EXHIBIT 10.8
OPERATING AGREEMENT
BETWEEN
SYRACUSE UNIVERSITY
(OWNER)
and
PROJECT ORANGE ASSOCIATES, L.P.
(OPERATOR)
Dated: February 27, 1990
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS................................................................................2
Section 1.01 Definition of Terms.............................................................2
ARTICLE 2 EXISTING PLANT.............................................................................3
Section 2.01 Existing Plant..................................................................3
Section 2.02 Right to Operate................................................................3
Section 2.03 ................................................................................7
ARTICLE 3 TERM ................................................................................7
Section 3.01 ................................................................................7
Section 3.02 ................................................................................8
ARTICLE 4 USE OF EXISTING PLANT......................................................................10
Section 4.01 ................................................................................10
ARTICLE 5 USER CHARGE................................................................................10
Section 5.01 ................................................................................10
Section 5.02 ................................................................................12
Section 5.03 ................................................................................12
ARTICLE 6 OPERATION OF EXISTING PLANT................................................................16
Section 6.01 Operation by Operator...........................................................16
Section 6.02 Operating Agreements............................................................19
Section 6.03 Owner Training..................................................................19
ARTICLE 7 REPAIRS, MAINTENANCE AND ALTERATIONS.......................................................20
Section 7.01 Repairs and Maintenance.........................................................20
Section 7.02 Testing and Reports.............................................................29
Section 7.03 Alterations, Improvements and Additions.........................................30
ARTICLE 8 UTILITY EXPENSES...........................................................................31
Section 8.01 Utilities.......................................................................31
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ARTICLE 9 NET AGREEMENT..............................................................................31
Section 9.01 Net Agreement...................................................................31
Section 9.02 User Charge Not to ▇▇▇▇▇........................................................31
Section 9.03 Compliance with Environmental and Safety Laws
Laws........................................................................32
Section 9.04 Licensing Requirements..........................................................35
ARTICLE 10 REQUIREMENTS OF PUBLIC AUTHORITY...........................................................36
Section 10.01 Compliance by Operator..........................................................36
Section 10.02 Challenge to Validity...........................................................38
ARTICLE 11 COVENANT AGAINST LIENS.....................................................................38
Section 11.01 Operator's Obligations to Discharge.............................................38
Section 11.02 Right to Discharge..............................................................39
Section 11.03 No Implied Consent of Owner.....................................................40
ARTICLE 12 ACCESS TO EXISTING PLANT BY OWNER..........................................................40
Section 12.01 ................................................................................40
Section 12.02 ................................................................................41
ARTICLE 13 SURRENDER..................................................................................41
Section 13.01 Surrender of Operation..........................................................41
Section 13.02 ................................................................................42
Section 13.03 ................................................................................43
ARTICLE 14 INDEMNITY..................................................................................43
Section 14.01 Operator's Indemnification of Owner.............................................43
Section 14.02 Owner's Indemnification of Operator.............................................44
Section 14.03 Limitation of Owner's Indemnity.................................................45
Section 14.04 ................................................................................45
ARTICLE 15 INSURANCE..................................................................................46
Section 15.01 Casualty Insurance..............................................................46
Section 15.02 Other Insurance.................................................................46
Section 15.03 Evidence of Insurance and Possession of Policy..................................48
Section 15.04 Limitations Upon Concurrent Insurance...........................................49
Section 15.05 Disbursement of Proceeds........................................................49
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Section 15.06 Notice of Cancellation..........................................................49
Section 15.07 Apportionment of Premiums Upon Expiration of Terms..............................50
ARTICLE 16 EMINENT DOMAIN.............................................................................50
Section 16.01 Termination of Agreement........................................................50
Section 16.02 Distribution of Condemnation Proceeds...........................................51
Section 16.03 Partial Taking..................................................................52
ARTICLE 17 RIGHTS OF EACH PARTY TO PERFORM COVENANTS
OF THE OTHER...............................................................................52
Section 17.01 ................................................................................52
Section 17.02 ................................................................................52
Section 17.03 ................................................................................53
ARTICLE 18 DAMAGE OR DESTRIBUTION.....................................................................53
Section 18.01 ................................................................................53
ARTICLE 19 LATE CHARGES...............................................................................57
Section 19.01 Past Due User Charges...........................................................57
ARTICLE 20 DEFAULT....................................................................................57
Section 20.01 Events of Default...............................................................57
Section 20.02 Remedies on Default.............................................................60
Section 20.03 ................................................................................65
Section 20.04 ................................................................................65
Section 20.05 ................................................................................65
Section 20.06 ................................................................................65
Section 20.07 ................................................................................66
ARTICLE 21 WAIVERS....................................................................................66
Section 21.01 Waivers.........................................................................66
ARTICLE 22 REPRESENTATIONS............................................................................67
Section 22.01 ................................................................................67
ARTICLE 23 FORCE MAJEURE..............................................................................67
Section 23.01 ................................................................................67
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ARTICLE 24 NOTICE ................................................................................68
Section 24.01 ................................................................................68
ARTICLE 25 GOVERNING LAW..............................................................................70
Section 25.01 ................................................................................70
ARTICLE 26 PARTIAL INVALIDITY.........................................................................70
Section 26.01 ................................................................................70
ARTICLE 27 INTERPRETATION.............................................................................71
Section 27.01 ................................................................................71
ARTICLE 28 BINDING EFFECT.............................................................................71
Section 28.01 ................................................................................71
ARTICLE 29 NO ORAL MODIFICATION - ENTIRE AGREEMENT....................................................71
Section 29.01 ................................................................................71
ARTICLE 30 HEADINGS AND TABLE OF CONTENTS.............................................................72
Section 30.01 ................................................................................72
Section 30.02 ................................................................................72
ARTICLE 31 WAIVER OF JURY TRIAL AND COUNTERCLAIMS.....................................................73
Section 31.01 ................................................................................73
ARTICLE 32 MEMORANDUM OF AGREEMENT....................................................................73
Section 32.01 ................................................................................73
ARTICLE 33 TERMINATION................................................................................73
Section 33.01 ................................................................................73
Section 33.02 ................................................................................73
Exhibits
--------
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Exhibit A Map of Existing Plant
Exhibit B Supplemental Agreement
Exhibit C Existing Plant Operating Requirements
Exhibit D Schedule of Repair and Maintenance
Exhibit E Minimum Standards for Replacement Package Boilers
Exhibit F Guaranty of Approved Operator
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OPERATING AGREEMENT
THIS AGREEMENT (the "Agreement") made on February 27, 1990, between
SYRACUSE UNIVERSITY, a New York educational corporation having its principal
office at ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Owner") and PROJECT ORANGE ASSOCIATES,
L.P., a Delaware limited partnership (the "Operator").
RECITALS
--------
1. Owner has entered into an agreement with Operator dated on the
date of this Agreement (the "Steam Contract") for the purchase of steam to be
produced by Operator from a cogeneration facility (the "Cogeneration Plant") to
be constructed and operated by Operator upon certain land owned by Owner and
leased to Operator pursuant to a Lease Agreement dated on the date of this
Agreement (the "Lease").
2. Pursuant to the Steam Contract, Operator has also undertaken to
install and operate certain steam, water, condensate, fuel, gas and electric
lines and related apparatus and equipment necessary or appropriate for the
operation of the Cogeneration Plant and delivery of steam to Owner which,
together with the Cogeneration Plant, constitute the "Facility."
3. Pursuant to the Steam Contract, Owner will purchase, on its own
behalf and on behalf of certain other institutional users located near the
premises of the Owner who from time to time share steam costs with the Owner
(the "Ancillary Customers"), its and the Ancillary Customers' requirements for
steam from the Operator.
4. A standby steam generating facility is necessary to provide an
alternate or supplemental source of steam to meet the steam requirements of
Owner and its Ancillary Customers.
5. The Operator desires to use and operate the Owner's existing steam
generation facility (as hereinafter more specifically described, the "Existing
Plant") or an
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Auxiliary System (as hereinafter more specifically described) which operator may
install in the Existing Plant, to provide the required alternate or supplemental
source of steam.
6. The Owner and a predecessor of the Operator have previously
entered into a certain Operating Agreement, dated as of December 28, 1987,
pertaining to the subject matter of this Agreement ("the Prior Agreement"). This
Agreement is intended to supersede the Prior Agreement which has been terminated
by contemporaneous separate agreement between the Owner and such predecessor.
NOW, THEREFORE, the parties agree as follows.
ARTICLE 1
DEFINITIONS
Section 1.01. Definition of Terms. For purposes of this Agreement,
all defined terms, as indicated by the capitalization of the first letter of
such term, shall have the meanings specified in the Steam Contract, unless the
context or use clearly indicates another meaning.
ARTICLE 2
EXISTING PLANT
Section 2.01. Existing Plant. The Owner's Existing Plant is a steam
generation facility which consists principally of 4 gas fired and oil fired
steam boilers and related apparatus, equipment and structures, which include the
Alco Plant, the ▇▇▇▇▇ Plant and the gas house, and the underground oil storage
tanks, and provides the steam requirements of the Customer and its Ancillary
Customers, and the land on which it is located at ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ in the
City of Syracuse, New York, as shown on the map attached as Exhibit A.
Section 2.02. Right to Operate. Owner grants to Operator, upon and
subject to the terms, covenants, conditions and provisions of this Agreement,
the right to operate and use
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the Existing Plant. No leasehold possessory rights to the Existing Plant are
granted to the Operator by this Agreement; however, Owner shall at all times
throughout the term provide to Operator and its permitted assigns full access to
the Existing Plant sufficient so that Operator may satisfy its obligations
hereunder. Owner reserves the right to the exclusive use of (i) the office on
the second floor of the ▇▇▇▇▇ Plant for Owner's distribution system supervisory
and clerical employees, (ii) the office of the Owner's distribution system
supervisor on the second floor of the Alco Plant, and (iii) the locker, restroom
and shower facilities adjacent to the office described in (i) and those located
in the Alco Plant for Owner's distribution system hourly workers.
Owner reserves the right to the exclusive use of the electrical shop
on the first floor of the Alco Plant, to the exclusive use of a suitable space
on the first floor of the Alco Plant for Owner's welding operations, and to the
use of the elevator and hoist in the Alco Plant, provided such use shall not
unreasonably interfere with Operator's use of the Existing Plant.
Owner also reserves the right to the use of the Alco Plant for the
storage of equipment, parts, inventory and supplies used by Owner in its steam
distribution system, including, without limitation, the right to the storage of
fittings, blowers, pumps, valves and similar equipment and boiler and pipe
insulation on the first, second, and third floors of the Alco Plant, provided
such use shall not unreasonably interfere with Operator's use of the Existing
Plant.
