
Exhibit E
[MESC Release of Southern Parties]
RELEASE
In consideration of the provisions of that certain Development
Agreement, dated as of February 9, 2000 (the "Development Agreement") by and
among Southern Energy Resources, Inc. ("SERI"), Southern Energy Inc. ("SEI"),
Mobile Energy Services Company, L.L.C. ("MESC") and Mobile Energy Services
Holdings, Inc. ("MESH"), and in consideration of the transactions contemplated
by the Development Agreement, MESC, on behalf of itself and its predecessor and
successor companies, and their respective assigns, does hereby release and
forever discharge (i) MESH, SERI, SEI and The Southern Company (collectively,
the "Southern Parties"), (ii) the Southern Parties' respective affiliated,
related, parent, predecessor, successor, and subsidiary companies past and
present other than MESC or MESH (the "Southern Parties' Affiliates"), (iii) the
Southern Parties' (other than MESH's) and the Southern Parties Affiliates'
respective shareholders, officers, directors, agents, employees, attorneys,
insurers, heirs and assigns (the "Southern Related Parties"), and (iv) any
individuals or entities (other than MESH) that were members, directors,
officers, or employees of MESC or MESH (the "MESC Related Parties") from any and
all claims, actions, causes of action, losses, damages, rights, suits, and
demands whatsoever, in law or equity, known or unknown, fixed or contingent,
liquidated or unliquidated, arising prior to the effective date of the
Development Agreement and arising from or relating to:
(a) any dividend or distribution, repayment of debt, or other
transfer of funds directly or indirectly to any of the
Southern Parties prior to the effective date of the
Development Agreement from MESC or MESH, including, without
limitation, any claim based on fraudulent conveyance,
fraudulent transfer, preferential payments, the approval or
payment of distributions or dividends, or breach of fiduciary
duty, in each case under state or federal law;
(b) (x) the issuance of (1) the $255,210,000 principal amount of
8.665% First Mortgage Bonds due 2017 issued by MESC (such
First Mortgage Bonds, the "First Mortgage Bonds") or (2) the
$85,000,000 principal amount of 6.95% Solid Waste Revenue
Refunding Bonds (Mobile Energy Services Company, L.L.C.
Project) Series 1995 due 2020 issued by the Industrial
Development Board of the City of Mobile, Alabama (such Solid
Waste Revenue Refunding Bonds, the "IDB Bonds") and (y) the
entry by MESC into the Amended and Restated Lease and
Agreement dated August 1, 1995, among MESC, MESH and the
Industrial Revenue Board of the City of Mobile;
(c) that certain Debt Service Reserve Account Southern Guaranty
Agreement, dated August 1, 1995, entered into by The Southern
Company;
(d) the purchase by MESH of the Energy Complex (as defined in that
certain Intercreditor and Collateral Agency Agreement, dated
August 1, 1995, to which MESC and MESH are parties (as
supplemented, amended, modified or restated through the date
hereof, the "Intercreditor Agreement")) and certain related
assets from ▇▇▇▇▇ Paper Company in 1994 and the transfer by
MESH of its assets to MESC in 1995;
(e) any filings or disclosures made by MESC or MESH with the
Securities and Exchange Commission (the "SEC"), any allegation
that additional filings or disclosures should have been made
by MESC or MESH with the SEC, or any other claim related to
securities issued by MESC or MESH or the IDB Bonds and based
upon federal or state securities laws;
(f) any filings, disclosures, or certificates made by MESC, MESH,
SERI, or any of their directors, officers, or employees to the
Collateral Agent (as defined in the Intercreditor Agreement),
to the Indenture Trustee (as defined in the Intercreditor
Agreement), to the Tax-Exempt Indenture Trustee (as defined in
the Intercreditor Agreement), or to the Working Capital
Facility Provider (as defined in the Intercreditor Agreement);
and
(g) any acts or omissions of the Southern Parties, the Southern
Parties' Affiliates, the Southern Related Parties, or the MESC
Related Parties related to (1) the closure of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Tissue Company's ("KCTC") pulp mill in Mobile, Alabama, (2)
the pursuit of claims or potential claims against KCTC, (3)
the management of MESC or MESH with respect to any of the
items identified in paragraphs (a) through (g) of this
Release, (4) the retention of advisors to MESH or MESC, (5)
efforts to develop new business opportunities for MESC after
KCTC's announcement of its intent to close its pulp mill in
Mobile, Alabama, (6) the filing of bankruptcy petitions by
MESC or MESH, (7) the restructuring of MESC or MESH, (8) the
possible investment of additional equity in MESH or MESC by
any of the Southern Parties, (9) efforts of MESC to obtain a
right to purchase the KCTC pulp mill or certain of its assets;
(10) the administration of or negotiation of revisions to
MESC's contracts with KCTC or S.D. ▇▇▇▇▇▇ Alabama, L.L.C. (or
its affiliates), (11) efforts to develop a new cogeneration
facility to be owned by MESC (or a subsidiary of MESC), (12)
the design, procurement, and installation of the number 7
turbine by MESC, (13) any agreements entered into by MESC or
SERI with labor unions representing the workers operating
MESC's facilities; provided, however, that if SEI acknowledges
in writing that it has breached (or is found in a final,
non-appealable determination to have breached) its obligations
under Section 4.3 or Section 4.5(b) of the Development
Agreement, this Release shall be nullified and shall be of no
force and effect. Notwithstanding the foregoing, and in the
event that MESC contends that SEI has breached its obligations
under Section 4.3 or Section 4.5(b) of the Development
Agreement, nothing herein shall be construed as preventing
MESC from filing suit or taking such other steps as may be
necessary for the limited purpose of avoiding the expiration
of any applicable period of limitation prescribed by law,
contract or otherwise while a determination is made whether
SEI has breached such obligation, and MESC's rights to do so
shall be fully preserved. In the event such a suit or other
proceeding is commenced, and if SEI has not acknowledged in
writing that it has breached its obligation under Section 4.3
or Section 4.5(b) of the Development Agreement (and SEI has
not been found in a final, non-appealable determination to
have breached such obligations), then MESC agrees that such
suit or other proceeding shall be stayed until a final,
binding determination has been made pursuant to the dispute
resolution procedure set forth in Article XV of the
Development Agreement with respect to the claim that SEI has
breached its obligations under Section 4.3 or Section 4.5(b)
of the Development Agreement, which determination shall be
binding on MESC.
Notwithstanding any of the foregoing, nothing herein shall be deemed to
release any claim, demand, action or cause of action that is based on claims of
actual fraud, except that the Release shall apply (i) to claims of securities
fraud under state or federal law, and (ii) claims of fraudulent conveyance,
fraudulent transfer, wrongful payments of dividends or distributions, or breach
of fiduciary duty under state or federal law. In addition, nothing herein shall
be construed as releasing MESC or MESH from any obligations that either of them
may have regarding the payment of principal, interest, default interest, or
other sums with respect to the First Mortgage Bonds and/or the IDB Bonds, or
from any other obligations that MESC, MESH or either of them may owe under the
Intercreditor Agreement or under the indentures for the First Mortgage Bonds
and/or the IDB Bonds. The claims released shall not be an offset or defense to
any claims asserted by any of the Southern Parties against the bankruptcy
estates of MESC or MESH. Specifically, without limiting the foregoing, the
claims released shall not be a basis for disallowance, whether under 11 U.S.C.
ss. 502(d) or otherwise, of claims filed by any of the Southern Parties against
the bankruptcy estates of MESC or MESH.
This Release shall not be effective unless and until the Development
Agreement has been executed and delivered by the parties thereto.
This Release shall be governed by, and construed in accordance with the
laws of the State of New York, without giving effect to its conflict of law
rules.
This Release supersedes any and all prior negotiations and sets forth
the full scope of the releases being granted by MESC in connection with the
Development Agreement. This Release may not be modified or amended except in a
writing signed by MESC, with such Bankruptcy Court approval as may be needed.
The undersigned represents that (s)he has full authority to execute
this Release on behalf of MESC.
WHEREFORE MESC, acting through its duly authorized representative, has
executed this Release on this ___ day of __________, 2000.
MOBILE ENERGY SERVICES COMPANY L.L.C.
By: _________________________
Name:
Title:
[Collateral Agent Release of Southern Parties]
RELEASE
In consideration of the provisions of that certain Development
Agreement, dated as of February 9, 2000, (the "Development Agreement") by and
among Southern Energy Resources, Inc. ("SERI"), Southern Energy Inc. ("SEI"),
Mobile Energy Services Company, L.L.C. ("MESC") and Mobile Energy Services
Holdings, Inc. ("MESH"), and in consideration of the transactions contemplated
by the Development Agreement, Bankers Trust (Delaware), as collateral agent
under that certain Intercreditor and Collateral Agency Agreement, dated August
1, 1995 (as supplemented, amended, modified or restated through the date hereof,
the "Intercreditor Agreement") (Bankers Trust (Delaware) in such capacity, the
"Collateral Agent"), on behalf of itself and its predecessor and successor
companies, and their respective assigns, does hereby release and forever
discharge (i) SERI, SEI and The Southern Company (collectively, the "Southern
Parties"), (ii) the Southern Parties' respective affiliated, related, parent,
predecessor, successor, and subsidiary companies past and present other than
MESC or MESH (the "Southern Parties' Affiliates"), (iii) the Southern Parties'
and the Southern Parties Affiliates' respective shareholders, officers,
directors, agents, employees, attorneys, insurers, heirs and assigns (the
"Southern Related Parties"), and (iv) any individuals or entities (other than
MESH) that were members, directors, officers, or employees of MESC or MESH (the
"MESC Related Parties") from any and all claims, actions, causes of action,
losses, damages, rights, suits, and demands whatsoever, in law or equity, known
or unknown, fixed or contingent, liquidated or unliquidated, arising prior to
the effective date of the Development Agreement and arising from or relating to:
(a) any dividend or distribution, repayment of debt, or other
transfer of funds directly or indirectly to any of the
Southern Parties prior to the effective date of the
Development Agreement from MESC or MESH, including, without
limitation, any claim based on fraudulent conveyance,
fraudulent transfer, preferential payments, the approval or
payment of distributions or dividends, or breach of fiduciary
duty, in each case under state or federal law;
(b) (x) the issuance of (1) the $255,210,000 principal amount of
8.665% First Mortgage Bonds due 2017 issued by MESC (such
First Mortgage Bonds, the "First Mortgage Bonds") or (2) the
$85,000,000 principal amount of 6.95% Solid Waste Revenue
Refunding Bonds (Mobile Energy Services Company, L.L.C.
Project) Series 1995 due 2020 issued by the Industrial
Development Board of the City of Mobile, Alabama (such Solid
Waste Revenue Refunding Bonds, the "IDB Bonds") and (y) the
entry by MESC into the Amended and Restated Lease and
Agreement dated August 1, 1995, among MESC, MESH and the
Industrial Revenue Board of the City of Mobile;
(c) that certain Debt Service Reserve Account Southern Guaranty
Agreement, dated August 1, 1995, entered into by The Southern
Company;
(d) the purchase by MESH of the Energy Complex (as defined in the
Intercreditor Agreement) and certain related assets from ▇▇▇▇▇
Paper Company in 1994 and the transfer by MESH of its assets
to MESC in 1995;
(e) any filings or disclosures made by MESC or MESH with the
Securities and Exchange Commission (the "SEC"), any allegation
that additional filings or disclosures should have been made
by MESC or MESH with the SEC, or any other claim related to
securities issued by MESC or MESH or the IDB Bonds and based
upon federal or state securities laws;
(f) any filings, disclosures, or certificates made by MESC, MESH,
SERI, or any of their directors, officers, or employees to the
Collateral Agent, to the Indenture Trustee (as defined in the
Intercreditor Agreement), to the Tax-Exempt Indenture Trustee
(as defined in the Intercreditor Agreement), or to the Working
Capital Facility Provider (as defined in the Intercreditor
Agreement); and
(g) any acts or omissions of the Southern Parties, the Southern
Parties' Affiliates, the Southern Related Parties, or the MESC
Related Parties related to (1) the closure of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Tissue Company's ("KCTC") pulp mill in Mobile, Alabama, (2)
the pursuit of claims or potential claims against KCTC, (3)
the management of MESC or MESH with respect to any of the
items identified in paragraphs (a) through (g) of this
Release, (4) the retention of advisors to MESH or MESC, (5)
efforts to develop new business opportunities for MESC after
KCTC's announcement of its intent to close its pulp mill in
Mobile, Alabama, (6) the filing of bankruptcy petitions by
MESC or MESH, (7) the restructuring of MESC or MESH, (8) the
possible investment of additional equity in MESH or MESC by
any of the Southern Parties, (9) efforts of MESC to obtain a
right to purchase the KCTC pulp mill or certain of its assets;
(10) the administration of or negotiation of revisions to
MESC's contracts with KCTC or S.D. ▇▇▇▇▇▇ Alabama, L.L.C. (or
its affiliates), (11) efforts to develop a new cogeneration
facility to be owned by MESC (or a subsidiary of MESC), (12)
the design, procurement, and installation of the number 7
turbine by MESC, (13) any agreements entered into by MESC or
SERI with labor unions representing the workers operating
MESC's facilities; provided, however, that if SEI acknowledges
in writing that it has breached (or is found in a final,
non-appealable determination to have breached) its obligations
under Section 4.3 or Section 4.5(b) of the Development
Agreement, this Release shall be nullified and shall be of no
force and effect. Notwithstanding the foregoing, and in the
event that the Collateral Agent contends that SEI has breached
its obligations under Section 4.3 or Section 4.5(b) of the
Development Agreement, nothing herein shall be construed as
preventing the Collateral Agent from filing suit or taking
such other steps as may be necessary for the limited purpose
of avoiding the expiration of any applicable period of
limitation prescribed by law, contract or otherwise while a
determination is made whether SEI has breached such
obligation, and the Collateral Agent's rights to do so shall
be fully preserved. In the event such a suit or other
proceeding is commenced, and if SEI has not acknowledged in
writing that it has breached its obligation under Section 4.3
or Section 4.5(b) of the Development Agreement (and SEI has
not been found in a final, non-appealable determination to
have breached such obligations), then the Collateral Agent
agrees that such suit or other proceeding shall be stayed
until a final, binding determination has been made pursuant to
the dispute resolution procedure set forth in Article XV of
the Development Agreement with respect to the claim that SEI
has breached its obligations under Section 4.3 or Section
4.5(b) of the Development Agreement, which determination shall
be binding on the Collateral Agent.