Owner also reserves the right to use, in common with Operator, and
access at all times to, the electrical circuit breakers and switchgear and
related electrical apparatus and lines located in the Alco Plant and in the
▇▇▇▇▇ Plant ("the electrical service"), to the extent necessary for Owner's
operation of its chilled water plant. Operator shall not interrupt the
electrical service to the chilled water plant without the approval of Owner and
Owner shall not interrupt the electrical service to the Alco Plant or the ▇▇▇▇▇
Plant without the approval of Operator. Neither party shall modify the
electrical service without the approval of the other, which approval shall not
be unreasonably withheld.
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Owner reserves the right of access upon, over, across and under the
land constituting the Existing Plant (i) for the entry and passage of
pedestrians, vehicles and machines to and from the Existing Plant and Owner's
chilled water plant and transformer building located adjacent to the premises
leased by Owner to Operator pursuant to the Lease Agreement, (ii) for the
installation, repair, replacement and maintenance of lines for the transmission
of electrical power, communications, water, steam, condensate, fuel and other
utilities, consisting of overhead or underground poles, lines, conduits, pipes,
mains, ducts, manholes, and other appurtenant and supporting facilities,
apparatus and structures as Owner may now or from time to time deem necessary
for the operation of the chilled water plant and (iii) for the parking of five
vehicles in the area designated for parking on Exhibit A, provided that the use
described in clauses (i) and (ii) shall not unreasonably interfere with
Operator's use of the Existing Plant.
Owner shall install, at its cost and expense, (i) a new submeter, to
replace the existing submeter, in its chilled water plant to determine the
amount of electricity used by Owner in the operation of the chilled water plant
and (ii) a submeter in the Alco Plant to determine the amount of electricity
used by Owner in the operation of the equipment in its electrical shop and
welding shop (collectively "the submeters"). Owner daily shall read the
submeters and record the readings. Operator shall have access to the submeters
at reasonable hours upon advance notice to Owner for the purposes of reading and
testing the submeters.
Operator shall provide Owner with a copy of each electricity ▇▇▇▇
received by Operator from Niagara Mohawk Power Corporation for electricity used
in the Existing Plant and the chilled water plant (the "electricity ▇▇▇▇")
within ten (10) days of its receipt by Operator. Within fifteen (15) days after
Owner's receipt of the electricity ▇▇▇▇ from Operator, Owner shall reimburse
Operator for the cost (the "Owner's cost") of the electricity used by Owner in
the operation of its chilled water plant and in the operation of the equipment
used in its electrical shop and welding shop (collectively "Owner's electricity
usage") for the period covered by the electricity ▇▇▇▇. The Owner's cost shall
be an amount equal to a fraction of the total electricity ▇▇▇▇, the numerator of
which shall be the kilowatt hours attributable to Owner's electricity usage
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for the period covered by the electricity ▇▇▇▇, as determined by the submeters,
and the denominator of which shall be the total kilowatt hours included in the
electricity ▇▇▇▇. At the time of Owner's reimbursement of Owner's cost to
Operator, Owner shall also provide Operator with the cumulative daily kilowatt
hours readings from the submeters for the period covered by the electricity ▇▇▇▇
together with a statement setting forth in reasonable detail the calculation of
Owner's cost.
Upon the termination of this Agreement by Owner or upon Owner's
assumption of operating control of the Existing Plant pursuant to the terms of
this Agreement, Operator shall, so long as the Lease Agreement shall remain in
effect, have the right to park five vehicles in the area designated for parking
on Exhibit A.
Section 2.03. Any transfer, sale or encumbrance of the Existing Plant
by Owner shall be subject to the rights of Operator under this Agreement.
ARTICLE 3
TERM
Section 3.01. The term of this Agreement (the "term") shall commence
on the date (the "Term Commencement Date") upon which the Operator shall have
commenced delivery of steam to the Owner (other than for testing purposes which
shall not extend beyond a reasonable period of time) as required pursuant to the
Steam Contract and shall continue for a period of 40 years, unless terminated
earlier pursuant to this Agreement; provided, however that in the event that the
Operator shall be obligated to provide steam to the Owner from the Existing
Plant commencing on October 1, 1991, pursuant to the second unnumbered paragraph
of Section 1.06 of the Steam Contract, the term of this Agreement shall commence
on October 1, 1991 and shall expire upon the expiration of the term of the Steam
Contract, unless terminated earlier pursuant to this Agreement. The parties
shall enter into a supplemental agreement, substantially
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in the form attached as Exhibit B, setting forth the commencement and expiration
dates of the term.
Section 3.02. During the period prior to the Term Commencement Date
(the "pre-term period"), Owner shall have full responsibility for the Existing
Plant, shall operate and maintain the Existing Plant in the manner that it has
prior to the execution of this Agreement and shall maintain the quantities and
kinds of materials, spare parts, supplies, tools and equipment for use primarily
or exclusively in connection with the Existing Plant that it has customarily
maintained from time to time prior to the execution of this Agreement. During
the pre-term period, Operator and its authorized representatives shall have
access, upon reasonable notice, to the Existing Plant during normal business
hours for the performance of such studies and work that may be necessary for the
construction of any interconnections between the Cogeneration Plant and the
Existing Plant. The interconnections shall be designed and constructed in a
manner that will permit the separate and independent operation of either the
Cogeneration Plant or the Existing Plant. Owner shall also during the pre-term
period provide Operator with such operating and maintenance literature with
respect to the Existing Plant as Owner has in its possession, shall provide
training to Operator's designated personnel in the operation and maintenance of
the Existing Plant and shall permit Operator's employees to operate the Existing
Plant for the purposes of training Operator's personnel under the supervision of
Owner's personnel, provided, however, that any additional costs incurred in
providing such training shall be borne by Operator. Owner and Operator shall
cooperate with one another in the completion of any necessary interconnections
between the Cogeneration Plant and the Existing Plant and in the orderly and
efficient transfer of operation of the Existing Plant to Operator. Upon
expiration of the pre-term period, Operator shall have the option to purchase
from Owner all, or any part of the materials, spare parts, supplies, tools and
equipment (other than fuel oil) maintained by Owner for use in connection with
the Existing Plant ("the inventory"), at Owner's cost, which shall be paid by
Operator upon expiration of the pre-term period. Owner shall provide Operator a
list of the inventory and related cost information at least sixty (60) days
prior to the expiration of the pre-
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term period. Operator shall purchase from Owner all fuel oil ("the fuel oil")
maintained by Owner for the operation of the Existing Plant at Owner's cost,
which shall be paid by Operator upon the expiration of the pre-term period. Upon
the expiration or termination of this Agreement, Owner shall have the option to
purchase the inventory and, if fuel oil is then being used to fuel the Existing
Plant, the obligation to purchase the fuel oil from Operator upon the same terms
and conditions applicable to their purchase by Operator from Owner.
ARTICLE 4
USE OF EXISTING PLANT
Section 4.01. The Existing Plant and the Auxiliary System shall be
used and operated by the Operator only as a steam generation facility to provide
an alternate or supplemental source of steam to meet the steam requirements of
Owner and its Ancillary Customers. Under no circumstances shall any steam
produced from the Existing Plant or the Auxiliary System be used by Operator for
the generation of electricity. Nothing in this Section shall diminish, alter or
modify Operator's obligations to supply the steam requirements of Owner and its
Ancillary Customers pursuant to the Steam Contract.
ARTICLE 5
USER CHARGE
Section 5.01.
(a) In consideration of its right to operate and use the
Existing Plant, and irrespective of its installation and use of the Auxiliary
System, but subject to the provisions of Section 5.03, the Operator shall pay to
the owner annually on each anniversary of the Term Commencement Date (or the
Commercial Operation Date, in the event the Operator shall be obligated to
provide steam to the Owner from the Existing Plant prior to the Commercial
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Operation Date pursuant to the second unnumbered paragraph of Section 1.06 of
the Steam Contract) and throughout the term of this Agreement the following
amounts ("the user charge"):
Anniversary Dates Annual Payment
----------------- --------------
First through Fifth $ 1.00
Sixth through fifteenth 1,250,000.00
Sixteenth through twentieth 1,350,000.00
Twenty-first through thirtieth 1,450,000.00
Thirty-first through thirty ninth 1,550,000.00
and a final payment of $1,550,000 on the first day of the last month preceding
the expiration of the term, except that if the Commercial Operation Date is
later than the Term Commencement Date, the payment on the twentieth anniversary
of the Commercial Operation Date shall be increased ("the increase") by the sum
of $104,167 for each full month from the Term Commencement Date to the
Commercial Operation Date.
(b) The Operator shall have the option to make the annual payment
in twelve equal monthly installments, commencing on the first day of the month
following each anniversary, together with interest at a rate equal to the prime
rate announced by Chase Manhattan Bank, at its principal office in the City of
New York, New York ("the prime rate"), plus 200 basis points, on the unpaid
portion of the annual payment. Interest shall accrue from the anniversary date
and shall be payable on the due date of each monthly installment, calculated by
the use of the prime rate in effect on the first day of the previous month.
Section 5.02. The term "user charge" shall include, in addition to
the amounts payable under Section 5.01, any other sums, costs, expenses or
amounts from time to time payable by Operator to Owner under this Agreement,
whether by way of indemnity or otherwise, each of which whether or not expressed
to be a user charge, shall be deemed to be a user charge, and Owner shall have
all remedies for the collection of them, when in arrears, as are available to
Owner for the collection of any other user charge in arrears.
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Section 5.03.
(a) The payment of the user charges to the Owner pursuant to Section
5.01(a) (exclusive of any amounts included or treated as a user charge solely by
reason of the provisions of Section 5.02) shall be subordinate (the
"Subordinated User Charge") (i) to the debt service on the initial debt in the
aggregate principal amount not exceeding $210,000,000 ("the initial debt"), and
on any additional debt up to $25,000,000 ("the additional debt"), incurred for
the purposes permitted for a Permitted Mortgage, as defined in Article 23 of the
Lease Agreement (except any debt incurred for the purchase or redemption of any
economic interest in the owner of the Facility) and any refinancing of such
initial debt and additional debt, (ii) to all amounts required to be and
actually paid by the Operator to the New York State Energy Research Development
Authority in repayment of loans made to Gas Alternative Systems, Inc. in
connection with the development of the Facility, provided that the principal
amount to be paid shall not exceed $1,500,000, (iii) to all amounts required to
be and actually paid for or in connection with the operation and maintenance of
the Facility and the Existing Plant, including amounts to be paid to suppliers
and transporters of consumables, except the payment of any bonuses to any
operators, any management fees to G.A.S. Orange Development, Inc. ("G.A.S."),
▇▇▇▇ ▇. ▇▇▇▇▇▇ or to any entity controlled by, under common control with or
which controls either G.A.S. or ▇▇▇▇ ▇. ▇▇▇▇▇▇, or any other similar payments or
fees, (iv) all charges required to be and actually paid in connection with the
debt to which the user charges shall be subordinate, including payments to any
reserve fund required by such debt financing (less all amounts released to the
Operator from any such reserve fund), except any voluntary prepayments of
principal and payments in the nature of additional interest determined as a
percentage of net income or revenues of the Operator or in any other manner
contingent upon the operations of the Operator, (v) all amounts required to be
paid and actually paid or set aside for payment of real property taxes (or
payments to municipal authorities in lieu thereof) with respect of all or part
of the Facility or with respect to gross receipts, franchise or other similar
taxes, and (vi) all amounts required to be and actually paid for Operator's
reasonable expenses of administration and
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overhead (other than to or for the benefit of G.A.S., ▇▇▇▇ ▇. ▇▇▇▇▇▇ or any
entity controlled by, under common control with or which controls either G.A.S.
or ▇▇▇▇ ▇. ▇▇▇▇▇▇).
(b) Any Subordinated User Charge not paid when due by virtue of the
subordination provisions of paragraph (a) shall be deferred and shall be deemed
a Deferred User Charge. Failure to pay any Subordinated User Charge by reason
of such subordination and deferral shall not be a default hereunder, but no
payment shall be made by Operator by way of a return of its equity capital
(whether in the form of a redemption of equity or otherwise) or a distribution
with respect to such equity capital if and for so long as any Subordinated User
Charges are accrued and owing or any Deferred User Charges are outstanding.
(c) Any accrued Subordinated User Charge and any Deferred User Charges
are to be paid from the first cash available for payment ("first available
cash"), after the prior payment of all other Subordinated User Charges and shall
be paid in full no later than the twentieth anniversary of the Term Commencement
Date. The first available cash shall mean the excess (as determined with
respect to each calendar quarter) of (i) the sun of all amounts received by the
Operator from or relating to the operation of the Cogeneration Facility and
related facilities (as defined in the Lease Agreement) and the Existing Plant,
or any portion thereof, over (ii) the sum of all amounts described in paragraph
(a) of this Section 5.03 to which the user charge is subordinate. Interest on
the Deferred User Charges shall accrue daily at the prime rate plus 200 basis
points.
(d) The subordination of the payment of the user charge shall cease
(i) when the Cogeneration Facility is no longer encumbered by a Permitted
Mortgage, (ii) upon any further debt financing of the Facility or the related
facilities which is not a refinancing of the initial debt or the additional
debt, (iii) upon any payment by Operator by way of a return of its equity
capital (whether in the form of a redemption of equity or otherwise) or a
distribution made with respect to such equity capital (other than distributions
from cash flow derived from operating revenues or distributions out of proceeds
of other contributions to equity capital so long as the making of distributions
out of other contributions to equity capital does not result in
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any reduction in aggregate equity capital or, if any such distribution out of
other contributions to equity capital is made more than 30 days after the
earlier of the date upon which the initial debt is converted from a construction
loan to a term loan (the "conversion date") or 360 days after the Commercial
Operation Date, the aggregate of such distributions out of other contributions
to equity capital does not exceed the amount invested as equity capital by the
distributee) or (iv) the earlier of the twentieth anniversary of the conversion
date or the twenty-first anniversary of the Commercial Operation Date. For
purposes of this Section 5.03, a refinancing shall mean a refinancing as defined
in Section 23.01 of the Lease Agreement which does not result in any increase in
the principal amount outstanding of the initial debt or the additional debt.
(e) So long as any Subordinated User Charges are accrued and owing or
any Deferred User Charges are outstanding, then, on or before March 1st of each
calendar year, Operator shall furnish or cause to be furnished to Owner a
statement prepared by a nationally recognized independent certified public
accounting firm (the "auditors") designated by Operator, setting forth, in
reasonable detail, all amounts received by the Operator from or relating to the
operation of the Facility and the Existing Plant and all amounts described in
paragraph (a) of Section 5.03 to which the user charge is subordinate for the
preceding calendar year. Owner shall be entitled to obtain from the auditors, at
Operator's expense, such additional information with respect to the statement as
Owner may reasonably request.
ARTICLE 6
OPERATION OF EXISTING PLANT
Section 6.01. Operation by Operator.
(a) Except as expressly provided otherwise in this Section, the
Operator, at all times during the term of this Agreement, shall, with its own
work force and at its sole cost and expense, operate and maintain the Existing
Plant in a state of readiness to make available, and shall make available, an
alternate or supplemental source of steam to the Owner
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and its Ancillary Customers, at the pressures and temperature and meeting the
other requirements of the Steam Contract, within the shortest period of time
technically and reasonably possible, but in all events within no more than six
hours, after the interruption of the required supply of steam from the Facility,
provided, however, that Operator shall have satisfied the requirements of this
paragraph (a) if, within six hours following an interruption of the supply of
steam attributable to the involuntary outage of both gas turbines of the
Facility due to causes beyond the reasonable control of Operator, it shall have
commenced delivery of at least 250,000 pounds of steam per hour from the
Existing Plant and shall continue to fire additional boilers in the Existing
Plant to the extent necessary to meet the Owner's additional demands for steam
as promptly as is practical and consistent with the preservation and protection
of the boilers.
(b) Operator's obligations pursuant to this Section may be satisfied
by its installation and operation at the Existing Plant of new boilers and
related machinery, equipment and apparatus having a steam generation capability
at least equal to the capability of the Existing Plant and sufficient to provide
an alternate or supplemental source of steam to meet the steam requirements of
Owner and its Ancillary Customers ("the Auxiliary System"). The Auxiliary
System shall be approved by Owner, which shall not unreasonably withhold its
approval. Operator shall obtain, and maintain throughout the term of this
Agreement, good title to the Auxiliary System free and clear of any liens,
encumbrances, security interests or charges. As security for the performance of
Operator's obligations under this Agreement, Operator shall grant to Owner a
prior first security interest, or a security interest subordinate only to a
purchase money security interest, in the Auxiliary System ("the security
interest") and execute and deliver to Owner such documents as Owner may
reasonably request to evidence and perfect the security interest.
(c) Whenever and so long as Operator shall rely upon the Auxiliary
System to satisfy its obligations to provide an alternate or supplemental source
of steam to Owner and its Ancillary Customers in the manner required by
paragraph (a) of this Section (any such period "the Auxiliary Reliance Period"),
it shall, with its own work force and at its sole cost
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and expense operate and maintain the Auxiliary System and the Existing Plant in
the state of readiness required by paragraph (a).
(d) All steam supplied to the Owner by the Operator from the Existing
Plant or from the Auxiliary System shall be delivered in the manner and in
accordance with the requirements of Section 1.04 and Section 2.01 of the Steam
Contract and shall be purchased and sold at the price and in the manner stated
in Sections 2.01, 2.02 and 2.03 of the Steam Contract.
(e) For purposes of this Agreement, the term Existing Plant shall
include any replacements and additions and shall also include the Auxiliary
System unless the context or use clearly indicates its exclusion.
(f) Operator shall operate the Existing Plant, at a minimum, in
accordance with the requirements set forth in Exhibit C to this Agreement.
Section 6.02. Operating Agreements. Operator shall not enter into, amend,
modify, terminate or assign any operating agreement or other agreement for the
operation or use of the whole or any part of the Existing Plant nor assign this
Agreement without the prior written approval of Owner, provided, however, that
Operator may assign this Agreement (i) to the holder of a Permitted Mortgage or
(ii) to any corporation, partnership or other entity controlling, controlled by,
or under common control with the Operator. Any agreement entered into or
assignment made by Operator in violation of this paragraph shall be null and
void.
Section 6.03. Owner Training. Throughout the Term of this Agreement,
Operator, at its sole cost and expense, (i) shall provide Owner from time to
time complete and up to date operating manuals, instructions and other documents
and information relating to the operation and maintenance of the Auxiliary
System and the Existing Plant and (ii) shall provide training to employees of
Owner, designated by it from time to time, in the operation and maintenance of
the Auxiliary System and the Existing Plant by the Operator's personnel
regularly employed at the Existing Plant and the Facility.
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ARTICLE 7
REPAIRS, MAINTENANCE AND ALTERATIONS
Section 7.01. Repairs and Maintenance.
(a) Operator, at its sole cost and expense, shall manage, maintain and
promptly repair the Existing Plant including, without limitation, all machinery,
equipment, fixtures, apparatus, lines, pipes, sidewalks, passageways, roadways,
curbs, parking areas and landscaping, and all personal property used in the
operation of the Existing Plant, and shall keep them in as good condition,
ordinary wear and tear excepted, as they exist upon the Term Commencement Date
or upon their subsequent installation, as the case may be, provided, however,
that Owner shall be responsible for the maintenance and repair of the portions
of the Existing Plant (i) reserved for the exclusive use of Owner, but only to
the extent that such maintenance and repair is necessary principally because of
Owner's use, or (ii) which are damaged or require unusual or extraordinary
maintenance or repair as a result solely of Owner's use of the Existing Plant.
Without limiting the foregoing, Operator shall maintain the capability of the
Existing Plant to start up from a dead start, without utility power. "Repair"
shall include replacement, restoration and renewal when necessary. Operator's
obligations under this Article apply to all repairs, interior and exterior,
structural and non-structural, ordinary and extraordinary, and foreseen and
unforeseen. All repairs made by Operator shall be of good quality and class.
Operator shall do all necessary shoring of foundations and walls of any
structures of the Existing Plant and every other act or thing for the safety and
preservation of them and any other part of the Existing Plant which may be
necessary by reason of any excavation or other building operation upon any
adjoining property or street, alleyway or passageway. Operator shall manage and
maintain the Existing Plant as would a prudent owner and shall not commit, or
permit to be committed, any waste or any nuisance on them, or permit any part of
the Existing Plant to be used for any dangerous, noxious or offensive purpose,
and
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shall not permit any damaged improvement to remain at the Existing Plant for an
unreasonable period of time. Without limiting the generality of the foregoing
and the provisions of Section 7.02, Operator shall repair and maintain the
Existing Plant in accordance with the minimum requirements set forth in Exhibit
D attached to this Agreement.
(b) The steam boilers and related apparatus and equipment, and their
replacements, if any, shall be rebuilt whenever and to whatever extent
necessary. Rebuilding shall mean and include, without limitation, the
replacement of the fire and water tubes, replacement of refractory, replacement
of drums and frames, replacement of all burners, valves and related apparatus
and equipment and replacement of flues and duct work. If Owner and Operator
shall disagree as to the need for rebuilding, either party may notify the other
of the impasse and, within ten (10) days of giving the notice, a professional
consultant experienced in steam boiler maintenance and replacement (the
"consultant") shall be selected by Owner and Operator. The consultant shall
determine the need for rebuilding within thirty (30) days of his selection. If
Owner and Operator are unable to agree upon a mutually acceptable consultant,
within ten (10) days after the giving of the notice of impasse, each party
shall, within five (5) days after the expiration of the ten (10) day period,
select a consultant and the two consultants, within ten (10) days of their
selection, shall select a third consultant who, within thirty (30) days of his
selection, shall determine the need for rebuilding. The decision of the
consultant shall be binding upon the parties. Should the consultant determine
that any rebuilding is necessary, Operator shall promptly and diligently proceed
with the implementation of the consultant's determination. The fees and expenses
of each consultant in each determination made pursuant to this subparagraph or
pursuant to subparagraph (c) or subparagraph (d) of this Section shall be borne
as follows.