Notwithstanding any of the foregoing, nothing herein shall be deemed to
release any claim, demand, action or cause of action that is based on claims of
actual fraud, except that the Release shall apply (i) to claims of securities
fraud under state or federal law, and (ii) claims of fraudulent conveyance,
fraudulent transfer, wrongful payments of dividends or distributions, or breach
of fiduciary duty under state or federal law. In addition, nothing herein shall
be deemed to release any claim, demand or cause of action that the Collateral
Agent may have in its individual capacity against The Southern Company under the
Maintenance Plan Funding Subaccount Southern Guaranty Agreement, dated as of
August 1, 1995, between The Southern Company and the Collateral Agent in respect
of the Collateral Agent's fees and expenses, including, without limitation,
legal fees and expenses. In addition, nothing herein shall be construed as
releasing MESC or MESH from any obligations that either of them may have
regarding the payment of principal, interest, default interest, or other sums
with respect to the First Mortgage Bonds and/or the IDB Bonds, or from any other
obligations that MESC, MESH or either of them may owe under the Intercreditor
Agreement or under the indentures for the First Mortgage Bonds and/or the IDB
Bonds, including, without limitation, any fees and expenses (including legal
fees and expenses) owed thereunder.
This Release shall not be effective unless and until the Development
Agreement has been executed and delivered by the parties thereto.
This Release shall be governed by, and construed in accordance with the
laws of the State of New York, without giving effect to its conflict of law
rules.
This Release supersedes any and all prior negotiations and sets forth
the full scope of the releases being granted by the Collateral Agent in
connection with the Development Agreement. This Release may not be modified or
amended except in a writing signed by the Collateral Agent.
The undersigned represents that (s)he has full authority to execute
this Release on behalf of the Collateral Agent.
WHEREFORE the Collateral Agent, acting through its duly authorized
representative, has executed this Release on this ____ day of ________, 2000.
BANKERS TRUST (DELAWARE)
By: _________________________
Name:
Title:
[MESH Release of Southern Parties]
RELEASE
In consideration of the provisions of that certain Development
Agreement, dated as of February 9, 2000 (the "Development Agreement") by and
among Southern Energy Resources, Inc. ("SERI"), Southern Energy Inc. ("SEI"),
Mobile Energy Services Company, L.L.C. ("MESC") and Mobile Energy Services
Holdings, Inc. ("MESH"), and in consideration of the transactions contemplated
by the Development Agreement, MESH, on behalf of itself and its predecessor and
successor companies, and their respective assigns, does hereby release and
forever discharge (i) SERI, SEI and The Southern Company (collectively, the
"Southern Parties"), (ii) the Southern Parties' respective affiliated, related,
parent, predecessor, successor, and subsidiary companies past and present other
than MESC or MESH (the "Southern Parties' Affiliates"), (iii) the Southern
Parties' and the Southern Parties Affiliates' respective shareholders, officers,
directors, agents, employees, attorneys, insurers, heirs and assigns (the
"Southern Related Parties"), and (iv) any individuals or entities (other than
MESH) that were members, directors, officers, or employees of MESC or MESH (the
"MESC Related Parties") from any and all claims, actions, causes of action,
losses, damages, rights, suits, and demands whatsoever, in law or equity, known
or unknown, fixed or contingent, liquidated or unliquidated, arising prior to
the effective date of the Development Agreement and arising from or relating to:
(a) any dividend or distribution, repayment of debt, or other
transfer of funds directly or indirectly to any of the
Southern Parties prior to the effective date of the
Development Agreement from MESC or MESH, including, without
limitation, any claim based on fraudulent conveyance,
fraudulent transfer, preferential payments, the approval or
payment of distributions or dividends, or breach of fiduciary
duty, in each case under state or federal law;
(b) (x) the issuance of (1) the $255,210,000 principal amount of
8.665% First Mortgage Bonds due 2017 issued by MESC (such
First Mortgage Bonds, the "First Mortgage Bonds") or (2) the
$85,000,000 principal amount of 6.95% Solid Waste Revenue
Refunding Bonds (Mobile Energy Services Company, L.L.C.
Project) Series 1995 due 2020 issued by the Industrial
Development Board of the City of Mobile, Alabama (such Solid
Waste Revenue Refunding Bonds, the "IDB Bonds") and (y) the
entry by MESC into the Amended and Restated Lease and
Agreement dated August 1, 1995, among MESC, MESH and the
Industrial Revenue Board of the City of Mobile;
(c) that certain Debt Service Reserve Account Southern Guaranty
Agreement, dated August 1, 1995, entered into by The Southern
Company;
(d) the purchase by MESH of the Energy Complex (as defined in that
certain Intercreditor and Collateral Agency Agreement, dated
August 1, 1995, to which MESC and MESH are parties (as
supplemented, amended, modified or restated through the date
hereof, the "Intercreditor Agreement")) and certain related
assets from ▇▇▇▇▇ Paper Company in 1994 and the transfer by
MESH of its assets to MESC in 1995;
(e) any filings or disclosures made by MESC or MESH with the
Securities and Exchange Commission (the "SEC"), any allegation
that additional filings or disclosures should have been made
by MESC or MESH with the SEC, or any other claim related to
securities issued by MESC or MESH or the IDB Bonds and based
upon federal or state securities laws;
(f) any filings, disclosures, or certificates made by MESC, MESH,
SERI, or any of their directors, officers, or employees to the
Collateral Agent (as defined in the Intercreditor Agreement),
to the Indenture Trustee (as defined in the Intercreditor
Agreement), to the Tax-Exempt Indenture Trustee (as defined in
the Intercreditor Agreement), or to the Working Capital
Facility Provider (as defined in the Intercreditor Agreement);
and
(g) any acts or omissions of the Southern Parties, the Southern
Parties' Affiliates, the Southern Related Parties, or the MESC
Related Parties related to (1) the closure of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Tissue Company's ("KCTC") pulp mill in Mobile, Alabama, (2)
the pursuit of claims or potential claims against KCTC, (3)
the management of MESC or MESH with respect to any of the
items identified in paragraphs (a) through (g) of this
Release, (4) the retention of advisors to MESH or MESC, (5)
efforts to develop new business opportunities for MESC after
KCTC's announcement of its intent to close its pulp mill in
Mobile, Alabama, (6) the filing of bankruptcy petitions by
MESC or MESH, (7) the restructuring of MESC or MESH, (8) the
possible investment of additional equity in MESH or MESC by
any of the Southern Parties, (9) efforts of MESC to obtain a
right to purchase the KCTC pulp mill or certain of its assets;
(10) the administration of or negotiation of revisions to
MESC's contracts with KCTC or S.D. ▇▇▇▇▇▇ Alabama, L.L.C. (or
its affiliates), (11) efforts to develop a new cogeneration
facility to be owned by MESC (or a subsidiary of MESC), (12)
the design, procurement, and installation of the number 7
turbine by MESC, (13) any agreements entered into by MESC or
SERI with labor unions representing the workers operating
MESC's facilities;
provided, however, that if SEI acknowledges in writing that it has breached (or
is found in a final, non-appealable determination to have breached) its
obligations under Section 4.3 or Section 4.5(b) of the Development Agreement,
this Release shall be nullified and shall be of no force and effect.
Notwithstanding the foregoing, and in the event that MESH contends that SEI has
breached its obligations under Section 4.3 or Section 4.5(b) of the Development
Agreement, nothing herein shall be construed as preventing MESH from filing suit
or taking such other steps as may be necessary for the limited purpose of
avoiding the expiration of any applicable period of limitation prescribed by
law, contract or otherwise while a determination is made whether SEI has
breached such obligation, and MESH's rights to do so shall be fully preserved.
In the event such a suit or other proceeding is commenced, and if SEI has not
acknowledged in writing that it has breached its obligation under Section 4.3 or
Section 4.5(b) of the Development Agreement (and SEI has not been found in a
final, non-appealable determination to have breached such obligations), then
MESH agrees that such suit or other proceeding shall be stayed until a final,
binding determination has been made pursuant to the dispute resolution procedure
set forth in Article XV of the Development Agreement with respect to the claim
that SEI has breached its obligations under Section 4.3 or Section 4.5(b) of the
Development Agreement, which determination shall be binding on MESH.
Notwithstanding any of the foregoing, nothing herein shall be deemed to
release any claim, demand, action or cause of action that is based on claims of
actual fraud, except that the Release shall apply (i) to claims of securities
fraud under state or federal law, and (ii) claims of fraudulent conveyance,
fraudulent transfer, wrongful payments of dividends or distributions, or breach
of fiduciary duty under state or federal law. In addition, nothing herein shall
be construed as releasing MESC or MESH from any obligations that either of them
may have regarding the payment of principal, interest, default interest, or
other sums with respect to the First Mortgage Bonds and/or the IDB Bonds, or
from any other obligations that MESC, MESH or either of them may owe under the
Intercreditor Agreement or under the indentures for the First Mortgage Bonds
and/or the IDB Bonds. The claims released shall not be an offset or defense to
any claims asserted by any of the Southern Parties against the bankruptcy
estates of MESC or MESH. Specifically, without limiting the foregoing, the
claims released shall not be a basis for disallowance, whether under 11 U.S.C.
ss. 502(d) or otherwise, of claims filed by any of the Southern Parties against
the bankruptcy estates of MESC or MESH.
This Release shall not be effective unless and until the Development
Agreement has been executed and delivered by the parties thereto.
This Release shall be governed by, and construed in accordance with the
laws of the State of New York, without giving effect to its conflict of law
rules.
This Release supersedes any and all prior negotiations and sets forth
the full scope of the releases being granted by MESH in connection with the
Development Agreement. This Release may not be modified or amended except in a
writing signed by MESH, with such Bankruptcy Court approval as may be needed.
The undersigned represents that (s)he has full authority to execute
this Release on behalf of MESH.
WHEREFORE MESH, acting through its duly authorized representative, has
executed this Release on this ____ day of ________, 2000.
MOBILE ENERGY SERVICES HOLDINGS, INC.
By: _________________________
Name:
Title:
[Bondholder Release of Southern Parties]
RELEASE
In consideration of the provisions of that certain Development
Agreement, dated as of February 9, 2000, (the "Development Agreement") by and
among Southern Energy Resources, Inc. ("SERI"), Southern Energy Inc. ("SEI"),
Mobile Energy Services Company, L.L.C. ("MESC") and Mobile Energy Services
Holdings, Inc. ("MESH"), and in consideration of the transactions contemplated
by the Development Agreement, _____________________ in its capacity solely as a
holder of certain of the 8.665% First Mortgage Bonds due 2017 issued by MESC
and/or certain of the 6.95% Solid Waste Revenue Refunding Bonds (Mobile Energy
Services Company, L.L.C. Project) Series 1995 due 2020 issued by the Industrial
Development Board of the City of Mobile, Alabama (the "Bondholder"), on behalf
of itself and its predecessor and successor companies, and their respective
assigns, does hereby release and forever discharge (i) SERI, SEI and The
Southern Company (collectively, the "Southern Parties"), (ii) the Southern
Parties' respective affiliated, related, parent, predecessor, successor, and
subsidiary companies past and present other than MESC or MESH (the "Southern
Parties' Affiliates"), (iii) the Southern Parties' and the Southern Parties
Affiliates' respective shareholders, officers, directors, agents, employees,
attorneys, insurers, heirs and assigns (the "Southern Related Parties"), and
(iv) any individuals or entities (other than MESH) that were members, directors,
officers, or employees of MESC or MESH (the "MESC Related Parties") from any and
all claims, actions, causes of action, losses, damages, rights, suits, and
demands whatsoever, in law or equity, known or unknown, fixed or contingent,
liquidated or unliquidated, arising prior to the effective date of the
Development Agreement and arising from or relating to:
(a) any dividend or distribution, repayment of debt, or other
transfer of funds directly or indirectly to any of the
Southern Parties prior to the effective date of the
Development Agreement from MESC or MESH, including, without
limitation, any claim based on fraudulent conveyance,
fraudulent transfer, preferential payments, the approval or
payment of distributions or dividends, or breach of fiduciary
duty, in each case under state or federal law;
(b) (x) the issuance of (1) the $255,210,000 principal amount of
8.665% First Mortgage Bonds due 2017 issued by MESC (such
First Mortgage Bonds, the "First Mortgage Bonds") or (2) the
$85,000,000 principal amount of 6.95% Solid Waste Revenue
Refunding Bonds (Mobile Energy Services Company, L.L.C.
Project) Series 1995 due 2020 issued by the Industrial
Development Board of the City of Mobile, Alabama (such Solid
Waste Revenue Refunding Bonds, the "IDB Bonds") and (y) the
entry by MESC into the Amended and Restated Lease and
Agreement dated August 1, 1995, among MESC, MESH and the
Industrial Revenue Board of the City of Mobile;
(c) that certain Debt Service Reserve Account Southern Guaranty
Agreement, dated August 1, 1995, entered into by The Southern
Company;
(d) the purchase by MESH of the Energy Complex (as defined in that
certain Intercreditor and Collateral Agency Agreement, dated
August 1, 1995, to which MESC and MESH are parties (as
supplemented, amended, modified or restated through the date
hereof, the "Intercreditor Agreement")) and certain related
assets from ▇▇▇▇▇ Paper Company in 1994 and the transfer by
MESH of its assets to MESC in 1995;
(e) any filings or disclosures made by MESC or MESH with the
Securities and Exchange Commission (the "SEC"), any allegation
that additional filings or disclosures should have been made
by MESC or MESH with the SEC, or any other claim related to
securities issued by MESC or MESH or the IDB Bonds and based
upon federal or state securities laws;
(f) any filings, disclosures, or certificates made by MESC, MESH,
SERI, or any of their directors, officers, or employees to the
Collateral Agent (as defined in the Intercreditor Agreement),
to the Indenture Trustee (as defined in the Intercreditor
Agreement), to the Tax-Exempt Indenture Trustee (as defined in
the Intercreditor Agreement), or to the Working Capital
Facility Provider (as defined in the Intercreditor Agreement);
and
(g) any acts or omissions of the Southern Parties, the Southern
Parties' Affiliates, the Southern Related Parties, or the MESC
Related Parties related to (1) the closure of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Tissue Company's ("KCTC") pulp mill in Mobile, Alabama, (2)
the pursuit of claims or potential claims against KCTC, (3)
the management of MESC or MESH with respect to any of the
items identified in paragraphs (a) through (g) of this
Release, (4) the retention of advisors to MESH or MESC, (5)
efforts to develop new business opportunities for MESC after
KCTC's announcement of its intent to close its pulp mill in
Mobile, Alabama, (6) the filing of bankruptcy petitions by
MESC or MESH, (7) the restructuring of MESC or MESH, (8) the
possible investment of additional equity in MESH or MESC by
any of the Southern Parties, (9) efforts of MESC to obtain a
right to purchase the KCTC pulp mill or certain of its assets;
(10) the administration of or negotiation of revisions to
MESC's contracts with KCTC or S.D. ▇▇▇▇▇▇ Alabama, L.L.C. (or
its affiliates), (11) efforts to develop a new cogeneration
facility to be owned by MESC (or a subsidiary of MESC), (12)
the design, procurement, and installation of the number 7
turbine by MESC, (13) any agreements entered into by MESC or
SERI with labor unions representing the workers operating
MESC's facilities;
provided, however, that if SEI acknowledges in writing that it has breached (or
is found in a final, non-appealable determination to have breached) its
obligations under Section 4.3 or Section 4.5(b) of the Development Agreement,
this Release shall be nullified and shall be of no force and effect.
Notwithstanding the foregoing, and in the event that the Bondholder contends
that SEI has breached its obligations under Section 4.3 or Section 4.5(b) of the
Development Agreement, nothing herein shall be construed as preventing the
Bondholder from filing suit or taking such other steps as may be necessary for
the limited purpose of avoiding the expiration of any applicable period of
limitation prescribed by law, contract or otherwise while a determination is
made whether SEI has breached such obligation, and the Bondholder's rights to do
so shall be fully preserved. In the event such a suit or other proceeding is
commenced, and if SEI has not acknowledged in writing that it has breached its
obligation under Section 4.3 or Section 4.5 (b) of the Development Agreement
(and SEI has not been found in a final, non-appealable determination to have
breached such obligations), then the Bondholder agrees that such suit or other
proceeding shall be stayed until a final, binding determination has been made
pursuant to the dispute resolution procedure set forth in Article XV of the
Development Agreement with respect to the claim that SEI has breached its
obligations under Section 4.3 or Section 4.5(b) of the Development Agreement,
which determination shall be binding on the Bondholder.
Notwithstanding any of the foregoing, nothing herein shall be deemed to
release any claim, demand, action or cause of action that is based on claims of
actual fraud, except that the Release shall apply (i) to claims of securities
fraud under state or federal law, and (ii) claims of fraudulent conveyance,
fraudulent transfer, wrongful payments of dividends or distributions, or breach
of fiduciary duty under state or federal law. In addition, nothing herein shall
be construed as releasing MESC or MESH from any obligations that either of them
may have regarding the payment of principal, interest, default interest, or
other sums with respect to the First Mortgage Bonds and/or the IDB Bonds, or
from any other obligations that MESC, MESH or either of them may owe under the
Intercreditor Agreement or under the indentures for the First Mortgage Bonds
and/or the IDB Bonds, including, without limitation, any fees and expenses
(including legal fees and expenses) owed thereunder.
This Release shall not be effective unless and until (i) the execution
and delivery of the Development Agreement have been approved in a final order or
final orders entered by the Bankruptcy Court having jurisdiction over MESC's and
MESH's pending Chapter 11 cases, and (ii) the Development Agreement has been
executed and delivered by the parties thereto.
This Release shall be governed by, and construed in accordance with the
laws of the State of New York, without giving effect to its conflict of law
rules.
This Release supersedes any and all prior negotiations and sets forth
the full scope of the releases being granted by the Bondholder in connection
with the Development Agreement. This Release may not be modified or amended
except in a writing signed by the Bondholder.
The undersigned represents that (s)he has full authority to execute
this Release on behalf of the Bondholder.
WHEREFORE the Bondholder, acting through its duly authorized
representative, has executed this Release on this ____ day of ________, 2000.
[BONDHOLDER]
By: _________________________
Name:
Title:
[Tax Exempt Indenture Trustee Release of Southern Parties]
RELEASE
In consideration of the provisions of that certain Development
Agreement, dated as of February 9, 2000, (the "Development Agreement") by and
among Southern Energy Resources, Inc. ("SERI"), Southern Energy Inc. ("SEI"),
Mobile Energy Services Company, L.L.C. ("MESC") and Mobile Energy Services
Holdings, Inc. ("MESH"), and in consideration of the transactions contemplated
by the Development Agreement, First Union National Bank, successor by merger to
First Union National Bank of Georgia, as trustee under that certain Amended and
Restated Trust Indenture, dated August 1, 1995 by and between the Industrial
Development Board of the City of Mobile, Alabama, and First Union National Bank
(as supplemented, amended, modified or restated through the date hereof, the
"Tax Exempt Trust Indenture") (First Union National Bank in such capacity, the
"Tax Exempt Indenture Trustee"), on behalf of itself and its predecessor and
successor companies, and their respective assigns, does hereby release and
forever discharge (i) SERI, SEI and The Southern Company (collectively, the
"Southern Parties"), (ii) the Southern Parties' respective affiliated, related,
parent, predecessor, successor, and subsidiary companies past and present other
than MESC or MESH (the "Southern Parties' Affiliates"), (iii) the Southern
Parties' and the Southern Parties Affiliates' respective shareholders, officers,
directors, agents, employees, attorneys, insurers, heirs and assigns (the
"Southern Related Parties"), and (iv) any individuals or entities (other than
MESH) that were members, directors, officers, or employees of MESC or MESH (the
"MESC Related Parties") from any and all claims, actions, causes of action,
losses, damages, rights, suits, and demands whatsoever, in law or equity, known
or unknown, fixed or contingent, liquidated or unliquidated, arising prior to
the effective date of the Development Agreement and arising from or relating to:
(a) any dividend or distribution, repayment of debt, or other
transfer of funds directly or indirectly to any of the
Southern Parties prior to the effective date of the
Development Agreement from MESC or MESH, including, without
limitation, any claim based on fraudulent conveyance,
fraudulent transfer, preferential payments, the approval or
payment of distributions or dividends, or breach of fiduciary
duty, in each case under state or federal law;
(b) (x) the issuance of (1) the $255,210,000 principal amount of
8.665% First Mortgage Bonds due 2017 issued by MESC (such
First Mortgage Bonds, the "First Mortgage Bonds") or (2) the
$85,000,000 principal amount of 6.95% Solid Waste Revenue
Refunding Bonds (Mobile Energy Services Company, L.L.C.
Project) Series 1995 due 2020 issued by the Industrial
Development Board of the City of Mobile, Alabama (such Solid
Waste Revenue Refunding Bonds, the "IDB Bonds") and (y) the
entry by MESC into the Amended and Restated Lease and
Agreement dated August 1, 1995, among MESC, MESH and the
Industrial Revenue Board of the City of Mobile;
(c) that certain Debt Service Reserve Account Southern Guaranty
Agreement, dated August 1, 1995, entered into by The Southern
Company;
(d) the purchase by MESH of the Energy Complex (as defined in the
Tax Exempt Trust Indenture) and certain related assets from
▇▇▇▇▇ Paper Company in 1994 and the transfer by MESH of its
assets to MESC in 1995;
(e) any filings or disclosures made by MESC or MESH with the
Securities and Exchange Commission (the "SEC"), any allegation
that additional filings or disclosures should have been made
by MESC or MESH with the SEC, or any other claim related to
securities issued by MESC or MESH or the IDB Bonds and based
upon federal or state securities laws;
(f) any filings, disclosures, or certificates made by MESC, MESH,
SERI, or any of their directors, officers, or employees to the
Collateral Agent (as defined in the Tax Exempt Trust
Indenture), to the Indenture Trustee (as defined in the Tax
Exempt Trust Indenture), to the Tax-Exempt Indenture Trustee,
or to the Working Capital Facility Provider (as defined in the
Tax Exempt Trust Indenture); and
(g) any acts or omissions of the Southern Parties, the Southern
Parties' Affiliates, the Southern Related Parties, or the MESC
Related Parties related to (1) the closure of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Tissue Company's ("KCTC") pulp mill in Mobile, Alabama, (2)
the pursuit of claims or potential claims against KCTC, (3)
the management of MESC or MESH with respect to any of the
items identified in paragraphs (a) through (g) of this
Release, (4) the retention of advisors to MESH or MESC, (5)
efforts to develop new business opportunities for MESC after
KCTC's announcement of its intent to close its pulp mill in
Mobile, Alabama, (6) the filing of bankruptcy petitions by
MESC or MESH, (7) the restructuring of MESC or MESH, (8) the
possible investment of additional equity in MESH or MESC by
any of the Southern Parties, (9) efforts of MESC to obtain a
right to purchase the KCTC pulp mill or certain of its assets;
(10) the administration of or negotiation of revisions to
MESC's contracts with KCTC or S.D. ▇▇▇▇▇▇ Alabama, L.L.C. (or
its affiliates), (11) efforts to develop a new cogeneration
facility to be owned by MESC (or a subsidiary of MESC), (12)
the design, procurement, and installation of the number 7
turbine by MESC, (13) any agreements entered into by MESC or
SERI with labor unions representing the workers operating
MESC's facilities;
provided, however, that if SEI acknowledges in writing that it has breached (or
is found in a final, non-appealable determination to have breached) its
obligations under Section 4.3 or Section 4.5(b) of the Development Agreement,
this Release shall be nullified and shall be of no force and effect.
Notwithstanding the foregoing, and in the event that the Tax Exempt Indenture
Trustee contends that SEI has breached its obligations under Section 4.3 or
Section 4.5(b) of the Development Agreement, nothing herein shall be construed
as preventing the Tax Exempt Indenture Trustee from filing suit or taking such
other steps as may be necessary for the limited purpose of avoiding the
expiration of any applicable period of limitation prescribed by law, contract or
otherwise while a determination is made whether SEI has breached such
obligation, and the Tax Exempt Indenture Trustee's rights to do so shall be
fully preserved. In the event such a suit or other proceeding is commenced, and
if SEI has not acknowledged in writing that it has breached its obligation under
Section 4.3 or Section 4.5(b) of the Development Agreement (and SEI has not been
found in a final, non-appealable determination to have breached such
obligations), then the Tax Exempt Indenture Trustee agrees that such suit or
other proceeding shall be stayed until a final, binding determination has been
made pursuant to the dispute resolution procedure set forth in Article XV of the
Development Agreement with respect to the claim that SEI has breached its
obligations under Section 4.3 or Section 4.5(b) of the Development Agreement,
which determination shall be binding on the Tax Exempt Indenture Trustee.
Notwithstanding any of the foregoing, nothing herein shall be deemed to
release any claim, demand, action or cause of action that is based on claims of
actual fraud, except that the Release shall apply (i) to claims of securities
fraud under state or federal law, and (ii) claims of fraudulent conveyance,
fraudulent transfer, wrongful payments of dividends or distributions, or breach
of fiduciary duty under state or federal law. In addition, nothing herein shall
be construed as releasing MESC or MESH from any obligations that either of them
may have regarding the payment of principal, interest, default interest, or
other sums with respect to the First Mortgage Bonds and/or the IDB Bonds, or
from any other obligations that MESC, MESH or either of them may owe under the
Intercreditor Agreement or under the indentures for the First Mortgage Bonds
and/or the IDB Bonds, including, without limitation, any fees and expenses
(including legal fees and expenses) owed thereunder.
This Release shall not be effective unless and until the Development
Agreement has been executed and delivered by the parties thereto.
This Release shall be governed by, and construed in accordance with the
laws of the State of New York, without giving effect to its conflict of law
rules.
This Release supersedes any and all prior negotiations and sets forth
the full scope of the releases being granted by the Tax Exempt Indenture Trustee
in connection with the Development Agreement. This Release may not be modified
or amended except in a writing signed by the Tax Exempt Indenture Trustee.
The undersigned represents that (s)he has full authority to execute
this Release on behalf of the Tax Exempt Indenture Trustee.
WHEREFORE the Tax Exempt Indenture Trustee, acting through its duly
authorized representative, has executed this Release on this ____ day of
________, 2000.
FIRST UNION NATIONAL BANK, successor
by merger to FIRST UNION NATIONAL
BANK OF GEORGIA, as trustee under
the Tax Exempt Trust Indenture
By: _________________________
Name:
Title:
[Indenture Trustee Release of Southern Parties]
RELEASE
In consideration of the provisions of that certain Development
Agreement, dated as of February 9, 2000, (the "Development Agreement") by and
among Southern Energy Resources, Inc. ("SERI"), Southern Energy Inc. ("SEI"),
Mobile Energy Services Company, L.L.C. ("MESC") and Mobile Energy Services
Holdings, Inc. ("MESH"), and in consideration of the transactions contemplated
by the Development Agreement, First Union National Bank, successor by merger to
First Union National Bank of Georgia, as trustee under that certain Trust
Indenture, dated August 1, 1995 (as supplemented, amended, modified or restated
through the date hereof, the "Trust Indenture") (First Union National Bank in
such capacity, the "Indenture Trustee"), on behalf of itself and its predecessor
and successor companies, and their respective assigns, does hereby release and
forever discharge (i) SERI, SEI and The Southern Company (collectively, the
"Southern Parties"), (ii) the Southern Parties' respective affiliated, related,
parent, predecessor, successor, and subsidiary companies past and present other
than MESC or MESH (the "Southern Parties' Affiliates"), (iii) the Southern
Parties' and the Southern Parties Affiliates' respective shareholders, officers,
directors, agents, employees, attorneys, insurers, heirs and assigns (the
"Southern Related Parties"), and (iv) any individuals or entities (other than
MESH) that were members, directors, officers, or employees of MESC or MESH (the
"MESC Related Parties") from any and all claims, actions, causes of action,
losses, damages, rights, suits, and demands whatsoever, in law or equity, known
or unknown, fixed or contingent, liquidated or unliquidated, arising prior to
the effective date of the Development Agreement and arising from or relating to:
(a) any dividend or distribution, repayment of debt, or other
transfer of funds directly or indirectly to any of the
Southern Parties prior to the effective date of the
Development Agreement from MESC or MESH, including, without
limitation, any claim based on fraudulent conveyance,
fraudulent transfer, preferential payments, the approval or
payment of distributions or dividends, or breach of fiduciary
duty, in each case under state or federal law;
(b) (x) the issuance of (1) the $255,210,000 principal amount of
8.665% First Mortgage Bonds due 2017 issued by MESC (such
First Mortgage Bonds, the "First Mortgage Bonds") or (2) the
$85,000,000 principal amount of 6.95% Solid Waste Revenue
Refunding Bonds (Mobile Energy Services Company, L.L.C.