(i) the fees and expenses of the consultant, if any, mutually
acceptable to Owner and Operator shall be borne equally by Owner and
Operator;
(ii) if Owner and Operator are unable to agree upon a mutually
acceptable consultant, each party shall pay the fees and expenses of the
consultant it
-15-
selects and the fees and expenses of the third consultant
shall be borne equally by Owner and Operator.
(c) Operator shall have the option to replace a boiler with a package
boiler if replacement of the boiler shall be more economic than rebuilding the
boiler. In determining whether replacement of a boiler is more economic than
rebuilding a boiler, factors to be considered shall include long term
maintenance and capital costs and fuel efficiency. The replacement package
boiler shall have a dual gas and No. 2 oil firing capability with a steam
production capability at least equal to that of the boiler replaced (including
minimum temperature and pressure requirements) and shall meet United States ASME
specifications, the requirements of New York State Boiler Code Rule 14, the
requirements of the New York State Energy Conservation Code and the minimum
standards set forth in Exhibit E. A replacement boiler shall not replace more
than one boiler so that at all times there shall be at least four boilers having
a steam production capability at least equal to the steam production capability
of each of existing boilers 3, 4, 6 and 7 (which in the aggregate equals 500,000
pounds of steam per hour). Operator shall bear the cost and expense of the
complete installation of the replacement boiler and of the removal of the boiler
replaced. The installation of the replacement boiler and the removal of the
boiler replaced shall be done in accordance with all provisions of this
Agreement. The replacement boilers shall be installed free and clear of any
liens, encumbrances, security interests or charges and, whether or not affixed
or moveable, shall upon installation become the property of Owner and part of
the Existing Plant. If Owner and Operator shall disagree on whether replacement
of a boiler with a package boiler is more economic than the rebuilding of a
boiler, either party may notify the other of the impasse and the issue shall be
determined by the consultant in accordance with the procedure set forth in
subparagraph (b) of this Section. The determination of the consultant shall be
limited solely to the economics of replacement.
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(d) Operator shall keep and maintain the Existing Plant and all
adjoining sidewalks, curbs, alleyways and passage ways in a clean and orderly
condition, free of dirt, rubbish, snow, ice and unlawful obstructions.
(e) Operator shall make available to Owner for its inspection at all
times during normal business hours all records and documents relating to the
operation, repair, maintenance and testing of the Existing Plant, including,
without limitation, all operating logs and records and reports of inspection and
testing maintained by the Operator in accordance with Exhibit D. Operator also
shall furnish to Owner copies of the annual New York State boiler inspection
report on the Existing Plant within thirty (30) days of issuance of the report
by the insurance carrier.
(f) Each of Operator's obligations to rebuild the steam boilers and
related apparatus and equipment and their replacements, if any, pursuant to this
Section 7.01 ("Operator's rebuilding obligations") which arises during the first
fifteen (15) years of this Agreement, or during the stated term, including any
renewals, of an operating and maintenance agreement between Operator and an
independent contractor approved by Owner (the "Approved Operator"), if greater
than fifteen (15) years, (in either case the "Initial Guaranty Period") shall be
secured by the guaranty of the Approved Operator in the form attached as Exhibit
F. Upon the expiration of the Initial Guaranty Period, or upon the termination
of the guaranty of the Approved Operator, in accordance with the terms set forth
in Exhibit F, prior to the expiration of the Initial Guaranty Period, Operator's
rebuilding obligations shall be immediately secured by either (i) the guaranty
by an entity ("the guarantor"), and in form, acceptable to Owner acting
reasonably, having at all times a minimum of net worth, based upon audited
financial statements by a firm of independent public accountants of recognized
standing reasonably acceptable to Owner ("audited financial statements") equal
to one hundred fifty percent (150%) of the cost of the replacement of all of the
steam boilers and related apparatus and equipment ("the boiler replacement
costs") or (ii) an irrevocable and unconditional letter of credit or other
comparable financial assurance acceptable to Owner acting reasonably in an
amount equal to one hundred
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percent (100%) of the boiler replacement costs, unless Operator shall, upon the
expiration of the Initial Guaranty Period, or upon the termination of the
guaranty of the Approved Operator, as the case may be, and at all times
thereafter, have a minimum net worth, based upon its audited financial
statements, equal to one hundred fifty percent (150%) of the boiler replacement
costs. If at any time during the Initial Guaranty Period the net worth of the
Approved Operator, based upon its audited financial statements, shall be less
than one hundred fifty percent (150%) of the boiler replacement costs,
Operator's rebuilding obligations shall also be secured by either (i) the
guaranty of an entity ("the additional guarantor") and in form, acceptable to
Owner acting reasonably, having at all times a minimum net worth, based upon its
audited financial statements, equal to one hundred fifty percent (150%) of the
boiler replacement costs or (ii) an irrevocable and unconditional letter of
credit or other comparable financial assurance acceptable to Owner acting
reasonably in an amount equal to one hundred percent (100%) of the boiler
replacement costs, unless Operator shall at all times during the remainder of
the Initial Guaranty Period have a minimum net worth, based upon its audited
financial statements, equal to one hundred fifty percent (150%) of the boiler
replacement costs.
Operator shall provide Owner annually with audited financial
statements (i) of Operator throughout the term of this Agreement and (ii) of the
Approved Operator and of any additional guarantor, during the Initial Guaranty
Period, within one hundred twenty (120) days following the end of the fiscal
year of each. At least 90 days, but no more than 180 days, prior to the
expiration of the Initial Guaranty Period, and at least thirty (30) days prior
to the termination of the guaranty of the Approved Operator, Operator shall
provide Owner with the audited financial statements of the guarantor, if any, to
succeed the guaranty of the Approved Operator for its most recent fiscal year
and thereafter, annually, audited financial statements within one hundred twenty
(120) days following the end of its fiscal year.
Notwithstanding anything to the contrary contained in this
subparagraph (f), the net worth requirement of the Approved Operator, the
guarantor or the Operator under this subparagraph (f) shall be no greater than
Twenty Million Dollars ($20,000,000) determined upon
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the book value of its assets, net of liabilities, or Sixty Million Dollars
($60,000,000) determined upon the fair market value of its assets, net of
liabilities, based upon appraisals of the assets acceptable to Owner acting
reasonably.
Owner and Operator agree that the current boiler replacement costs are
Eight Million Dollars ($8,000,000) for the replacement of boilers 3, 4, 6 and 7.
The boiler replacement costs shall be increased upon each anniversary of the
execution of this Agreement by five percent (5%) until the next determination of
the boiler replacement costs.
Owner and Operator shall use their best efforts to reach agreement on
a redetermination of the boiler replacement costs upon the fifth anniversary of
the Term Commencement Date and every fifth year thereafter. If Owner and
Operator shall disagree on the boiler replacement costs, either party may notify
the other of the impasse and the boiler replacement costs shall be determined by
a consultant in accordance with the procedure set forth in subparagraph (b) of
this Section. The boiler replacement costs as redetermined each fifth year shall
be increased upon each anniversary of the Term Commencement Date by five percent
(5%) (the "adjusted boiler replacement costs") until the next redetermination of
the boiler replacement costs. The adjusted boiler replacement costs shall also
be decreased ("the replacement cost decrease") by the undepreciated cost, as
certified by a firm of national independent certified public accountants
acceptable to Owner, of any replacement boilers installed by Operator (which for
the purpose of this Section 7.01 shall be based upon a depreciation of such
boilers over a period of 120 months on a straight line basis); provided,
however, that the adjusted boiler replacement costs (including the replacement
boilers) shall not be reduced, on a cumulative basis, by more than thirty-three
and one-third percent (33-1/3%). The replacement cost decrease shall become
effective when the replacement boilers shall have been installed in accordance
with each of the provisions of this Agreement and shall have become operational.
Upon each anniversary of the Term Commencement Date subsequent to the
installation of any replacement boiler by Operator, and upon each
redetermination of the adjusted boiler replacement costs every fifth year, the
adjusted boiler replacement costs shall be further adjusted to reflect the then
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undepreciated cost of any replacement boilers installed by Operator, determined
in the manner, and subject to the limitation of the reduction of the adjusted
boiler replacement costs by no more than thirty-three and one-third percent (33-
1/3%) on a cumulative basis, as provided in this subparagraph (f). All fees and
expenses of each consultant in each determination of the boiler replacement
costs pursuant to this subparagraph (f) shall be borne by Operator.
(g) Owner acknowledges and agrees that each of Becon Construction
Company, Inc. and ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ Operations, Inc. is an Approved
Operator.
Section 7.02. Testing and Reports. Commencing on the first day of the month
following the end of the first seven full calendar months of the term of this
Agreement, and semi-annually thereafter, Operator shall provide Owner a report
of all major maintenance performed on the Existing Plant within the previous six
months and all major maintenance projected during the next six months. The
reports shall be in such form and detail as Owner reasonably may request.
Operator, at its sole cost and expense, shall at least twice during each
calendar year, at such time as Owner shall designate upon thirty (30) days prior
written notice to Operator, test the readiness and capability of the Existing
Plant, or the Auxiliary System during the Auxiliary Reliance Period, as
applicable, to furnish the steam requirements of the Owner and its Ancillary
Customers within six hours after the interruption of the supply of steam from
the Facility, by the operation of the Existing Plant, or the Auxiliary System,
as applicable, and the supply of Owner's and its Ancillary Customers' steam
requirements solely from the Existing Plant, or the Auxiliary system, as
applicable, for a period of at least eight (8) hours. Operator, at its sole cost
and expense, shall also perform, from time to time, such additional tests as
Owner reasonably may request to determine the status of the maintenance and
readiness of the Existing Plant, including the Auxiliary System.
Section 7.03. Alterations, Improvements and Additions. Except as otherwise
expressly provided in this Agreement, Operator shall not make any alterations,
improvements or additions to the Existing Plant, including the Auxiliary System
(collectively "alterations") without the prior written consent of Owner, which
consent shall not unreasonably be withheld.
-20-
Operator's request to Owner for permission to make alterations shall be
accompanied by detailed plans and specifications, estimated costs and the
identity of the contractors which shall perform the work. Any alterations
permitted by Owner shall be of good quality and class and shall be made in
accordance with the requirements of Owner and all of the provisions of this
Agreement. No part of the Existing Plant or of the Auxiliary System shall be
removed without the prior written consent of the Owner. All alterations,
improvements and additions made to the Existing Plant, except the Auxiliary
System, and whether or not affixed or moveable, shall upon installation become
the property of the Owner. The Auxiliary system shall become the property of the
Owner upon the expiration or earlier termination of this Agreement in accordance
with its terms.
ARTICLE 8
UTILITY EXPENSES
Section 8.01. Utilities. Operator shall pay and discharge punctually
all sewer rents and charges for water, gas, electricity, light and power, and
any and all other services and utilities furnished to the Existing Plant.
ARTICLE 9
NET AGREEMENT
Section 9.01. Net Agreement. Except as otherwise expressly provided in
Section 9.03, the annual user charge payable by Operator pursuant to Section
5.01 under this Agreement shall be absolutely net to Owner, with the intent and
effect that all costs, expenses and obligations of every kind and nature
whatsoever relating to the Existing Plant, which may arise or become due
-21-
during the term of this Agreement ("the expenses") shall be paid by the Operator
and Operator shall indemnify and save Owner harmless from and against the
expenses.
Section 9.02. User Charge Not to ▇▇▇▇▇. Operator's obligation to pay the
user charge under this Agreement shall not be affected by, nor shall it ▇▇▇▇▇ or
be diminished or reduced on account of any want of repair, destruction or damage
to the Existing Plant, regardless of the cause or extent of them, or for any
inconvenience, discomfort, interruption of business or
therwise arising from the making of alterations, changes, additions,
improvements or repairs to the Existing Plant, or because of any present or
future governmental laws, ordinances, requirements, orders, directives, rules or
regulations, or for any other cause or reason.
Section 9.03. Compliance with Environmental and Safety Laws.
(a) Prior to the execution of this Agreement, Operator shall caused to
be conducted at its expense, by an engineering firm acceptable to an
institutional lender providing financing for the Facility, an audit of the
Existing Plant, the scope and description of which shall have been approved by
Owner (the "audit"), for purposes of determining (i) the existence at the
Existing Plant of any circumstance or condition which does not comply with all
federal, state and local laws, codes and rules and regulations promulgated
pursuant to statutory authority (collectively, "Environmental Laws") governing
the production, generation, release, discharge, emission, disposal,
transportation, containment, storage or remediation involving any substance
which is hazardous or acutely hazardous to the public health or safety or which
could be the basis for or support a claim under any Environmental Laws (any such
substance, a "Hazardous Substance") and (ii) the Existing Plant's compliance
with the requirements of the Occupational, Safety and Health Act of 1970
("OSHA") and other applicable safety laws (collectively, "Safety Laws").
(b) If any liability shall be imposed upon the Operator, at any time
before or after the Term Commencement Date or the expiration or earlier
termination of this Agreement, under or by reason of any Environmental Laws, (i)
due to the existence of
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Hazardous Substances at or about the Existing Plant (except any liability
imposed upon the Operator because of any conditions caused by Operator, its
employees, agents, contractors and assigns (collectively "the Operators") during
the pre-term period or because of any aggravation by Operators after the Term
Commencement Date of any conditions disclosed by the audit), the existence of
which is determined prior to or as a result of the audit described in paragraph
(a) or (ii) occurs solely as a result of the acts or activities of Owner
subsequent to such audit or (iii) occurs solely as a result of the negligence of
Owner during the pre-term period, the Owner shall, at its sole cost and expense,
comply with all requirements of Environmental Laws relating to such Hazardous
Substances (other than asbestos which shall be governed exclusively by paragraph
(c)), including requirements relating to the removal or containment thereof, and
shall save, defend, indemnify and hold the Operators harmless from and against
any such liability, including without limitation, damages, fines, penalties,
reasonable legal fees and all other reasonable costs to the Operators in
connection therewith.
(c) Owner acknowledges the presence at the Existing Plant of asbestos
and represents and warrants that the condition of the asbestos in the Existing
Plant presently complies with the Environmental Laws. Owner further agrees that
all action necessary to remove or contain such asbestos in order to comply with
the requirements of Environmental Laws (i) at the Term Commencement Date (except
any removal or containment of asbestos necessary because of the acts or
activities of the Operators during the pre-term period) or (ii) thereafter, to
the extent that such removal or containment becomes necessary as a result solely
of Owner's acts or activities within the Existing Plant subsequent to the Term
Commencement Date, shall be effected by Owner at Owner's sole cost and expense.
Owner shall save, defend, indemnify and hold harmless the Operators from and
against any and all cost, liability, damage or expense (including reasonable
legal fees and expenses) which any of them may incur or to which any of them may
be subject by reason of the breach of the representation, warranty and agreement
made by Owner pursuant to this paragraph (c). It is expressly understood and
agreed that, except for the representation, warranty and agreement made by Owner
with respect to asbestos in the
-23-
Existing Plant pursuant to this paragraph (c), Owner shall have no liability
whatsoever to the Operators from, and the Operators shall assume, any liability
which may be imposed for the continued existence of asbestos in the Existing
Plant after the Term Commencement Date.
(d) Owner shall, at its sole cost and expense, comply with all
requirements of the Safety Laws (i) to the extent that the audit described in
paragraph (a) determines that the Existing Plant is not in compliance with such
requirements, or (ii) to the extent that conditions in the Existing Plant change
after such audit as a result solely of Owner's acts or activities within the
Existing Plant. Owner shall also be responsible for compliance with changes in
the Safety Laws which become effective either (x) prior to the Term Commencement
Date or (y) thereafter to the extent such changes apply solely to Owner's acts
or activities within the Existing Plant.
(e) The indemnification provided by Owner to Operators, and the
remedies of Operators for any breach by Owner of any of the representations and
warranties made by Owner, under this Section 9.03 shall be the sole and
exclusive remedy of Operators against Owner with respect to the presence of
Hazardous Substances and asbestos at the Existing Plant and shall be in lieu of
any indemnification that might otherwise have been available to Operators
pursuant to Article 14 of this Agreement.
Section 9.04. Licensing Requirements. Owner shall upon request by Operator,
and at Operator's sole cost and expense, provide Operator from time to time, but
not more frequently than annually, until the Term Commencement Date with
evidence reasonably satisfactory to Operator that the Existing Plant is in
compliance with all applicable licensing requirements. From and after the Term
Commencement Date, Owner shall cooperate with Operator as necessary to obtain
and maintain all required licenses and permits for the operation of the Existing
Plant in the name of Owner, Operator, or both, if necessary, at Operator's sole
cost and expense.
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ARTICLE 10
REQUIREMENTS OF PUBLIC AUTHORITY
Section 10.01. Compliance by Operator.
(a) Except as otherwise provided in Section 9.03, from and after the
Term Commencement Date, Operator, at its sole cost and expense, shall promptly
comply with all present and future laws, ordinances, requirements, orders,
directives, rules and regulations of all federal, state, county, town and city
governments and of all other governmental authorities, departments, boards and
officers, and all orders, rules and regulations of the National and New York
Boards of Fire Underwriters or any other body or bodies which may exercise
similar functions, foreseen and unforeseen, ordinary and extraordinary,
applicable to the Existing Plant or any part of it or to its use, whether in
force at the Term Commencement Date or passed, enacted or directed in the
future, and whether or not compliance shall require structural changes
(collectively in this Article "the requirements"). Operator shall also comply
with all requirements to the extent of their application to Operator's use of
the Existing Plant during the pre-term period. Operator shall pay all costs,
expenses, liabilities, losses, damages, fines, penalties, claims and demands,
including reasonable counsel fees (collectively "the costs"), that may in any
manner arise from or be imposed because of the failure of Operator to comply
with this Article and shall indemnify, hold harmless and defend Owner of and
from the costs.
(b) Owner has not received any notice, and is not aware, of any
noncompliance of the Existing Plant with the requirements as of the date of this
Agreement, except as set forth in this paragraph (b). Owner has been informed
that an industrial wastewater discharge permit (the "discharge permit") will be
required from the Onondaga County Department of Drainage and Sanitation for the
discharges by the Existing Plant into the Onondaga County Sewer System. Owner is
finalizing plans for the modifications necessary for completion of its
application for the discharge permit. Owner has also undertaken various
corrective measures to assure the Existing Plant's compliance with OSHA ("the
compliance
-25-
measures"). Owner shall diligently prosecute the application for the discharge
permit and the compliance measures and shall obtain the discharge permit and
complete the compliance measures prior to the Term Commencement Date. Owner
shall promptly notify Operator of any such notice received by Owner hereafter,
shall provide Operator with copies of all communications made or received by
Owner relating thereto, and shall, until the Term Commencement Date, comply with
all requirements in force prior to the Term Commencement Date to the same extent
as required of Operator thereafter. Owner shall indemnify Operator for any
liability imposed upon Operator for Owner's noncompliance with such requirements
before the Term Commencement Date (except to the extent that such liability
arises from Operator's use of the Existing Plant during the pre-term period).
(c) Operator shall comply with the requirements of all policies of
public liability, fire and all other policies of insurance in force with respect
to the Existing Plant.
Section 10.02. Challenge to Validity. Operator shall have the right, after
prior written notice to the Owner, to contest by appropriate legal proceedings
("the proceedings") diligently conducted in good faith, in the name of the
Operator, Owner, or both, if necessary, without cost or expense to Owner, the
validity or application of the requirements. If compliance with the requirements
may be delayed during the proceedings without the incurrence of any lien, charge
or liability of any kind against the Existing Plant that cannot be bonded and
without subjecting Operator or Owner to any liability, civil or criminal, for
failure to comply with them, Operator may delay compliance with them until the
final determination of the proceedings. Owner shall execute all documents
reasonably necessary for the proceedings.
ARTICLE 11
COVENANT AGAINST LIENS
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Section 11.01. Operator's Obligations to Discharge. Operator shall not
create or permit to be created and shall promptly discharge, any mechanic's,
laborer's, or materialman's lien, or any other charge which might be or become a
lien, encumbrance or charge upon the Existing Plant ("the lien"), except for any
lien that is being contested in good faith by appropriate proceedings and is
appropriately bonded or results from any act or omission for which Owner is
responsible pursuant to Section 7.01, Section 9.03, Section 10.01(b) or Owner's
acts or activities subsequent to the Term Commencement Date.
Section 11.02. Right to Discharge. If any lien included in Section
11.01 shall be filed against the Existing Plant, Operator, at its own cost and
expense, within 30 days after the filing of the lien, shall discharge it of
record or post a bond reasonably satisfactory to Owner to assure its discharge.