Project) Series 1995 due 2020 issued by the Industrial
Development Board of the City of Mobile, Alabama (such Solid
Waste Revenue Refunding Bonds, the "IDB Bonds") and (y) the
entry by MESC into the Amended and Restated Lease and
Agreement dated August 1, 1995, among MESC, MESH and the
Industrial Revenue Board of the City of Mobile;
(c) that certain Debt Service Reserve Account Southern Guaranty
Agreement, dated August 1, 1995, entered into by The Southern
Company;
(d) the purchase by MESH of the Energy Complex (as defined in the
Trust Indenture) and certain related assets from ▇▇▇▇▇ Paper
Company in 1994 and the transfer by MESH of its assets to MESC
in 1995;
(e) any filings or disclosures made by MESC or MESH with the
Securities and Exchange Commission (the "SEC"), any allegation
that additional filings or disclosures should have been made
by MESC or MESH with the SEC, or any other claim related to
securities issued by MESC or MESH or the IDB Bonds and based
upon federal or state securities laws;
(f) any filings, disclosures, or certificates made by MESC, MESH,
SERI, or any of their directors, officers, or employees to the
Collateral Agent (as defined in the Trust Indenture), to the
Indenture Trustee, to the Tax-Exempt Indenture Trustee (as
defined in the Trust Indenture), or to the Working Capital
Facility Provider (as defined in the Trust Indenture); and
(g) any acts or omissions of the Southern Parties, the Southern
Parties' Affiliates, the Southern Related Parties, or the MESC
Related Parties related to (1) the closure of ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Tissue Company's ("KCTC") pulp mill in Mobile, Alabama, (2)
the pursuit of claims or potential claims against KCTC, (3)
the management of MESC or MESH with respect to any of the
items identified in paragraphs (a) through (g) of this
Release, (4) the retention of advisors to MESH or MESC, (5)
efforts to develop new business opportunities for MESC after
KCTC's announcement of its intent to close its pulp mill in
Mobile, Alabama, (6) the filing of bankruptcy petitions by
MESC or MESH, (7) the restructuring of MESC or MESH, (8) the
possible investment of additional equity in MESH or MESC by
any of the Southern Parties, (9) efforts of MESC to obtain a
right to purchase the KCTC pulp mill or certain of its assets;
(10) the administration of or negotiation of revisions to
MESC's contracts with KCTC or S.D. ▇▇▇▇▇▇ Alabama, L.L.C. (or
its affiliates), (11) efforts to develop a new cogeneration
facility to be owned by MESC (or a subsidiary of MESC), (12)
the design, procurement, and installation of the number 7
turbine by MESC, (13) any agreements entered into by MESC or
SERI with labor unions representing the workers operating
MESC's facilities;
provided, however, that if SEI acknowledges in writing that it has breached (or
is found in a final, non-appealable determination to have breached) its
obligations under Section 4.3 or Section 4.5(b) of the Development Agreement,
this Release shall be nullified and shall be of no force and effect.
Notwithstanding the foregoing, and in the event that the Indenture Trustee
contends that SEI has breached its obligations under Section 4.3 or Section
4.5(b) of the Development Agreement, nothing herein shall be construed as
preventing the Indenture Trustee from filing suit or taking such other steps as
may be necessary for the limited purpose of avoiding the expiration of any
applicable period of limitation prescribed by law, contract or otherwise while a
determination is made whether SEI has breached such obligation, and the
Indenture Trustee's rights to do so shall be fully preserved. In the event such
a suit or other proceeding is commenced, and if SEI has not acknowledged in
writing that it has breached its obligation under Section 4.3 or Section 4.5 (b)
of the Development Agreement (and SEI has not been found in a final,
non-appealable determination to have breached such obligations), then the
Indenture Trustee agrees that such suit or other proceeding shall be stayed
until a final, binding determination has been made pursuant to the dispute
resolution procedure set forth in Article XV of the Development Agreement with
respect to the claim that SEI has breached its obligations under Section 4.3 or
Section 4.5(b) of the Development Agreement, which determination shall be
binding on the Indenture Trustee.
Notwithstanding any of the foregoing, nothing herein shall be deemed to
release any claim, demand, action or cause of action that is based on claims of
actual fraud, except that the Release shall apply (i) to claims of securities
fraud under state or federal law, and (ii) claims of fraudulent conveyance,
fraudulent transfer, wrongful payments of dividends or distributions, or breach
of fiduciary duty under state or federal law. In addition, nothing herein shall
be construed as releasing MESC or MESH from any obligations that either of them
may have regarding the payment of principal, interest, default interest, or
other sums with respect to the First Mortgage Bonds and/or the IDB Bonds, or
from any other obligations that MESC, MESH or either of them may owe under the
Intercreditor Agreement or under the indentures for the First Mortgage Bonds
and/or the IDB Bonds, including, without limitation, any fees and expenses
(including legal fees and expenses) owed thereunder.
This Release shall not be effective unless and until the Development
Agreement has been executed and delivered by the parties thereto.
This Release shall be governed by, and construed in accordance with the
laws of the State of New York, without giving effect to its conflict of law
rules.
This Release supersedes any and all prior negotiations and sets forth
the full scope of the releases being granted by the Indenture Trustee in
connection with the Development Agreement. This Release may not be modified or
amended except in a writing signed by the Indenture Trustee.
The undersigned represents that (s)he has full authority to execute
this Release on behalf of the Indenture Trustee. WHEREFORE the
Indenture Trustee, acting through its duly authorized representative,
has executed this Release on this ____
day of ________, 2000.
FIRST UNION NATIONAL BANK, successor
by merger to FIRST UNION NATIONAL
BANK OF GEORGIA, as trustee under
the Trust Indenture
By: _________________________
Name:
Title:
Exhibit F
The holders of an aggregate principal amount equal to over fifty percent (50%)
of each of the Working Capital Facility, the Taxable Bonds and the Tax Exempt
Bonds will execute the Releases.
Exhibit G
Steering Committee Representatives
MESC and MESH ▇▇▇▇ ▇▇▇▇
SERI and SEI ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Lender Representative ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Exhibit H
COGENERATION FACILITY
OPERATIONS AND MAINTENANCE AGREEMENT
Between
SOUTHERN ENERGY RESOURCES, INC.
and
MOBILE ENERGY SERVICES COMPANY, INC.
Dated as of February 9, 2000
TABLE OF CONTENTS
ARTICLE I.................................................................1
A. Definitions............................................................1
-----------
ARTICLE II................................................................7
2.1 Term 7
----
ARTICLE III...............................................................7
3.1 Owner Representations and Warranties..................................7
------------------------------------
3.2 Operator Representations and Warranties...............................8
---------------------------------------
ARTICLE IV................................................................9
4.1 Operator's Services...................................................9
-------------------
4.2 No Obligations.......................................................12
--------------
4.3 Curtailment of Energy Complex Operations.............................12
----------------------------------------
ARTICLE V................................................................12
5.1 Items to be Furnished by Owner.......................................12
------------------------------
5.2 Access to and Use of Facilities and Equipment........................13
---------------------------------------------
5.3 Owner's Representative...............................................13
----------------------
5.4 Taxes................................................................13
-----
ARTICLE VI...............................................................14
6.1 Payment of Operating Expenses........................................14
-----------------------------
6.2 Annual Operating Plan and Budget.....................................15
--------------------------------
6.3 Payments From Imprest Account........................................16
-----------------------------
6.4 Payment of Other Operating Expenses..................................16
-----------------------------------
6.5 Payment and Interest on Payment Delays; Disputes Concerning Payments.16
--------------------------------------------------------------------
6.6 Taxes................................................................16
-----
ARTICLE VII..............................................................17
7.1 Limitation of Liability..............................................17
7.2 Equipment............................................................17
---------
7.3 Disclaimer of Warranty...............................................17
ARTICLE VIII.............................................................18
8.1 Termination for Cause................................................18
---------------------
8.2 Additional Right of Either Party to Terminate........................18
---------------------------------------------
8.3 Payments to Operator Upon Termination................................18
-------------------------------------
ARTICLE IX...............................................................18
9.1 Indemnification of Operator..........................................19
---------------------------
9.2 Survival.............................................................19
--------
9.3 Notice and Legal Defense.............................................19
------------------------
9.4 Failure to Defend Action.............................................19
------------------------
ARTICLE X................................................................19
10.1 Obligation to Obtain................................................19
--------------------
10.2 Coverage Which Must be Purchased by the Operator....................20
------------------------------------------------
10.3 Coverage Which Must be Purchased by the Owner.......................21
---------------------------------------------
10.4 Form and Content....................................................22
----------------
10.5 Certificates, Proof of Loss.........................................23
---------------------------
10.6 No Limitation on Liability..........................................23
--------------------------
ARTICLE XI...............................................................23
11.1 Engagement of Third Parties.........................................23
---------------------------
11.2 Assignment of Rights or Obligations.................................23
-----------------------------------
ARTICLE XII..............................................................24
12.1 Good Faith Resolution...............................................24
---------------------
12.2 Arbitration Notice..................................................24
------------------
12.3 Selection of Arbitrators............................................24
------------------------
12.4 Procedure...........................................................25
---------
12.5 Binding Nature......................................................25
--------------
12.6 Enforceability......................................................25
--------------
ARTICLE XIII.............................................................25
13.1 Notices.............................................................25
-------
13.2 Governing Law.......................................................26
-------------
13.3 Counterparts........................................................26
------------
13.4 Successors and Assigns..............................................26
----------------------
13.5 Waiver..............................................................26
------
13.6 Not for the Benefit of Third Parties................................26
------------------------------------
13.7 Attorneys' Fees.....................................................26
---------------
13.8 Confidential Information............................................26
------------------------
13.9 Force Majeure.....................................................27
-------------
13.10 Severability.....................................................27
13.11 Owner's and Operator's Obligations Non-recourse....................28
-----------------------------------------------
13.12 Interpretation.....................................................28
--------------
13.13 Relationship of the Parties........................................28
---------------------------
SCHEDULES
A........- Description of Cogen Facility
B........- Cogen Facility Permits
C........- Outline of Operating Plan and Budget
D........- Reporting Requirements
COGENERATION FACILITY OPERATIONS AND MAINTENANCE AGREEMENT
This COGENERATION FACILITY OPERATIONS AND MAINTENANCE AGREEMENT, dated
as of February 9, 2000, between Southern Energy Resources, Inc., a Delaware
corporation with its principal business address in Atlanta, Georgia
("Operator"), and Mobile Energy Services Company, L.L.C., an Alabama limited
liability company with its principal business address in Mobile, Alabama
("Owner").
RECITALS
A........Owner is developing a cogeneration facility described more
particularly on Schedule A (the "Cogen Facility") located in Mobile, Alabama,
and desires to engage Operator to operate and maintain the Cogen Facility on
behalf of Owner and, in connection therewith, provide certain related
administrative services; and
B........Operator is willing to provide the necessary services to Owner
in connection with operating and maintaining the Cogen Facility on and subject
to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and their mutual
covenants set forth in this Agreement, Owner and Operator agree as follows:
ARTICLE I
DEFINITIONS
A........Definitions. In addition to other terms defined elsewhere in
this Agreement, the following terms shall have the meanings set forth below:
"Affiliate" of a specified Person means any other Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with the specified Person, or who holds or beneficially
owns ten percent (10%) or more of any class of voting securities of the
specified Person.
"Agreement" means this Agreement and the Schedules attached hereto, as
amended or supplemented in writing from time to time.
"Applicable Law" means any Governmental Rule or Permit which is
applicable to or affects the operation, maintenance, ownership, leasing or use
of the Cogen Facility, including any zoning, environmental protection,
pollution, sanitation or safety Governmental Rule or Permit and any waiver,
exemption, release, variance, order, Permit, authorization, right or license of,
from, imposed or otherwise issued by any Governmental Authority.
"Billing Period" means a calendar month in any Contract Year, except
that the first Billing Period shall begin on the Effective Date and shall end on
the last day of the month during which the Effective Date occurred and the last
Billing Period shall end on the last day of the last Contract Year.
"Boiler Ash Disposal Agreement" means the Boiler Ash Disposal
Agreement, dated as of December 12, 1994, between Owner and KCTC.
"Capital Improvement" means any additions or modifications to the Cogen
Facility and any replacement of existing equipment or facilities not included in
the Operating Plan and Budget as part of Routine Maintenance and/or performed as
the result of any Scheduled Outage or Major Maintenance Outage or Force Majeure.
"Cogen Facility" shall have the meaning set forth in Recital A.
"Cogen Facility Contracts" means any contracts between Owner and third
parties for the sale of electricity or steam processing services from the Cogen
Facility or related to the operation of the Cogen Facility other than this
Agreement.
"Cogen Facility Employees" means those persons hereafter employed by
Operator and assigned to the Cogen Facility.
"Cogen Facility Permits" means all Permits necessary for the conduct
of, or relating to the ownership, use, operation or maintenance of, the Cogen
Facility, as listed on Schedule B hereto and including any renewals, additions,
deletions, modifications or amendments thereto after date hereof.
"Cogen Financing" has the meaning set forth in the Development
Agreement.
"Confidentiality Agreement" means the Confidentiality Agreement dated
as of _______ __, 2000, among Owner and Operator, as amended, amended and
restated or otherwise modified from time to time.
"Contract Year" means (i) for the first Contract Year, the period
beginning on the Effective Date and ending on December 31 of the then current
calendar year, and (ii) thereafter, each calendar year, provided that the final
Contract Year shall terminate on the date that the Agreement expires or is
otherwise terminated in accordance with Article II hereof.
"Development Agreement" means the Development Agreement dated as of
February 9, 2000, among Owner, Operator, Mobile Energy Services Holdings, Inc.,
and Southern Energy, Inc.
"Effective Date" means the first date upon which each of the following
occurs or has occurred (i) the Bankruptcy Court approves the Development
Agreement, this Agreement and the Releases (as defined in the Development
Agreement), (ii) the Releases are delivered to The Southern Company, the
Operator, and Southern Energy, Inc., and (iii) the Security Interests (as
defined in the Development Agreement) are authorized, granted and effectuated
pursuant to an order of the Bankruptcy Court approving such Security Interests.
"Energy Services" means electricity and/or steam processing services.
"Financing Documents" means the documents, instruments and other
agreements evidencing, and securing the payment of, the Cogen Financing.