If Operator fails to discharge or bond the lien within 30 days after its filing,
Owner, in addition to any other right or remedy it may have, and without waiving
its right to declare a default, may discharge the lien of record or post a bond
to assure its discharge. Any amounts paid by Owner in the discharge or bonding
of the lien, including, but not limited to, penalties, interest, costs,
allowances and reasonable attorney's fees, together with interest at the rate of
l8% per annum, shall be paid by Operator to Owner on demand. Any amount paid by
Operator in the discharge or bonding of a lien which results from any act or
omission for which Owner is responsible pursuant to Section 9.03, including, but
not limited to penalties, interest, costs, allowances and reasonable attorney's
fees, together with interest at the rate of 18% per annum, shall be paid by
Owner to Operator on demand.
Section 11.03. No Implied Consent of Owner. Except to the extent of
the acknowledgement of an Approved Operator pursuant to Section 7.01 (g),
nothing in this Agreement shall be construed as the consent or request of Owner,
express or implied, by inference or otherwise, to any contractor, subcontractor,
laborer or materialman for the performance of any labor or the furnishing of any
materials for any improvement, alteration or repair of the Existing Plant.
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ARTICLE 12
ACCESS TO EXISTING PLANT BY OWNER
Section 12.01. In addition to the rights of use reserved by Owner
pursuant to Section 2.02, Owner and its authorized representatives shall
continue to have access, upon reasonable notice, to the Existing Plant at all
times during normal business hours for all purposes, including, without
limitation, inspection and testing of the Existing Plant and making any
necessary repairs or maintenance or performing any other work required to be
performed by Owner pursuant to Section 7.01 or that may be necessary because of
Operator's failure to make repairs or perform other work after written notice
from Owner, or at any time without notice in case of emergency. Owner shall also
have access to the Existing Plant at all times for the purpose of obtaining and
testing samples of the condensate return. Operator shall also provide to Owner
suitable space within the Existing Plant to enable Owner to test the condensate
return. Owner's right of access shall not imply any duty on its part to perform
any repairs or other work and Owner's performance of any repairs or work shall
not constitute a waiver of any default of Operator.
Section 12.02. During the progress of any work at the Existing Plant
by Owner pursuant to Section 12.01, Owner may store all necessary materials,
tools, supplies and equipment at the Existing Plant. Except as provided in
Section 9.03 or Section 14.02, Owner shall not be liable for any damage incurred
by Operator because of the performance of those repairs or work, or the storing
of materials, tools, supplies and equipment at the Existing Plant in connection
with such work.
ARTICLE 13
SURRENDER
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Section 13.01. Surrender of Operation. Upon the expiration or earlier
termination of the term of this Agreement, Operator shall surrender to Owner the
operation and use of the Existing Plant, including the Auxiliary System, without
delay, in as good condition and repair as it exists upon the Term Commencement
Date or upon the subsequent date of installation, as the case may be, except for
damage occasioned by Owner's acts or activities and for reasonable wear and tear
after the last necessary repair, replacement, restoration or renewal made by
Operator, and free and clear of all liens, encumbrances and charges other than
those resulting from any acts or activities for which Owner is responsible as
described in Section 11.01, without any payment or allowance by Owner on account
of any improvements to the Existing Plant, and all rights of Operator under this
Agreement and in the Existing Plant, including the Auxiliary System, shall
terminate. Notwithstanding the expiration or termination of this Agreement, each
of the parties shall remain liable to the other for any loss or damage suffered
by the other because of any default of such party. Upon surrender, Operator
shall assign to Owner all operating agreements and other agreements relating to
the operation or use of the Existing Plant, as Owner may request.
Section 13.02. Except as otherwise provided in the last sentence of
Section 3.02, any personal property of Operator remaining at the Existing Plant
after the 60 day period following expiration or earlier termination of this
Agreement, may, at the option of owner, be deemed to have been abandoned by
Operator and may be retained by Owner as its property, or disposed of, without
accountability, by Owner in such manner as it deems appropriate. In addition,
Owner, at its option, within thirty days after the expiration or earlier
termination of this Agreement, and upon ten days written notice to Operator, may
require Operator, at Operator's sole cost and expense, to remove from the
Existing Plant any fuel oil (other than fuel oil which Owner is obligated to
purchase pursuant to Section 3.02) from the underground oil storage tanks and
from any other storage area at the Existing Plant, any inventory not purchased
by Owner and any other personal property of Owner within thirty days of the
giving of notice by Owner.
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Section 13.03. The provisions of this Article shall survive the
expiration or earlier termination of this Agreement.
ARTICLE 14
INDEMNITY
Section 14.01. Operator's Indemnification of Owner. The Operator
shall indemnify and hold the Owner harmless from and against any and all
liabilities, obligations, damages, penalties, claims, costs, charges and
expenses, including, without limitation, reasonable fees of architects,
engineers, attorneys and other professionals and experts (collectively
"claims"), which may be imposed upon, incurred by or asserted against Owner
because of any of the following, unless the claims arise as a consequence of the
action or failure to act by the Owner pursuant to Section 9.03 or otherwise or
the Owner's use of the Existing
Plant:
(i) Any work or thing done in, on or about the Existing Plant;
(ii) Any use, non-use, occupation, condition, operation,
maintenance or management of the Existing Plant or any part of it;
(iii) Any act or omission of Operator or any of its agents,
contractors, servants, employees, licensees, or invitees; or
(iv) Any accident, injury or death to any person or damage to any
property occurring in, on or about the Existing Plant.
If any action or proceeding is brought against Owner because of any
one or more of the claims, Operator, at its sole cost and expense, upon written
notice from Owner, shall defend that action or proceeding by counsel approved by
Owner in writing.
Section 14.02. Owner's Indemnification of Operator. The Owner shall
indemnify and hold the Operator (including for this purpose any corporation,
partnership or other entity controlling, controlled by or under common control
with, the Operator) harmless from and
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against any and all claims which may be imposed upon, incurred by or asserted
against the Operator because of any of the following, unless the claims are
covered by Section 9.03 or by the Lease or arise as a consequence of the action
or failure to act by the Operator:
(i) any work or thing done in, on or about the premises of the
Owner (excluding the Existing Plant except to the extent covered by clause (v)
below);
(ii) any use, non--use, possession, occupation, condition,
operation, maintenance or management of the premises of the Owner (excluding the
Existing Plant except to the extent covered by clause (v) below);
(iii) any act or omission of the Owner or any of its agents,
contractors, servants, employees, licensees, or invitees;
(iv) any accident, injury or death to any person or damage to
property occurring in, on or about the premises of the Owner (other than the
Existing Plant except to the extent covered by clause (v) below); or
(v) any use of the Existing Plant by Owner.
If any action or proceeding is brought against Operator because of any
one or more of the claims, Owner, at its sole cost and expense, upon written
notice from Operator, shall defend that action or proceeding by counsel approved
by Operator in writing.
Section 14.03. Limitation of Owner's Indemnity. The indemnification of
Operator by Owner and of Owner by Operator pursuant to this Article shall in all
events be limited by the applicable provisions of Section 9.03.
Section 14.04. The provisions of this Article shall survive the
expiration or earlier termination of this Agreement.
ARTICLE 15
INSURANCE
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Section 15.01. Casualty Insurance. Operator, at its sole cost and expense,
shall keep the Existing Plant insured against loss or damage by fire or other
casualty, with such extended coverage as shall from time to time be customary
for premises similarly situated in the Syracuse, New York, area, with a
replacement cost endorsement, in amounts sufficient to prevent Owner or Operator
from becoming a co-insurer within the terms of the policy and in no event less
than one hundred percent (l00%) of the replacement value of the Existing Plant,
exclusive of the cost of foundations, excavations, and footings below the lowest
basement floor, without any deduction for depreciation. At the request of Owner,
and at the sole cost and expense of Operator, the replacement value shall be
determined from time to time, but not more frequently than once every two years,
by an appraiser acceptable to Owner.
Section 15.02. Other Insurance. Operator, at its sole cost and expense,
shall maintain:
(a) general public liability insurance against all claims for bodily
injury, death or property damage, occurring upon, in or about the Existing
Plant, and on or about any adjoining sidewalks and passageways, in the amount of
at least $5,000,000 for injury or death to any one person and $25,000,000 for
injury or death to more than one person in any one accident or occurrence and
$10,000,000 for damage to property or in such greater limits as may be required
by Owner;
(b) boiler and pressure vessel insurance, including pressure pipes,
upon all steam boiler and other pressure vessels and pipes in the Existing Plant
in an amount not less than the greater of $10,000,000 or the replacement value
of the boilers, pressure vessels and pipes;
(c) Worker's compensation insurance, disability benefits insurance and
all other insurance Operator is required by law to provide covering loss
resulting from injury, sickness, disability or death of all persons employed by
Operator or by Operator's contractors, subcontractors, or agents;
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(d) Contractual Coverage Insurance providing protection for Operator
and Operator's contractors, subcontractors and agents against damage claims that
may arise from operations under this Agreement, with limits in the amounts
required in paragraph (a) of this Section;
(e) business interruption insurance in an amount that can be obtained
by the payment of an annual premium of $10,000 during the Base Year and by the
payment of an additional $1,000 in each succeeding year. The maximum annual
premium shall not exceed $50,000; and
(f) such other insurance and in such amounts as may from time to time
be reasonably required by Owner.
Section 15.03. Evidence of Insurance and Possession of Policy.
(a) All insurance required by this Article shall be obtained by valid
and enforceable policies, issued by insurers of recognized responsibility and
licensed to do business in the State of New York. Prior to the Term Commencement
Date, Operator shall deliver to Owner certified copies of the policies of
insurance to be furnished by Operator. Thereafter, Operator shall furnish to
Owner, not less than thirty (30) days prior to the expiration dates of such
policies, certified copies of the renewal policies. Operator shall also deliver
to Owner evidence satisfactory to Owner of the payment in full of the premiums
on such policies (i) prior to the Term Commencement Date, for the period covered
by the initial policies and (ii) prior to the expiration dates of such policies
and any renewal policies, for the period covered by the renewal policies.
(b) Blanket Insurance. Operator may obtain the insurance required by
-----------------
this Article under a blanket insurance policy or policies ("the blanket
policies") covering the Existing Plant and other properties, provided:
(i) the blanket policies shall specify, or Operator shall furnish
Owner with a written statement from the insurers under the blanket policies
specifying, the
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amounts of the total insurance specifically allocated to the Existing Plant
which shall not be less than the amounts required by this Article;
(ii) the amounts specified shall be sufficient to prevent any one of
the assureds from becoming a co-insurer within the terms of the applicable
policy; and
(iii) the blanket policies shall in all respects comply with the
endorsements and coverage required by this Article.
Section 15.04. Limitations Upon Concurrent Insurance. Except the insurance
required by Section 15.02(a), neither Owner nor Operator shall obtain separate
insurance concurrent in form, or contributing in the event of loss, with the
insurance required by this Article, unless Owner and Operator are named
insureds, with loss payable as required by this Agreement, provided, however,
that Owner may obtain business interruption/extra expense insurance without
including Operator as a named insured. Each party shall immediately notify the
other of any such separate insurance and Operator shall deliver the policies to
Owner as required by Section 15.03.
Section 15.05. Disbursement of Proceeds.
(a) All policies of insurance required by this Article ("the
policies") shall name Owner and Operator as insureds as their interests may
appear. The loss, if any, under the policies shall be adjusted and the proceeds
disbursed as follows:
(i) If the damage or destruction does not exceed $250,000, the
loss shall be adjusted by Operator and the proceeds shall be paid to
Operator for the repair of the damage; and
(ii) If the damage or destruction exceeds $250,000, the loss
shall be adjusted by Owner and the proceeds shall be disbursed in
accordance with Article 18.
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(b) The policies shall provide that any loss shall be adjusted
and the proceeds paid as provided in this Agreement.
Section 15.06. Notice of Cancellation. The policies and certificates
evidencing the policies shall provide for thirty (30) days prior written notice
to Owner of any cancellation, reduction in amount or change in coverage.
Section 15.07. Apportionment of Premiums Upon Expiration of Term. Upon
the expiration of the term of this Agreement, all transferable policies shall,
at Owner's option, be transferred by Operator to Owner and the premiums on them
shall be apportioned between Owner and Operator if Operator is not in default
under this Agreement.
ARTICLE 16
EMINENT DOMAIN
Section 16.01. Termination of Agreement. If all or substantially all of the
Existing Plant shall be taken for any public or quasi-public use under any
statute, by right of eminent domain or by private purchase in lieu of a taking
(the "Condemnation Proceedings"), this Agreement shall automatically terminate
on the date title passes or possession is taken, whichever occurs first. If less
than all or substantially all of the Existing Plant is taken, this Agreement
shall continue in full force and effect as to the portions not taken. For
purposes of this Article substantially all of the Existing Plant shall be deemed
taken if the portions not taken shall be insufficient for its continued use for
the purpose stated in Section 4.01. The provisions of this Article shall survive
the termination of this Agreement.
Section 16.02. Distribution of Condemnation Proceeds. The net award for any
taking of the Existing Plant, after deducting all expenses and costs, including
attorneys fees ("the net award") shall be apportioned between Owner and Operator
as follows:
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(a) First, the amount which represents the then present value, at the
time of the taking, of the Owner's right to receive the then applicable annual
user charge provided in Section 5.01 for the remainder of the forty (40) year
term of this Agreement, calculated at a rate of interest of 8 percent per annum,
shall be paid to Owner;
(b) Second, from the balance of the net award, the amount of the
accrued Subordinated User Charges and Deferred User Charges, with interest,
shall be paid to the Owner;
(c) Third, from the remaining balance of the net award, the amount
which represents the Operator's undepreciated cost of the Auxiliary System,
determined in accordance with generally accepted accounting principles, shall be
paid to Operator;
(d) Fourth, the amount equal to that fraction of the then remaining
balance of the net award, the numerator of which is the remaining years of the
term of this Agreement and the denominator of which is forty (40), shall be paid
to the Operator and the remaining balance of the net award shall be payable to
Owner.
Section 16.03. Partial Taking. If less than substantially all of the
Existing Plant is taken (the "partial taking"), the condemnation proceeds shall
be payable to Owner and disbursed to Operator, who shall, to the extent of the
condemnation proceeds, promptly restore the Existing Plant to a complete
architectural unit and, to the extent reasonably practicable, as nearly like its
condition prior to the taking. The balance of the condemnation proceeds, if any,
remaining after the completion of the restoration shall belong to and be
retained by Owner.
ARTICLE 17
RIGHT OF EACH PARTY TO PERFORM
COVENANTS OF THE OTHER
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Section 17.01. If either party shall fail to perform any of its
obligations under this Agreement, the other party (the "curing party") may, at
its option, after ten (10) days' notice
to the defaulting party, or without notice in case of an emergency, perform any
of such obligations.
Section 17.02. Any moneys paid and all costs and expenses incurred by
the curing party, including reasonable attorneys' fees, in the performance of
the defaulting party's obligations under this Agreement, together with interest
at the rate of eighteen per cent (18%) per annum, shall be paid by the
defaulting party to the curing party on demand.
Section 17.03. The curing party's exercise of its rights under this
Article shall not constitute a waiver of any other rights or remedies it may
have because of the default of the other party.
ARTICLE 18
DAMAGE OR DESTRUCTION
Section 18.01.
(a) If the Existing Plant or any part of it shall be damaged or
destroyed by fire or otherwise, Operator shall promptly notify Owner, and, at
its sole cost and expense, and whether or not the insurance proceeds are
sufficient, restore, repair, replace, or rebuild the Existing Plant
(individually and collectively "restore" or "the restoration"), provided,
however, that if the insurance proceeds are insufficient for the restoration,
Operator's obligation to restore with funds other than insurance proceeds shall
be subject to Owner's obligation of indemnity to Operator, if any, and to the
extent required, under the Agreements or any of them, whether or not hereafter
expressly so stated. The restoration shall be at least equal in quality and
class to the original, and shall be performed pursuant to plans and
specifications approved by Owner acting
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reasonably and in accordance with all other provisions of this Agreement. The
restoration shall be commenced within ninety (90) days from the date of the
damage or destruction, provided, however, that Owner shall grant such extensions
of time for the adjustment of insurance and the preparation of the plans and
specifications as reasonably may be required. The architect or engineer in
charge of the restoration shall be selected by Owner, with the approval of
Operator, which approval shall not be unreasonably withheld. Operator shall
diligently complete the restoration.
(b) The insurance proceeds payable because of damage to or destruction
of the Existing Plant ("the insurance proceeds") shall be paid to Owner, except
as otherwise provided in Section 15.05(a)(i). The insurance proceeds, net of the
costs of adjustment and collection ("the net insurance proceeds"), shall be
disbursed in accordance with the following subparagraphs.
(c) The net insurance proceeds shall be disbursed to Operator for the
restoration, in installments equal to ninety per cent (90%) of the work
completed and materials furnished in the restoration, upon the written request
of Operator accompanied by the following:
(i) evidence, by an official search of a licensed title insurance
company doing business in Syracuse, New York, approved by Owner, that no
lien has been filed against the Existing Plant; and
(ii) a certificate signed and verified by Operator and the
architect or engineer in charge of the restoration, stating that:
A. the amount requested is justly due to contractors,
subcontractors, materialmen, engineers, architects or other persons who
have rendered services or furnished materials for the restoration, a
description of the services and materials and the amounts due each person,
and that no part of the amount requested has been included in any other
request by Operator;
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B. except for the amount requested, after due inquiry, no other
amounts are due on the date of the certificate for labor, wages, materials,
supplies or services in connection with the restoration;
C. the cost of labor and materials required to complete the
restoration will not exceed the net insurance proceeds remaining after
payment of the amount requested; and
D. the restoration is in substantial compliance with the plans
and specifications approved by Owner and has been performed in accordance
with all the provisions of this Agreement.
(d) Upon completion of the restoration, there shall be paid to
Operator, from, and only to the extent of, the net insurance proceeds, an amount
equal to 100% of the costs of work completed and materials furnished in the
restoration less the amounts previously disbursed to Operator, provided Operator
shall have complied with all the requirements and provisions of this Article and
shall have obtained an unconditional permanent certificate of occupancy, if
required, from the appropriate governmental authority.
(e) Upon receipt of evidence satisfactory to Owner that the
restoration has been completed in accordance with the provisions of this
Agreement and its cost paid in full and that there are no liens upon the
Existing Plant, the net insurance proceeds remaining, if any, shall be paid to
Operator, provided Operator is not in default under this Agreement.
(f) If this Agreement shall be terminated for any reason, Owner shall
be entitled to all insurance proceeds, and Operator shall have no interest in,
nor any right, title, or claim to them.
(g) No destruction or damage to the Existing Plant or any part of it
shall relieve Operator from its obligation to pay the user charge or from any of
its other obligations under this Agreement, subject, however, to Owner's
obligation of indemnity to Operator, if any, and to the extent required, under
the Agreements or any of them.
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ARTICLE 19
LATE CHARGES
Section 19.01. Past Due User Charges. Except as otherwise contemplated by
Section 5.03, if Operator shall fail to pay the user charge when due and
payable, Operator shall pay to Owner, as an additional user charge, an amount
calculated at a rate per year equal to 18% on the delinquent user charge, until
paid in full. Nothing in this section shall limit Owner's rights and remedies
under any other provision of this Agreement.
ARTICLE 20
DEFAULT
Section 20.01. Events of Default. Any one or more of the following events
shall constitute an event of default (an "event of default")
(a) Operator's failure to pay any user charges when due and payable
(otherwise than as permitted under Section 5.03) and the continuation of the
failure for sixty (60) days after written notice from Owner;
(b) Operator's failure to observe and perform any of the terms,
covenants, conditions, limitations or agreements under this Agreement on
Operator's part to be observed or performed (except the obligation described in
paragraph (a) of this Section) and the continuation of the failure for a period
of sixty (60) days after notice from Owner specifying the nature of the failure.
If the event of default is curable but Operator is unable, exercising due
diligence, to cure the default within sixty (60) days after such notice, so long
as Operator shall commence and diligently prosecute the curing of the default,
the Operator shall have a period of one hundred twenty (120) days from the date
notice of default shall have been given by Owner within which to cure the
default. Operator shall have such additional time for compliance with
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the requirements described in Article 10 as may be granted by the applicable
governmental authorities having jurisdiction, provided that Operator shall
proceed diligently and that compliance may be delayed without the incurrence of
any lien, charge or liability of any kind against the Existing Plant and without
subjecting Owner to any liability, civil or criminal. If Operator is unable,
exercising due diligence, to cure a default in the rebuilding of the steam
boilers and related apparatus and equipment within such 120 day period, Operator
shall have a period of one (1) year from the date notice of default shall have
been given by Owner (exclusive of delays caused by force majeure and other
reasons beyond the reasonable control of Operator) within which to cure the
default so long as Operator shall diligently prosecute the curing of the
default; provided, however, that delays caused by force majeure or by reasons
beyond the reasonable control of Operator shall not extend the period of cure
beyond two (2) years from the date notice of default shall have been given by
Owner to Operator.
(c) Operator shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or any future federal bankruptcy
code or any other present or future federal, state or other bankruptcy or
insolvency statute or law (collectively in this Article "insolvency laws"), or
shall seek, consent to or acquiesce in the appointment of any bankruptcy or
insolvency trustee, receiver or liquidator of Operator or of all or any
substantial part of its properties or the Facility;
(d) The commencement of any action, case or proceeding ("proceeding")
against Operator seeking (i) any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any insolvency
laws, or (ii) the appointment, without the consent or acquiescence of Operator,
of any trustee, receiver or liquidator of Operator or of all or substantially
all of its properties or the Facility, and the proceeding shall continue
undismissed or unstayed for a period of ninety (90) days;
(e) Operator shall abandon the Existing Plant;
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(f) The termination of the Steam Contract for any reason other
than the default of Owner; and
(g) The termination of the Lease Agreement for any reason other
than the default of Owner.