"Force Majeure" means any circumstances beyond the reasonable control
of a Party experiencing delay in the performance of, or inability to perform,
its obligations hereunder by reason of the occurrence thereof, if such
circumstances are not the fault of such Party, including, but not limited to,
acts of God; unusually severe weather conditions; accident; fire; strikes or
other labor unrest; war; riots; requirements, actions or failures to act on the
part of Governmental Authorities preventing performance; inability despite due
diligence to obtain or renew Permits; change of law; or failure or faulty design
of major equipment which could not reasonably be detected through standard
quality assurance/quality control procedures; provided that, as to Operator,
Force Majeure shall not include any labor dispute at the Cogen Facility or
involving the Cogen Facility Employees.
"Governmental Authority" means any national, state or local government
(whether domestic or foreign), any political subdivision thereof or any other
governmental, quasi-governmental, judicial, public or statutory instrumentality,
authority, body, agency, department, bureau or entity, (including any zoning
authority, the Securities and Exchange Commission, Federal Energy Regulatory
Commission, the Alabama Public Service Commission or any comparable authority)
or any arbitrator with authority to bind a party at law.
"Governmental Rule" means any law, rule, regulation, ordinance, order,
code interpretation, judgment, decree, directive, guideline, policy or similar
form of decision of any Governmental Authority having the effect and force of
law.
"Hazardous Materials" means hazardous wastes, hazardous substances,
hazardous constituents, air contaminants, toxic substances or related materials,
whether solids, liquids or gases, including but not limited to substances
defined or otherwise regulated as "hazardous wastes," "hazardous substances,"
toxic substances," "pollutants," "contaminants," "carcinogens," "hazardous air
pollutants," "criteria pollutants," "reproductive toxins," "radioactive
materials," "toxic chemicals," "solid waste" or other similar designations in,
or otherwise subject to regulation under, any Governmental Rule, whether or not
released, emitted, discharged or having otherwise entered the environment,
including without limitation, petroleum hydrocarbons, asbestos-containing
materials, urea formaldehyde foam insulation, polychlorinated biphenyls and
radionuclides.
"Imprest Account" means the deposit account established by Owner in
accordance with Section 6.3 hereof.
"Interim Budget" has the meaning set forth in Section 6.2(a).
"KCTC" means ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Tissue Company, a Pennsylvania corporation.
"Labor Costs" means, for any Billing Period, the sum of
(i) all direct payroll costs associated with the
Cogen Facility Employees, including wages
and salaries and all direct payroll overhead
costs paid or accrued on behalf of the Cogen
Facility Employees, including pension and
other employee benefits, bonuses, insurance,
payroll taxes, and holiday, sick leave and
vacation pay accruals; plus an additional
amount equal to ten percent (10%) of such
costs to cover Operator's general and
administrative expenses; and
(ii) all direct payroll costs of Operator's
employees other than the Cogen Facility
Employees, as identified through Operator's
work order system, as billed at the
applicable salaries or hourly wage rates of
such employees, which shall include an
allocable portion of such employees' direct
payroll overhead costs that is based on such
salaries or hourly wage rates, plus an
additional amount equal to ten percent (10%)
of such costs to cover Operator's general
and administrative expenses.
"Lender" has the meaning set forth in Section 11.2(c).
"Major Maintenance Outage" means the temporary shutdown of major
equipment or machinery at the Cogen Facility for any major maintenance or
overhaul thereof.
"Master Operating Agreement" means the Master Operating Agreement dated
as of December 12, 1994, as amended, among Owner, KCTC, KCTC in its capacity as
owner of the Pulp Mill, KCTC in its capacity as owner of the Tissue Mill, and
Sappi in its capacity as owner of the Paper Mill.
"▇▇▇▇▇" means the Pulp Mill, the Tissue Mill, and the Paper Mill.
"Mill Owner" means KCTC, as owner of the Pulp Mill and Tissue Mill, or
Sappi, as owner of the Paper Mill, as the context requires.
"Operating Expenses" shall have the meaning given in Section 6.1.
"Operating Plan and Budget" means the annual plan and budget prepared
by Operator in accordance with Section 6.2(a), which shall indicate periods when
the Cogen Facility is expected to be providing the Energy Services, the
estimated expenses for the Cogen Facility during each Contract Year, including
an annual expense budget, and Operator's forecast of Scheduled Outages and Major
Maintenance Outages and the associated costs thereof, which plan and budget
shall contain the information required by Schedule C attached hereto.
"Operator" shall have the meaning given in the first paragraph of this
Agreement.
"Owner" shall have the meaning given in the first paragraph of this
Agreement.
"Paper Mill" means Sappi's paper mill in Mobile, Alabama.
"Party" means the Operator or the Owner.
"Permit" means any license, permit, franchise, approval, authorization,
consent, waiver, exemption, variance or order of, or filing with, or other
issuance by any Governmental Authority.
"Person" means any natural person, corporation, limited liability
company, partnership, firm, association, trust, unincorporated organization,
Governmental Authority or any other entity whether acting in an individual,
fiduciary or other capacity.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank, N.A., as its prime rate in effect
at its principal office in New York City.
"Prudent Plant Operating Standards" means a spectrum of reasonable
practices, methods and acts which (i) are commonly used to operate steam
generating or processing and electricity generating equipment and associated
facilities safely, reliably and efficiently and in compliance with all
applicable Governmental Rules or (ii) in the exercise of reasonable judgment
considering the facts known when such practices, methods or acts are engaged in,
could have been expected to achieve the desired result safely, reliably and
efficiently and having due regard to all applicable Governmental Rules,
including, but not limited to, reasonable practices, methods and acts to (a)
have available adequate materials and supplies to meet the Cogen Facility's
needs under normal conditions and reasonably anticipated abnormal conditions;
(b) have available sufficient operating personnel with appropriate experience
and training to operate facilities of the type that comprise the Cogen Facility
properly and sufficiently and to respond to reasonably anticipated abnormal
conditions; (c) perform preventative, routine and non-routine maintenance and
repairs appropriate for facilities of the type that comprise the Cogen Facility;
(d) perform monitoring and testing appropriate for facilities of the type that
comprise the Cogen Facility to ascertain whether the equipment will function as
expected under both normal and reasonably anticipated abnormal conditions; and
(e) operate equipment with appropriate regard to safety and equipment
limitations for facilities of the type that comprise the Cogen Facility.
"Pulp Mill" means the pulp mill on the Site (as defined in the Master
Operating Agreement).
"Routine Maintenance" means the performance of all routine and
preventive maintenance required to be performed periodically to keep the Cogen
Facility and its components in good working order, other than maintenance
activities performed in connection with Scheduled Outages and Major Maintenance
Outages.
"Sappi" means S.D. ▇▇▇▇▇▇ Alabama, LLC, an Alabama limited liability
company.
"Scheduled Outage" means the temporary shutdown of any of the major
machinery or equipment at the Cogen Facility for the inspection, repair or
maintenance thereof (other than Major Maintenance Outages), the timing and
duration of which shutdown is indicated in the Operating Plan and Budget.
"Services" shall have the meaning given in Section 4.1.
"Subcontractor(s)" means those Persons who have a contract with
Operator for the performance of any part of the Services to be performed by
Operator hereunder.
"Supplies" means all necessary supplies, parts, stores, consumables and
inventories (including, without limitation, supplemental fuel, water, back-up
utility service, lubricants, spare parts and chemicals) required or used in
connection with the operation and maintenance of the Cogen Facility.
"Taxes" means all taxes, fees, assessments, charges, levies and impost
of any kind or nature imposed by any Governmental Authority.
"Term" means the term of this Agreement as specified in Section 2.1.
"Tissue Mill" means KCTC's tissue mill in Mobile, Alabama.
"Total Casualty" means any physical loss or destruction of, or
destruction to, the Cogen Facility that results in damage or destruction to
equipment, machinery, components or systems of the Cogen Facility that exceeds
one hundred million dollars ($100,000,000) or that cannot be replaced, restored
or rebuilt within thirty-six (36) months of the occurrence of such loss or
destruction.
"Unscheduled Outage" means any outage of the Cogen Facility which is
not a Scheduled Outage or Major Maintenance Outage, other than any outage which
is caused by a Force Majeure event.
"Vendor(s)" means those persons or companies who supply materials or
equipment to Operator or any Subcontractor for the Cogen Facility.
"Warranties" means all rights of Owner under or pursuant to all
warranties, representations and guarantees made by manufacturers and suppliers
in connection with the Cogen Facility.
ARTICLE II
TERM OF AGREEMENT
2.1 Term. This Agreement shall be effective from the Effective Date
and, unless earlier terminated in accordance with the terms of Article VIII,
shall continue for a period of three (3) years from the date hereof, subject to
termination in accordance with Article VIII hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Owner Representations and Warranties. Owner hereby
represents and warrants to Operator as follows:
(a) Organization and Existence. Owner is a limited liability
company, duly organized, validly existing and in good standing under
the laws of the State of Alabama and has sufficient corporate power and
authority to execute and deliver this Agreement and to perform its
obligations hereunder and to carry on its business as it is now being
conducted and as it is contemplated hereunder to be conducted in the
future.
(b) Due Authorization. The execution, delivery and performance
of this Agreement by Owner have been duly and effectively authorized by
all requisite corporate action. This Agreement has been duly and
effectively executed and delivered by Owner and constitutes the legal,
valid and binding obligation of Owner, enforceable against Owner in
accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the
rights of creditors generally and by general principles of equity.
(c) Litigation. There is no action, suit, claim, proceeding or
investigation pending or, to Owner's knowledge, threatened against
Owner by or before any Governmental Authority having jurisdiction over
Owner or its properties which, if adversely determined, would have a
material adverse effect upon Owner's ability to enter into and perform
its obligations and consummate the transactions contemplated by this
Agreement. Owner is not subject to any outstanding judgment, order,
writ, injunction or decree of any Governmental Authority having
jurisdiction over Owner or its properties which would materially and
adversely affect its ability to enter into and perform its obligations
under this Agreement.
(d) No Material Violation, No Material Impairment. There is no
provision of Owner's organizational documents, nor any existing
statute, law, or regulation, nor any note, bond, resolution, indenture,
agreement or instrument to which Owner is a party and which is
enforceable against Owner which would be violated by or which would
impair Owner's entry into this Agreement or the performance by Owner of
its obligations hereunder in accordance with the terms hereof or the
consummation of the transactions contemplated hereby in accordance with
the terms hereof.
(e) Approvals. All approvals and consents, including, without
limitation, all approvals and consents of Governmental Authorities,
necessary for Owner to enter into this Agreement, to perform its
obligation hereunder and to consummate the transactions contemplated
hereby have been received and are in full force and effect.
3.2 Operator Representations and Warranties. Operator hereby
represents and warrants to Owner as follows:
---------------------------------------
(a) Organization and Existence. Operator is a corporation,
duly organized, validly existing and in good standing under the laws of
the State of Delaware and has sufficient corporate power and authority
to execute and deliver this Agreement and to perform its obligations
hereunder and to carry on its business as it is now being conducted and
as it is contemplated hereunder to be conducted in the future.
(b) Due Authorization. The execution, delivery and performance
of this Agreement by Operator has been duly and effectively authorized
by all requisite corporate action. This Agreement has been duly and
effectively executed and delivered by Operator and constitutes the
legal, valid and binding obligation of Operator, enforceable against
Operator in accordance with its terms, except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the rights or creditors generally and by general principles
of equity.
(c) Litigation. There is no action, suit, claim, proceeding or
investigation pending or, to Operator's knowledge, threatened against
Operator by or before any Governmental Authority having jurisdiction
over Operator or its properties which, if adversely determined, would
have a material adverse effect upon Operator's ability to enter into
and perform its obligations under this Agreement. Operator is not
subject to any outstanding judgment, order, writ, injunction or decree
of any Governmental Authority having jurisdiction over Operator or its
properties which would materially and adversely affect its ability to
enter into and perform its obligations under this Agreement.
(d) No Material Violation, No Material Impairment. There is no
provision of Operator's charter or bylaws, nor any existing statute,
law, regulation, nor any material note, bond, resolution, indenture,
agreement or instrument to which Operator is a party and which is
enforceable against Operator which would be violated by or which would
impair Operator's entry into this Agreement or the performance by
Operator of its obligations hereunder in accordance with the terms
hereof.
(e) Approvals. All approvals and consents, including, without
limitation, all approvals and consents of Governmental Authorities,
necessary for Operator to enter into this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby have been received and are in full force and effect.
ARTICLE IV
SERVICES TO BE PROVIDED BY OPERATOR
4.1 Operator's Services. On and after the Effective Date, Operator
shall provide the operations, maintenance and administrative services (the
"Services") specified in this Section 4.1 for the Cogen Facility and such
additional Services as Owner may from time to time request for the Cogen
Facility, provided that prior to the Cogen Facility becoming commercially
operable, Operator shall provide the Services to the extent appropriate based
upon the extent of completion of the Cogen Facility.
(a) Employees. As of the Effective Date, Operator shall hire
and train Cogen Facility Employees, and shall implement training procedures and
instructional programs designed to maintain the technical proficiency of all
such employees, provided that prior to the Cogen Facility becoming commercially
operable, Operator shall hire and train Cogen Facility Employees to the extent
appropriate based upon the extent of completion of the Cogen Facility.
(b) Operation and Maintenance Services. Operator shall staff
the Cogen Facility 24 hours a day, 365 or 366 days per year, as applicable, and
shall use its commercially reasonable efforts to operate the Cogen Facility in
accordance with each of the Cogen Facility Contracts, Prudent Plant Operating
Standards, Warranties (to the extent consistent with Prudent Plant Operating
Standards), operating manuals provided by Owner, all Governmental Rules and
Permits applicable to the Cogen Facility, and the Operating Plan and Budget. As
a part of such activities, Operator shall perform or assist Owner in carrying
out all of the Owner's duties under the Cogen Facility Contracts and shall
perform all Routine Maintenance and all maintenance activities in connection
with Scheduled Outages and Major Maintenance Outages.
(c) Procurement of Supplies, Parts and Equipment. Operator
shall procure in accordance with the Operating Plan and Budget or upon request
by Owner and at Owner's expense all Supplies, replacement parts and equipment
necessary or appropriate for the operation and maintenance of the Cogen
Facility. As a part of such activity, Operator will review and make
recommendations regarding a spare parts inventory and Supply procurement
program, and shall manage the receipt, unloading, handling and storage of all
Supplies, spare parts or other required materials.
(d) Capital Improvements. Operator shall, upon Owner's request
and at Owner's expense, make Capital Improvements to the Cogen Facility, subject
to agreement by the Parties upon the terms and conditions under which Operator
is to make any such Capital Improvement, including time of performance, payment
terms, and the availability of personnel and materials necessary therefor.
(e) Administration of Contracts. Operator on Owner's behalf
shall administer all Cogen Facility Contracts (to the extent associated with the
operations and maintenance of the Cogen Facility), all Financing Documents, and
contracts for Supplies and Capital Improvements. As a part of such activities,
Operator shall prepare all routine notices, reports and certificates and
maintain all records required to be sent or maintained pursuant to any of the
foregoing contracts. Copies of all records and reports shall be retained by
Operator for the periods specified in the Cogen Facility Contracts.
(f) Collection of Payments to Owner. Operator shall collect on
behalf of Owner all payments due Owner with respect to the Cogen Facility
(including all amounts due Owner under the Cogen Facility Contracts), and
account for and remit all such sums to Owner in accordance with subparagraph (g)
of this Section, provided that Owner shall pay all costs and expenses of formal
proceedings instituted to collect such payments;
(g) Administration of Owner Accounts. Operator shall maintain
in the name and for the exclusive benefit of Owner accounts at one or more banks
or other financial institutions designated by Owner, into or through which
Operator shall deposit the funds received by it with respect to the Cogen
Facility (and not any other project or facility managed or operated by
Operator);
(h) Disbursements from Owner's Accounts. Operator shall direct
the application of Owner's funds for payment of all taxes imposed upon or
against Owner or the Cogen Facility and, at the direction of Owner, defend
against any charges and seek revision of or appeal from any assessment or charge
deemed improper by Owner, all such actions to be in the name and at the expense
of Owner;
(i) Payment of Other Owner Expenses. Operator shall direct the
application of Owner's funds for payment of all amounts due from Owner under the
Cogen Facility Contracts and all other expenses properly attributable to Owner
with respect to the Cogen Facility.
(j) Books and Records; Inspections. Operator shall prepare and
maintain all books and records on behalf of Owner, including, without
limitation, records of financial results, operating logs, maintenance reports,
vendor invoices, and accounts and records of inventory and parts usage. Owner
shall have the right, during normal business hours and with twenty-four (24)
hours notice, to inspect all books and records relating to the Cogen Facility,
and to cause an audit thereof at its own expense.
(k) Reports. Operator shall prepare, maintain and file
the regulatory, financial and other reports specified
-------
in Schedule D.
(l) Insurance. Operator shall procure and maintain, at Owner's
expense, all insurance coverages required of Owner under the terms of this
Agreement, the Cogen Facility Contracts, and the Financing Documents.
(m) Waste Handling. Operator, as Owner's agent and at Owner's
expense, shall arrange for the handling and proper preparation for disposal of
all wastes produced by the Cogen Facility, other than such wastes as will be
disposed of under the terms of the Boiler Ash Disposal Agreement (if any),
provided that Owner shall be responsible for selection of the site for disposal
of all Hazardous Substances produced by the Cogen Facility and shall sign all
required manifests and shipping forms as the generator of such wastes.
(n) Sale of Used Equipment. Operator shall, as agent for
Owner, undertake to sell equipment that is no longer used or useful in the
operations of the Cogen Facility and for which a replacement has been obtained.
The terms of any such sale shall be subject to Owner's prior approval.
(o) Cogen Facility Permits. Operator shall assist Owner in
obtaining all Cogen Facility Permits, in each case on or before the dates on
which such Permits are required to be obtained, and thereafter shall use its
commercially reasonable efforts to maintain all such Permits in full force and
effect.
(p) Operating Plan and Budget. Operator shall prepare
the Operating Plan and Budget for each Contract Year in
-------------------------
accordance with Section 6.2.
(q) Additional Services. Subject to the availability of
personnel and other resources, Operator agrees to provide and perform for Owner,
upon request and at Owner's expense, such other and additional Services as Owner
may from time to time request relating to the Cogen Facility. Operator shall
have no obligation to hire additional employees to provide any such additional
services.
4.2 No Obligations. Operator shall not be responsible for any
obligations of Owner, including, without limitation, obligations to make any
payments pursuant to or otherwise comply with any Cogen Facility Contract or any
other agreement to which Owner is or may be a party, nor shall Operator have any
obligations with respect to the decommissioning or costs of decommissioning of
the Cogen Facility, including remediation of the Cogen Facility site and
dismantling and disposal of equipment.
4.3 Curtailment of Cogen Facility Operations.
----------------------------------------
(a) Operator shall have the right to curtail or to shut down
the Cogen Facility if such curtailment or shut down is necessary in order to
protect the Cogen Facility from any potential material damage or in order to
comply with Prudent Plant Operating Standards, Permits, or Applicable Laws,
provided however, that Operator shall not be relieved of its obligations to
Owner if the necessity for curtailing or shutting down the Cogen Facility in
order to comply with the foregoing is the result of Operator's action or
inaction.
(b) The Parties agree that if any Mill Owner reasonably
determines and notifies Operator that a condition exists which may have a
material adverse physical impact on a Mill or any component thereof and which,
in such Mill Owner's sole judgment, requires a change in any of the Energy
Services provided to such Mill Owner by Owner, then Operator shall immediately
suspend or reduce operations in a manner consistent with Prudent Plant Operating
Standards as requested by such Mill Owner upon oral notice or written notice, as
appropriate, to the extent required to eliminate such adverse impact, whether or
not Owner has also received a copy of such notice.
ARTICLE V
RESPONSIBILITIES OF OWNER
5.1 Items to be Furnished by Owner. Owner shall furnish to Operator, at
Owner's expense, the information, services, facilities, materials and other
items described below in this Section 5.1. All such items shall be made
available at such times and in such manner as may be required for the
expeditious and orderly performance of the Services by Operator.
(a) Cogen Facility Contracts. Owner shall deliver to Operator
full and complete copies of the Cogen Facility Contracts and shall promptly
provide all amendments, modifications or revisions of any such agreements, as
well as copies of all notices received by Owner from the other parties thereto.
(b) Cogen Facility Permits. Owner shall, with Operator's
assistance, as provided in Section 4.1(o), obtain and maintain all Cogen
Facility Permits (including renewals or updates thereof) and shall deliver to
Operator copies of all Cogen Facility Permits together with all renewals or
amendments thereof, as well as copies of all notices received by Owner from the
Governmental Authorities issuing or granting such Permits.
(c) Supplies. Owner shall provide, at its expense, all
Supplies necessary for the operation and maintenance of
--------
the Cogen Facility.
(d) Operating Manuals. Owner shall deliver to Operator
operating manuals containing equipment descriptions and
-----------------
equipment operations and maintenance instructions for all equipment necessary
to operate the Cogen Facility.
5.2 Access to and Use of Facilities and Equipment. Owner shall provide
Operator and its agents, employees, Subcontractors and Vendors full access to
and use of the Cogen Facility and all facilities that are a part thereof, and
shall be responsible for providing to Operator at Owner's cost all equipment and
tools necessary for the operation and maintenance of the Cogen Facility and for
the performance of the other Services to be provided by Operator hereunder,
including motor vehicles, office equipment, telephone equipment and such other
equipment and tools as may reasonably be necessary for Operator to provide the
Services under this Agreement. In addition, Owner shall provide Operator and its
agents, employees, Subcontractors and Vendors full access to and use of such
other facilities (including facilities associated with the ▇▇▇▇▇) to which Owner
has obtained rights of access and use, including dining facilities, office
space, parking space, lavatories and locker rooms, infirmary, storage
facilities, and work shops.
5.3 Owner's Representative. On or before the Effective Date, Owner
shall appoint a representative who shall be authorized to act on behalf of
Owner, with whom Operator may consult, and whose instructions, requests and
decisions will be binding on Owner as to all matters pertaining to this
Agreement. All communications, requirements and instructions given to the
Owner's representative shall have the same effect as if given to Owner. In no
case will the decisions of Owner's representative be binding on Operator where,
in the opinion of Operator, any such decision could cause injury or damage to
personnel or equipment.
5.4 Taxes. Owner shall promptly pay all Taxes and any assessments
levied against or in connection with the Cogen Facility or the Cogen Facility
site and all sales and use taxes on items to be provided by Owner hereunder.
ARTICLE VI
EXPENSES AND PAYMENTS
6.1 Payment of Operating Expenses. Owner shall pay, or reimburse
Operator for, all Operating Expenses incurred by or on behalf of Operator in
connection with the performance of the Services under this Agreement. "Operating
Expenses" shall include, among other items, all Labor Costs and all other
expenses incurred or paid by Operator in connection with operating and
maintaining the Cogen Facility and providing the other Services under this
Agreement that have been included in the Operating Plan and Budget, as such plan
may be amended in accordance with this Agreement, and the costs of any
additional Services that may be requested. In addition, Owner shall pay or
reimburse Operator for all legal or other expenses incurred by Operator on
Owner's behalf and at Owner's request that relate to the Cogen Facility,
including, without limitation, costs of enforcing the Cogen Facility Contracts
and other rights of Owner and/or Operator, and costs of complying with all
Applicable Laws.
6.2 Annual Operating Plan and Budget.
--------------------------------
(a) Preparation and Approval. Operator shall prepare and
submit for Owner's approval at least one hundred fifty (150) days in advance of
the beginning of each Contract Year a proposed Operating Plan and Budget for
such Contract Year containing the information required by Schedule C, except
that the Operating Plan and Budget for the first Contract Year shall be
submitted for Owner's approval no later than sixty (60) days after the Effective
Date. No later than sixty (60) days after receipt of the proposed Operating Plan
and Budget, Owner shall notify Operator in writing of Owner's acceptance or
disapproval thereof, and, if Owner disapproves of the proposed Operating Plan
and Budget, or any part thereof, shall state the basis for its objection and
suggest appropriate changes. The Parties shall proceed in good faith to resolve
any objections to the proposed Operating Plan and Budget made by the Owner
before the beginning of the next Contract Year. If the Parties are unable to
resolve any such objections to the proposed Operating Plan and Budget before the
beginning of the next Contract Year, then the interim annual operating budget
("Interim Budget") for such Contract Year shall be equal to the annual operating
budget approved as a part of the Operating Plan and Budget for the preceding
Contract Year, except that (i) the categories 1.1 through 1.5 as they appear on
Schedule C hereto shall be escalated in accordance with the United States
Producer Price Index, and (ii) any expenditures for Services in connection with
Scheduled Outages and Major Maintenance Outages and any increases in costs
attributable to additions to plant personnel approved by Owner shall be
reimbursed in full. Operator shall operate and maintain the Cogen Facility on
the basis set forth in the approved Operating Plan and Budget. If, during any
Contract Year, Operator believes that a significant variance will occur between
the total actual expenses of operating the Cogen Facility and the total expenses
budgeted in the approved annual operating budget, Operator shall promptly notify
Owner of such belief and advise Owner of the necessary revisions to the annual
operating budget and the reasons for these revisions; provided that the
foregoing is not intended to require such revision on a line item basis. The
Parties shall proceed in good faith to revise the Operating Plan and Budget in
such manner for the balance of such Contract Year.
(b) Amendments. In addition to the foregoing, Owner, subject
to obtaining the consent of the Lender if and to the extent required by the
Financing Documents, shall approve changes or amendments to the approved
Operating Plan and Budget in any Contract Year as required to provide for
changes in Cogen Facility operations and payment of, or reimbursement of
Operator for, all increased Operating Expenses in connection with any of the
following:
(i) The execution of new Cogen Facility Contracts or
amendments, modifications or replacements of Cogen
Facility Contracts;
(ii) Any failure of Owner to perform its material
obligations under this Agreement in a timely manner;
(iii) The occurrence or continuation of any event of Force
Majeure or of an event described in Section 4.3; or
(iv) Changes or additions to the Services to be
rendered by Operator pursuant to this
Agreement or any amendment hereof.
6.3 Payments From Imprest Account. Owner shall establish and maintain
an escrowed bank account in a bank approved in advance by Operator (the "Imprest
Account") from which Operator shall have the unrestricted authority to draw
funds for payment of Operating Expenses. Owner shall deposit funds into the
Imprest Account on the first business day of each month during the Term hereof
based on the amounts set forth in the Operating Plan and Budget (or Interim
Budget) then in effect. If funds remain in the Imprest Account at the end of any
month, the amount thereof shall be credited against the amount to be deposited
therein on the first business day of the following month. Once Owner has
deposited funds into the Imprest Account, Owner may not withdraw the funds
without Operator's prior written consent. Within twenty (20) business days
following the end of each calendar month during the Term of this Agreement,
Operator shall submit to Owner as Owner may request from time to time invoices
and other documentation to support the amount of any draws from the Imprest
Account made during the immediately preceding calendar month for payment of
Operating Expenses.
6.4 Payment of Other Operating Expenses. If insufficient funds are
available in the Imprest Account to cover any Operating Expenses, or if Operator
incurs and pays Operating Expenses that are not budgeted, then Owner shall pay
the amount thereof directly to Operator in cash or certified funds within thirty
(30) days of receipt of Operator's invoice for such payment, together with
supporting documentation.
6.5 Payment and Interest on Payment Delays; Disputes Concerning
Payments. Except as otherwise provided herein, Owner shall pay all amounts owing
to Operator under this Agreement within thirty (30) days after the date of
Owner's receipt of an invoice therefor. Any such amounts which are not paid
within such thirty (30) day period shall accrue interest at the Prime Rate on
the date on which payment was due, plus two (2) percentage points. Interest at
the rate defined above shall be computed monthly and prorated daily from the
time such obligation arises. Should Owner dispute any portion of the amount
invoiced, the undisputed portion of such amount shall be paid within the time
stated above, and, at the same time, Owner shall advise Operator in writing of
the disputed portion. Any disputes over payments shall be resolved in accordance
with the procedures set forth in Article XII. The Parties shall continue to
perform under this Agreement during the period in which any such disputes are
being resolved.
6.6 Taxes. The amounts payable to Operator hereunder are exclusive of
any sales, use, service, excise, property, or other federal, state or local tax
levied on the price, delivery or performance of the Operator's obligations under
this Agreement. Owner shall reimburse Operator for all such taxes required to be
paid by Operator (other than income taxes payable on Operator's net income).
ARTICLE VII
LIMITATIONS ON OPERATOR'S LIABILITY
7.1 Limitation of Liability . The aggregate liability of (i) Operator
for any damages to Owner arising from Operator's performance or failure to
perform its obligations under this Agreement and (ii) SEI, Operator, and any
Affiliates of Operator for any damages to Owner or the Bondholders (as defined
in the Development Agreement) arising from SEI's or Operator's (or Operator's
Affiliates') performance or failure to perform their respective obligations
under the Development Agreement or any other agreement contemplated by the
Development Agreement to which SEI, Operator or an Affiliate of Operator, as the
case may be, is or shall become a party shall be limited to nine million dollars
($9,000,000); provided that where under applicable law Owner or the Bondholders
are entitled to recover consequential, indirect or incidental damages for any
such performance or failure to perform by Operator, SEI, or an Affiliate of
Operator, the aggregate liability of SEI, Operator and any Affiliate of Operator
for such consequential, indirect or incidental damages shall be limited to four
million five hundred thousand dollars ($4,500,000). Such limitations shall not
apply to direct damages incurred by Owner or the Bondholders as a result of the
gross negligence or willful misconduct of Operator. In no event shall Operator
be liable for any special or punitive damages.
7.2 Equipment . Owner acknowledges that Operator is not a
manufacturer or vendor of equipment and agrees that Operator shall not be liable
to Owner for any damage, liability, judgment, settlement, penalty, cost, fine or
expense, including without limitation attorneys' fees, court costs and other
expenses of litigation, incurred by or imposed against Owner by reason of or in
connection with any act or omission of any Vendor whether in contract, warranty,
tort (including negligence), strict liability or any other cause or form of
action whatsoever.
7.3 Disclaimer of Warranty. OPERATOR, FOR ITSELF, ALL OF ITS
AFFILIATES AND THE SUCCESSORS AND ASSIGNS OF EACH OF THEM, MAKES NO WARRANTIES
OR GUARANTEES, EXPRESSED OR IMPLIED, WRITTEN OR ORAL, RELATING TO ITS SERVICES,
AND OPERATOR DISCLAIMS ALL IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW
(INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND
ALL WARRANTIES OF COURSE OF DEALING OR USAGE OF TRADE) WHETHER CONCERNING ANY
SERVICES OF, OR ANY EQUIPMENT, MATERIALS, SUPPLIES OR OTHER GOODS INSTALLED,
USED, OPERATED, REPAIRED AND/OR APPROVED BY OPERATOR.
ARTICLE VIII
TERMINATION, DEFAULTS AND REMEDIES
8.1 Termination for Cause. Either Party may terminate this Agreement
upon thirty (30) days written notice to the other Party in the event of a breach
of any material provision of this Agreement by the defaulting Party if the
defaulting Party does not cure such breach within thirty (30) days of the
receipt of written notice thereof; provided, however, that the defaulting Party
shall have such additional period of time as is reasonably necessary to correct
or cure such breach, not to exceed ninety (90) additional days without the
consent of the non-defaulting Party, if the defaulting Party commences and
diligently pursues a cure within such thirty (30) day period, the breach or the
conditions giving rise to it are not reasonably susceptible to correction or
cure within such thirty (30) day period, and the non-defaulting Party is not, as
a result of the continuation thereof, in breach of any material provision of any
other agreement to which it is a party which cannot be cured within the
additional time period provided to the defaulting Party to cure such breach
under this Agreement.
8.2 Additional Rights to Terminate. This Agreement may be terminated
(a) by either Party upon thirty (30) days' written notice in the event of (i) a
Total Casualty, or condemnation of such a substantial portion of the Cogen
Facility or Cogen Facility site that the remainder is not sufficient to permit
the operation of the Cogen Facility on a commercially feasible basis, or (ii)
the existence of an event of Force Majeure substantially preventing performance
hereunder by either Party occurs and continues for more than twelve (12) months;
(b) by Operator upon sixty (60) days prior written notice, in the event that (A)
the Development Agreement is terminated prior to its expiration for any reason
other than an Event of Default (as defined in the Development Agreement) by
Operator or SEI or (B) a Person or Persons unaffiliated with Operator or the
holders of the Senior Debt (as defined in the Development Agreement) becomes or
become, either directly or indirectly, the owner of fifty percent (50%) or more
of any class of voting securities of the owner of the Cogen Facility; or (c) by
Owner upon sixty (60) days prior written notice for any other reason, with or
without cause; provided that Operator shall, at Owner's expense, cooperate with
and assist Owner in the transition to a new operator.
8.3 Payments to Operator Upon Termination. In the event of termination
under this Article VIII, Operator shall be entitled, in addition to any other
rights or remedies available to Operator at law or in equity, to receive
compensation under Article VI for all Services provided hereunder prior to
termination and reimbursement of all Operating Expenses and of all other
reasonable and necessary costs and expenses of demobilization, including,
without limitation, severance costs associated with the Cogen Facility
Employees.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification of Operator. Owner shall indemnify, save harmless
and defend Operator and Operator's Affiliates, and their respective directors,
officers, agents, employees, successors and assigns (each an "Indemnified
Party") from and against any loss directly or indirectly arising out of or
relating to the acts or omissions of Owner or any person employed or engaged by
Owner, or to the Services to be performed by Operator hereunder, but only to the
extent any such loss was not caused by Operator's breach of its obligations
under this Agreement or by such Indemnified Party's gross negligence or willful
misconduct. Owner shall also indemnify, save harmless and defend any Indemnified
Party from and against all fines and clean-up costs levied against such
Indemnified Party or the Cogen Facility as a result of Operator's performance of
waste handling services under Section 4.1(m) hereof, except to the extent that
any such fines and clean-up costs are the result of Operator's gross negligence
or willful misconduct.
9.2 Survival. The duty of Owner to indemnify under this Article IX will
continue in full force and effect, notwithstanding the expiration or termination
of this Agreement, with respect to any claim or action based on acts or
conditions which occurred prior to such termination.
9.3 Notice and Legal Defense. Promptly after receipt by any Indemnified
Party of any claim or notice of the commencement of any action, administrative
or legal proceeding, or investigation as to which the indemnity provided may
apply, such Indemnified Party shall notify Owner in writing of such fact. Owner
shall have the option to assume the defense of any such action, proceeding or
investigation on behalf of such Indemnified Party, which, if exercised, it will
conduct with due diligence and in good faith with counsel reasonably
satisfactory to the Indemnified Party; provided that if the defendants in any
such action include the Owner and the Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it which are different
from or additional to, or inconsistent with, those available to Owner, the
Indemnified Party shall have the right to select separate counsel to participate
in the defense of such action on its own behalf at the Owner's expense.
9.4 Failure to Defend Action. If any claim, action, proceeding or
investigation arises as to which the indemnity provided for in Section 9.1
hereof may apply, and the Owner fails to assume the defense of such claim,
action, proceeding or investigation, then the Indemnified Party may at the
Owner's expense contest (or, with the prior written consent of the Owner,
settle) such claim.
ARTICLE X
INSURANCE
10.1 Obligation to Obtain. The Parties each agree to obtain and
maintain insurance of the types, in the amounts, and otherwise in accordance
with the provisions of this Article X. The Parties agree to coordinate their
insurance acquisition efforts with respect to the Cogen Facility, the Services
to be provided and the requirements of any Lender under any Financing Documents
to avoid duplication of coverage, minimize premiums and ensure that the amounts
payable under the policies required hereunder are not reduced by the existence
of additional policies not required hereunder. The Parties further agree to
provide all information required by any of the Parties in carrying out the
requirements of this Article X, including copies of all Cogen Facility Contracts
and documents which relate to the purchase and maintenance of insurance coverage
on the Cogen Facility and/or of Owner and Operator. All insurance policies shall
also contain any other provisions necessary to comply with the requirements of
the Cogen Facility Contracts and with any other written requirements of the
Owner. In the event that either Owner or Operator cannot obtain and maintain
insurance of the types, and in the amounts, required under this Article X on
commercially reasonable terms, then Owner and Operator shall, in good faith,
attempt to reach agreement as to different types and amounts of coverages and/or
allocation of risk, which may include self-insurance by either Party.
10.2 Coverage Which Must be Purchased by the Operator. Subject to the
foregoing, Operator shall obtain prior to commercial operation of the Cogen
Facility the following insurance, and shall name the Owner as named insured
under the policies specified in paragraphs (b), (c) and (d) of this Section
10.2. All premiums and other expenses associated with such insurance shall be
Operating Expenses. In addition, Owner shall reimburse Operator for all payments
made by Operator under such policies within the deductible limits thereof,
except to be extent that any such payment is required as a result of Operator's
gross negligence or willful misconduct.
(a) Workers' Compensation Insurance. Workers' Compensation
insurance, in accordance with Alabama law, on all persons employed by
Operator in conjunction with its performance of the duties under this
Agreement with statutorily required limits, including "All States"
Endorsement; and Employer's Liability insurance with limits of not less
than $1,000,000.00 each person for injury by accident and $1,000,000.00
each person and aggregate for injury by disease. In lieu of purchasing
and maintaining the foregoing Workers' Compensation policy coverages,
Operator may qualify as a self-insurer under applicable Alabama law.
(b) Automobile Liability Insurance. Automobile liability
insurance, including but not limited to, coverage for owned, non-owned
and hired automobiles with limits of not less than $5,000,000.00 per
occurrence and containing no-fault insurance provisions as required
under Alabama law, covering automobiles used by the Operator or its
agents in connection with Cogen Facility operations.
(c) Comprehensive General Liability Insurance. Comprehensive
general liability insurance policy covering personal injury and
property damage to third parties. The coverage referred to herein shall
be provided either in a single policy or through a combination of
policies. Such policy or policies may have personal injury deductible
and property damage deductibles of not more than $1,000,000.00 per
event or occurrence and shall have a limit of not less than
$2,000,000.00 per occurrence, or such greater deductibles as may be
agreed to by the Owner. Comprehensive general liability insurance
policies shall contain a Broad Form Property Damage Endorsement and
shall also insure contractual liability for all written, oral and
implied contracts, including this Agreement.
(d) Umbrella Liability Insurance. Umbrella liability
insurance increasing the limits and coverages of that
----------------------------
insurance required in paragraphs (b) and (c) hereof with a limit of
not less than $10,000,000.00 per event or occurrence.
10.3 Coverage Which Must be Purchased by the Owner. Subject to the
foregoing Sections 10.1 and 10.2, Owner shall obtain and maintain at its
expense, as of the dates set forth below, the following insurance, and shall
name the Operator as an additional insured under the policies specified in
paragraphs (b) and (c), below. Owner shall bear responsibility for all
deductibles under Section 10.3.
(a) Workers' Compensation Insurance. Workers' Compensation
insurance, if required, in accordance with Alabama law, on all persons
employed by Owner in conjunction with its performance of its duties
under this Agreement with statutorily required limits, including "All
States" endorsement, and Employers' Liability insurance with limits of
not less than $1,000,000.00 each person for injury by accident, and
$1,000,000.00 each person and aggregate for injury by disease. In lieu
of purchasing and maintaining the foregoing Workers' Compensation
policy coverages, Owner may qualify as a self-insurer under applicable
Alabama law.
(b) Automobile Liability Insurance. Automobile Liability
Insurance, if required, including but not limited to, coverage for
owned, non-owned and hired automobiles with limits of not less than
$1,000,000 per occurrence and containing no-fault insurance provisions
as required under Alabama law, covering automobiles used by the Owner
or its agents in connection with Cogen Facility operations.
(c) All Risk Physical Damage/Business Interruption Insurance.
"All-Risk" physical damage insurance, including coverage for the perils
of earthquake and flood with limits in a minimum aggregate amount of
the greater of (i) $200,000,000 (combined Property Damage and Business
Interruption), or (ii) the aggregate amount of outstanding indebtedness
of Mobile Energy under the Financing Documents. Earthquake, windstorm,
and flood perils may be insured for sub-limits lower than the limit
required for other "All-Risk" perils, if full replacement cost limits
for these perils are not available or cannot be purchased on a
commercially reasonable basis, but in no case shall flood, windstorm,
and earthquake perils be insured for limits of less than $5,000,000.00
per event or occurrence. Deductibles for "All-Risk" perils shall not be
in excess of $500,000.00 per event or occurrence. Deductibles for
earthquake and flood perils shall not be in excess of five (5) percent
of the total insured values of the Cogen Facility per event or
occurrence. Such limitations shall only be exceeded with the prior
written consent of the other Party to this Agreement. In conjunction
with such physical damage insurance, Owner shall also purchase business
interruption insurance covering Owner's net income and continuing fixed
operating expenses in the case of a loss with an indemnity period of no
less than twelve (12) months and a deductible no greater than sixty
(60) days. All insurance amounts, deductibles, terms and conditions are
subject to their availability at commercially reasonable terms.
10.4 Form and Content. All insurance policies with respect to coverage
maintained by either Operator or Owner pursuant to this Article X shall:
(a) Be placed with insurance companies authorized to do
business in the State of Alabama with a rating of "A" or better (and a
minimum size rating of IX by Best's Insurance Guide and Key Ratings (or
an equivalent rating by another nationally recognized insurance rating
agency of similar standing if Best's Insurance Guide and Key Ratings
shall no longer be published) or other insurance companies of
recognized responsibility satisfactory to the Owner's Lenders.
(b) State that it is primary, or excess only with respect to
the specified primary policy provided by the same Party for such
coverage, and not excess or contributing with respect to any other
insurance (or self-insurance available to Owner, Operator or other
named insured) and that all provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a separate
policy covering each named insured under each such policy.
(c) Provide that there will be no recourse against the named
insured (other than the Party obtaining such policy) for the payment of
premiums, additional premiums or assessments, it being understood that
these are obligations of the Party providing such insurance pursuant to
this Agreement.
(d) With respect to the insurance described in this Article X,
where appropriate, waive any right of subrogation of the insurers
thereunder against Owner, Operator, or the Lenders under any Financing
Documents and the officers, directors and employees of each of them,
and any right of the insurers to any set-off or counterclaim or any
other deduction, whether by attachment or otherwise, in respect of any
liability of any such person insured under such policy.
(e) Provide that it may not be canceled, non-renewed or
materially changed without giving Owner, Operator, other named or
additional insureds, and the Lenders under any Financing Documents
sixty (60) days prior written notification thereof.
10.5 Certificates, Proof of Loss. On or before the required date for
the insurance to be provided hereunder, each Party shall furnish certificates of
insurance to the other Party evidencing the insurance required of such Party
pursuant to this Agreement. The Party maintaining each insurance hereunder shall
make all proofs of loss under each such policy and shall take all other action
reasonably required to ensure collection from insurers for any loss under each
such policy.
10.6 No Limitation on Liability. The provision of any insurance
hereunder shall not be construed to limit or expand the
--------------------------
liability of either Party hereto under this Agreement.
ARTICLE XI
THIRD PARTIES
11.1 Engagement of Third Parties. Except as otherwise provided herein,
Operator may engage such persons, corporations or other entities, including
Affiliates of Operator, as it deems advisable for the purpose of performing or
carrying out any of the obligations of Operator under this Agreement, provided
that Operator shall remain responsible for all obligations under this Agreement,
and further provided that Operator shall not subcontract all or substantially
all of its obligations under this Agreement without the prior written consent of
Owner and Lender, which consent shall not be unreasonably withheld or delayed.
11.2 Assignment of Rights or Obligations.
-----------------------------------
(a) Except as provided in this Section 11.2, neither Party
shall assign all or any of the rights or obligations under this Agreement
without the prior written consent of the other Party, and any assignment in
violation of this Section 11.2 shall be null and void.
(b) Notwithstanding the foregoing, (a) Operator shall have the
right to assign its interest under this Agreement to an Affiliate and to
subcontract certain of its obligations to third parties (whether Affiliates or
otherwise), provided that no such assignment or subcontract shall relieve
Operator of its obligations hereunder; and (b) subject to the consent of KCTC
and Sappi, if any such consent is required under the Master Operating Agreement
or any agreement between MESC and KCTC or Sappi for the sale of energy services,
Operator shall have the right to assign its rights and delegate its obligations
hereunder (and, upon such assignment and delegation, Operator shall be released
by Owner for any obligations hereunder arising thereafter) to another Person (i)
approved by Owner, which approval shall not be unreasonably withheld, or (ii)
having recognized experience and capability in operating power generation
facilities similar to, or of greater size and complexity than, the Cogen
Facility, in accordance with Prudent Plant Operating Standards.
(c) Owner may assign its rights and interest under this
Agreement (i) to its Lenders and (ii) to the Lenders to any direct or indirect
wholly-owned subsidiary of Owner that incurs debt to finance the Cogen Facility,
as collateral security for the obligations of Owner and such subsidiary to their
respective Lenders; provided, however, that, except to the extent provided in
the immediately succeeding sentence, any such assignment shall not, in any way,
limit, modify or otherwise affect the rights or remedies of Operator hereunder
against Owner or otherwise, including any rights of termination hereunder. In
connection with any such collateral assignment, Operator shall enter into a
consent and agreement with such Lenders on terms as may be customary under the
circumstances and as shall be reasonably required by such Lenders. The terms
"Lenders" shall mean providers of debt financing, owners of debt instruments,
and their respective successors and assigns, including transferees of debt
instruments, and any trustee, collateral agent or other fiduciary or nominee
acting on behalf of any of the foregoing Persons.
ARTICLE XII
DISPUTES
12.1 Good Faith Resolution. The Parties agree to make a diligent, good
faith attempt to resolve all disputes. If the representatives of the Parties are
unable to resolve a dispute within fifteen (15) days after notice from one Party
to the other, such dispute shall be submitted promptly to the chief executive
officers of the Parties, who shall meet, in person or by telephone, not later
than fourteen (14) days after the date such dispute was submitted to them. In
the event that the officers cannot resolve the dispute within sixty (60) days
after the matter is submitted to them, then, unless otherwise agreed, such
dispute shall be submitted to arbitration.
12.2 Arbitration Notice. If a Party elects to submit a dispute to
arbitration, such Party shall serve an arbitration notice on the other Party.
The arbitration notice shall contain a detailed description of the dispute,
including the amount involved, the position of the Party serving the notice, the
remedy sought and the name of one (1) independent arbitrator. Within twenty (20)
days after receipt of an arbitration notice, the receiving Party shall send a
notice to the other Party containing a detailed response to the claim giving the
position of the Party and the remedy sought, and an acceptance of the arbitrator
designated in the arbitration notice or a designation of a second arbitrator.
12.3 Selection of Arbitrators. If the Parties agree to a single
arbitrator, the arbitration shall be decided by such arbitrator. If the Parties
each designate an arbitrator, the arbitrators designated by the Parties shall
designate a third arbitrator within ten (10) days after the date of the notice
in response to the arbitration notice, and the arbitration shall be decided by
the three arbitrators. In the event the two arbitrators cannot or do not select
a third independent arbitrator within ten (10) days of such second notice,
either Party may apply to the American Arbitration Association for the purpose
of appointing any person listed with the American Arbitration Association as the
third independent arbitrator.
12.4 Procedure. A hearing shall be held by the arbitrator(s) within
sixty (60) days following designation of the arbitrator(s) and a resolution of
the matter submitted shall be rendered within thirty (30) days after the
hearing. The arbitration shall be conducted pursuant to the Commercial
Arbitration Rules of the American Arbitration Association or such other
additional procedures agreed to by the Parties; provided, however, that the
Parties shall have the right to engage in reasonable discovery of documents
involved in the dispute. All arbitration hearings shall be held in Atlanta,
Georgia. Nothing contained herein shall limit the right of either Party,
conferred elsewhere in this Agreement, to obtain documents from the other Party.
12.5 Binding Nature. The arbitration shall be final and binding on the
Parties and not subject to any appeal. The costs of arbitration and all expenses
related thereto, including, without limitation, each Party's attorneys' fees,
shall be borne and paid by the nonprevailing Party; provided that if a Party is
nonprevailing only in part, such Party shall bear the expenses in proportion to
the extent to which it is nonprevailing.
12.6 Enforceability. The foregoing agreement to arbitrate shall be
specifically enforceable, the award rendered by the arbitrator(s) shall be final
and judgment may be entered upon it in accordance with applicable law in any
court having jurisdiction thereof.
ARTICLE XIII
GENERAL PROVISIONS
13.1 Notices. Any notice required or permitted under this Agreement
shall be in writing (including by facsimile transmission) and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made (a)
in the case of delivery by hand or by nationally recognized overnight courier,
when delivered, or (b) in the case of delivery by facsimile transmission, when
sent and receipt has been confirmed, addressed to the Party's address shown
below or to such other address as a Party may designate by prior written notice
given in accordance with this provisions to the other Party:
If to Operator:
Southern Energy Resources, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax:
If to Owner:
Mobile Energy Services Company, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
13.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Georgia.
-------------
13.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.4 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective successors and
permitted assigns.
13.5 Waiver. The waiver of any breach of any term or condition of this
Agreement shall not be deemed a waiver of any other or subsequent breach,
whether of like or different nature.
13.6 Not for the Benefit of Third Parties. This Agreement and each and
every provision thereof is for the exclusive benefit of the Parties hereto and
not for the benefit of any other third party.
13.7 Attorneys' Fees. Notwithstanding any other provision of this
Agreement, if any action or proceeding is brought by either Party to remedy a
breach of this Agreement or to enforce any of its provisions, the prevailing
Party shall be entitled, in addition to any other relief granted in such action
or proceeding, to receive reasonable attorneys' fees, disbursements and court
costs.
13.8 Confidential Information. With respect to any information
that may be obtained by either Party hereto in connection
------------------------
with this Agreement, the Parties shall comply with all of the terms and
provisions of the Confidentiality Agreement.
13.9 Force Majeure. If either Party is rendered wholly or partially
unable to perform or is delayed in performing its obligations under this
Agreement because of the occurrence and existence of an event of Force Majeure,
that Party will be excused from whatever performance is affected by such event
of Force Majeure to the extent and for the time so affected, except that Owner
shall not be excused from its obligations to make timely payments hereunder;
provided that:
(a) The non-performing Party gives the other Party notice
describing the particulars of the occurrence within
seventy-two (72) hours thereafter, including an estimate of
its expected duration and probable impact on the performance
of such Party's obligations hereunder, and continues to
furnish timely regular reports with respect thereto during the
continuation of the event of Force Majeure; provided that if
such notice is not given within seventy-two (72) hours, then
the non-performing Party's obligations shall be suspended only
from the giving of such notice;
(b) The suspension or delay of performance shall be of no greater
scope and of no longer duration than is reasonably
required by the event of Force Majeure;
(c) No liability of either Party which arose before the occurrence
of the event of Force Majeure causing the suspension or delay
of performance shall be excused as a result of the occurrence;
(d) The non-performing Party shall mitigate or limit damages to
the other Party;
(e) The non-performing Party shall use its commercially reasonable
efforts to continue to perform such of its obligations
hereunder as are not affected by the event of Force Majeure
and to correct or cure the event or condition giving rise to
the event of Force Majeure; and
(f) When the non-performing Party is able to resume performance of
its obligations under this Agreement, that Party shall give
the other Party written notice to that effect and shall
promptly resume performance hereunder.
13.10 Severability . Should any Article or Section or any part of any
Section hereof for any reason be declared invalid or unenforceable by final and
unappealable order of any court of competent jurisdiction, the remaining
portions of this Agreement shall remain in full force and effect, and the
Parties hereto shall immediately renegotiate in good faith the Article or
Section or part of any Section declared invalid or unenforceable so as to
eliminate such invalidity or unenforceability.
13.11 Owner's and Operator's Obligations Non-recourse. The Parties
acknowledge that the Owner and Operator each has entered into this Agreement
entirely on its own behalf, and in no manner on behalf of its Affiliates, and
that neither Owner nor Operator shall have any recourse against any of the
other's Affiliates, partners, joint venturers, officers, directors, successors
or assigns for any reason whatsoever in connection with this Agreement.
13.12 Interpretation. This Agreement sets forth the full and complete
agreement of the Parties relating to the subject matter hereof and supersedes
all prior agreements and representations. The Article and Section headings have
been provided for convenience of reference only and shall not affect the meaning
or construction of any provision of this Agreement. In the event of any conflict
or inconsistency between any provision contained in the Articles of this
Agreement and any Schedule hereto, the provision contained in the Articles shall
govern. This Agreement was negotiated by the Parties with the benefit of legal
representation and any rule of construction or interpretation requiring this
Agreement to be construed or interpreted in any respect against any Party shall
not apply to any construction or interpretation hereof.
13.13 Relationship of the Parties. Nothing in this Agreement shall be
deemed to constitute either party hereto a partner, agent (except as
specifically provided in subparagraphs (m) and (n) of Section 4.1 hereof) or
legal representative of the other party, or to create a fiduciary relationship
between the parties. Operator is and shall remain an independent contractor in
the performance of this Agreement, maintaining complete control of its
personnel, workers, subcontractors and operations required for performance of
its obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized representatives as
of the day and year first above written.
SOUTHERN ENERGY RESOURCES, INC.
By:
-----------------------------------------------------------
Name:
Title:
MOBILE ENERGY SERVICES COMPANY, L.L.C.
By:
-----------------------------------------------------------
Name:
Title:
SCHEDULE A
DESCRIPTION OF COGEN FACILITY
The Cogen Project will consist of the addition of a new combustion
turbine-generator (CTG) and heat recovery steam generator (HRSG) system to the
existing power complex for the purpose of supplementing the production of
process steam and the generation of electrical power.
The new CTG/HRSG addition will produce approximately 600,000 MMBTU/hour steam
for the 1325-psig header and the 50-psig header. Electrical power will be
produced primarily for sale at wholesale. The new CT will be a General Electric
Model 7241 (7FA) combustion turbine with a nominal rating of 170 MW (gross). The
new heat recovery steam generator will be a two pressure level design with a
supplemental burner.
SCHEDULE B
COGEN FACILITY PERMITS
The Cogen Facility Permits are to be identified by the Operator after the
Effective Date.
SCHEDULE C
OUTLINE OF OPERATING PLAN AND BUDGET
1.0 Operations & Maintenance Budget
1.1 Station Labor Expenses
1.2 Routine Maintenance Expenses Other Than Station Labor
1.3 Equipment Expenses Other Than Station Labor
1.4 Operating Expenses Other Than Station Labor
1.5 Administrative Expenses Other Than Station Labor
1.6 Insurance Expenses
1.7 Inventory Levels and Expenses
1.8 Annual Scheduled Outage Expenses Other Than Station
Labor
1.9 Major Maintenance Outage Expenses Other Than Station
Labor and Escrow Account Analysis
(3 year projection)
1.10 Capital Expenses (3 year projection)
2.0 Schedule Outage Work Plan
3.0 Staffing Plan
4.0 Projected Liquor Processing Services, Steam Processing
Services, and Power Processing Services
5.0 Projected Fuel Consumption
6.0 Projected Waste Products To Be Generated
7.0 Other Non-Operations and Maintenance Expenses
The Form of Annual Budget will be developed after the Effective Date
SCHEDULE D
REPORTING REQUIREMENTS
Plant Performance Report, which will be prepared monthly and will include data
about plant current performance against the plan goals as well as significant
operating events.
Maintenance Reports, which will be prepared for each Scheduled Outage and Major
Maintenance Outage and will include all equipment inspection and maintenance
performed during the outage. They will have as attachments, reports prepared by
outside contractors engaged for the outage.
Unit Trip Reports, which will be prepared for each Unscheduled Outage and
include explanations of the reason for the trip and corrective actions taken to
repair equipment as well as any actions taken to prevent a similar trip.
Completed Work Orders, which will be kept on site and include details of the
reason for the generation of the work order and the actions taken to correct the
source of the work order.
Administration Report, reporting accounting, human resource, and warehousing
activities.
Reports and data required to be prepared, maintained, and filed under terms of
Cogen Facility Permits.
Exhibit I
$3,311,408.00 is owed to MESH pursuant to the Tax Allocation Agreement
($1,749,144.00 is the estimated amount of income tax paid or to be paid by
Southern based on the taxable income of MESH)
Pursuant to the Mill Owner Maintenance Reserve Account Agreement, dated as of
August 1, 1995 (the "MOMRA Agreement"), by and among Mobile Energy Services
Company, LLC, The Southern Company, ▇▇▇▇▇ Paper Company (both in its capacity as
the owner of the Pulp Mill and as the owner of the Tissue Mill) and S.D. ▇▇▇▇▇▇
Company, Southern agreed to make deposits, in an amount not to exceed $2,000,000
in the aggregate, into a Mill Owner Maintenance Reserve Account, upon the
receipt of notice from the Mill Owners. Amounts on deposit in the Mill Owner
Maintenance Reserve Account are disbursed at the instructions of the Mill Owners
and are to be applied to the certain expenses of MESC. Please note that,
notwithstanding the inclusion of this disclosure with respect to the MOMRA
Agreement, SEI and SERI do not consider Southern's obligations under the MOMRA
Agreement to be a guaranty "provided to MESC."