Each notice to Operator pursuant to this Section 20.01 shall also be given to
the holders of a Permitted Mortgage, as defined in Article 23 of the Lease
Agreement, who shall have been identified in a written notice by the Operator to
the Owner, at the address of the holder stated in the Operator's notice to
Owner.
Section 20.02. Remedies on Default.
(a) Upon any one or more events of default, Owner may, at its option,
at any time thereafter, give written notice to Operator specifying the event or
events of default and stating that this Agreement shall terminate on the date
specified in the notice, which shall be at least ten days after the giving of
the notice. The notice of termination shall also be given to the holders of a
Permitted Mortgage described in Section 20.01. Upon the date specified in the
notice, this Agreement and all rights of Operator under this Agreement shall
terminate. The termination of this Agreement by Owner shall not relieve Operator
of its liability under this Agreement, which shall survive.
(b) Upon termination of this Agreement pursuant to this Section,
Operator shall surrender the use and operation of the Existing Plant to Owner.
Owner, upon, or at any time after, the termination of this Agreement, without
additional notice and without prejudice to any other rights and remedies it
shall have at law or in equity, may occupy, use and operate the Existing Plant,
and remove from it Operator, its agents, employees, servants, licensees, and
other persons, firms or corporations and all or any of its or their property, by
force or otherwise, without being liable for damages for such action.
(c) Upon Owner's termination of this Agreement:
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(i) Operator, until the end of what would have been the term of
this Agreement in the absence of termination, shall be liable to Owner, for
damages for Operator's default, which shall include, without limitation,
all reoccupation costs, operating expenses, legal expenses and reasonable
attorneys' fees;
(ii) Owner shall be entitled to recover damages from Operator, by
separate action, actions or proceedings, annually or at such other time or
times when the annual user charges provided for in Section 5.01(a) would
have been payable under this Agreement if it were still in effect.
(d) Nothing in this Article shall limit or prejudice the right of
Owner to prove and obtain damages in an amount equal to the maximum allowed by
any statute or rule of law in effect at the time those damages are to be proved,
whether or not that amount is greater than the amount provided by this Article.
(e) Upon any one or more events of default, or whenever and for so
long as Owner, in its reasonable judgment, deems it necessary (whether or not an
event of "force majeure" exists) (i) to preserve its property and the property
of its Ancillary Customers, (ii) to avoid injury to persons or (iii) to permit
the continued comfortable use and occupation of its buildings and structures and
those of its Ancillary Customers which are supplied steam by the Operator (any
of the circumstances described in the preceding clauses (i), (ii) and (iii), an
"emergency"), Owner may also, at its option, at any time during the continuance
of such default or emergency, immediately assume operating control of the
Existing Plant and may continue operating control until the termination of such
default or emergency, Owner's election to discontinue operating control or
Owner's termination of the Agreement, whichever occurs first. Owner's election
to assume operating control of the Existing Plant shall be communicated to the
Operator by delivery of written notice or delivery of telephonic notice
confirmed in writing within 24 hours. Thereafter, Owner shall be entitled to the
immediate operation and use of the Existing Plant and Owner may occupy, use and
operate the Existing Plant and remove from it Operator, its agents, employees,
servants, licensees and other persons, firms or corporations and
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all or any of its or their property by force or otherwise, without being liable
for damages for such action.
Owner may at any time discontinue operating control of the Existing
Plant on 30 days written notice to the Operator stating the effective date of
its discontinuance. Upon the effective date of Owner's discontinuance of
operating control of the Existing Plant, Operator shall resume the operation of
the Existing Plant in accordance with the terms, conditions, covenants and
provisions of this Agreement. Owner may require, as a condition to Operator's
resumption of operation of the Existing Plant, that Operator shall have cured
all curable defaults and shall have provided Owner with the guaranty or other
security required by subparagraph (f) of Section 7.01.
Upon Owner's assumption of operating control of the Existing Plant or
upon its termination of this Agreement, Owner may, but shall not be obligated
to, operate the Existing Plant to supply its steam requirements and the steam
requirements of its Ancillary Customers. Owner's assumption of operating control
of the Existing Plant or Owner's termination of this Agreement shall not relieve
Operator of its obligations to Owner pursuant to the Steam Contract, except to
the extent such assumption prevents Operator from the performance of its
obligations under the Steam Contract.
All reasonable costs, expenses and obligations of every kind and
nature whatsoever relating to the Existing Plant, whether in its operation or in
its maintenance in the state of readiness required under this Agreement,
incurred by the Owner after its assumption of operating control of the Existing
Plant, or after its termination of this Agreement, shall (unless the Owner would
have been responsible for such costs under this Agreement regardless of whether
it assumed operating control) be offset against all sums or amounts, if any,
payable by Owner to Operator under the Steam Contract. If and to the extent that
Owner operates the Existing Plant to supply its steam requirements and the steam
requirements of its Ancillary Customers, its obligations to Operator, if any, to
pay for steam pursuant to the Steam Contract shall be reduced by the Owner's
production cost of steam available for the Owner's distribution
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system as it leaves the Existing Plant, excluding costs attributable to
distribution which will include but not be limited to the applicable salary,
operating, equipment, overhead and depreciation costs of such distribution
system, as conclusively determined by the Owner's independent certified public
accountants.
(f) Notwithstanding anything to the contrary contained in this Section
20.02, Owner (i) shall not have the right to assume operating control of the
Existing Plant because of non-material defaults in the operation and maintenance
of the Existing Plant and (ii) shall not have the right to terminate this
Agreement because of an event of default described in paragraph (b) of Section
20.01 (other than defaults which can be cured or satisfied by the payment of
money and any default in the rebuilding of the steam boilers and related
apparatus and equipment pursuant to Section 7.01) unless the default shall be a
material default; provided, however, that the limitation of Owner's remedies of
the assumption of operating control of the Existing Plant or the termination of
this Agreement imposed by this paragraph (f) shall not apply if the default of
Operator would subject Owner or its Ancillary Customers to any liability, costs,
fines or penalties under applicable law, including the requirements described in
Article 10.
Section 20.03. Upon any breach or threatened breach by Operator of any of
the agreements, terms, covenants or conditions contained in this Agreement,
Owner may enjoin the breach or threatened breach and may invoke any right and
remedy allowed at law, in equity, by statute, or otherwise.
Section 20.04. Each right and remedy under this Article shall be in
addition to every other right or remedy provided for in this Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, for the
defaults enumerated in this Agreement or for any other breach of this Agreement,
including, without limitation, the right to recover damages for breach of this
Agreement, provided, however, that Owner shall have no right to terminate this
Agreement, the Steam Contract or the Lease Agreement (collectively the
"Agreements"), except as expressly provided in the Agreements. Each right and
remedy shall be cumulative and the
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exercise by Owner of any one or more of its rights or remedies shall not
preclude the simultaneous or later exercise by the Owner of any or all other
rights or remedies it may have.
Section 20.05. This Article shall survive any termination or
expiration of this Agreement.
Section 20.06. Owner may, at its option, from time to time, commence
actions to recover any user charges or damages and nothing in this Agreement
shall be deemed to require Owner to await the date this Agreement would have
expired had there been no default by Operator or no termination by owner.
Section 20.07. Owner and Operator agree to execute and deliver a
Consent and Agreement with respect to every Permitted Mortgage.
ARTICLE 21
WAIVERS
Section 21.01. Waivers. No failure by the Owner or the Operator to
insist upon the strict performance of any agreement, term, covenant or condition
of this Agreement or to exercise any right or remedy upon a breach of any of
them, and no acceptance of full or partial payment during the continuance of any
breach, shall constitute a waiver of the breach or of the agreement, term,
covenant or condition. No agreement, term, covenant or condition to be performed
or complied with by the Operator or the Owner, and no breach of any of them,
shall be waived, altered or modified except by a written instrument executed by
the Owner or the Operator, as the case may be. No waiver of any breach shall
affect or alter this Agreement, and each and every agreement, term, covenant and
condition of this Agreement shall continue in full force and effect with respect
to any other existing or subsequent breach.
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ARTICLE 22
REPRESENTATIONS
Section 22.01. Except as expressly provided in Sections 9.03, 9.04 and
10.01, no representation, statement, or warranty, express or implied, has been
made by Owner as to the condition of the Existing Plant, or its permitted use by
Operator for the purposes of this Agreement under applicable laws, ordinances
and regulations ("the regulations"). Except as expressly provided in Sections
9.03, 9.04 and 10.01, or except to the extent that the regulations are
applicable solely to the particular use of the Existing Plant by Owner after the
Term Commencement Date, Operator assumes all responsibility for compliance with
the regulations, and Owner shall have no liability or responsibility or any
defect in the Existing Plant or for any limitations upon the use of the Existing
Plant.
ARTICLE 23
FORCE MAJEURE
Section 23.01. If Owner or Operator shall be delayed, hindered in or
prevented from the performance of any act required under this Agreement by
reason of acts of God or a public enemy, strikes, lockouts, riots, injunctions
or other interference through legal proceedings, state, federal or local laws or
regulations or requisitions of any governmental authority ("force majeure"),
performance of that act shall be excused for the period of the delay and the
period for the performance of the act shall be extended for a period equivalent
to the period of the delay, provided the party delayed shall give the other
party written notice and full particulars of the force majeure within a
reasonable time after the event occurs. The provisions of this Article shall not
excuse Operator from the prompt payment of all user charges under this
Agreement.
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ARTICLE 24
NOTICE
Section 24.01. Every notice, request, demand, consent, approval,
objection, document or other communication authorized or required by this
Agreement shall be in writing and shall be deemed to be effective when delivered
personally or five days after deposited in the U.S. mails, registered or
certified mail, postage prepaid, return receipt requested, addressed to the
other party at the following address:
To Operator:
Project Orange Associates, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
and
▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
Kronish, Lieb, Weiner & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. and
To the holders of a Permitted Mortgage identified, and at the
address stated, in a written notice by the Operator to the Owner
To any guarantor of Operator's obligations under Section 7.01 at
the address stated in a written notice by the guarantor to Owner
To Owner:
Syracuse University
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-▇▇-
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Senior Vice President for Business and Finance or
Successor
with a copy to:
Bond, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
or to such other address as either party may designate by notice given from time
to time in accordance with this Section. A notice to change an address shall be
effective upon receipt by the other party.
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ARTICLE 25
GOVERNING LAW
Section 25.01. This Agreement and the performance of it shall be
governed, interpreted, construed and regulated by the laws of the State of New
York.
ARTICLE 26
PARTIAL INVALIDITY
Section 26.01. If any term, covenant, condition or provision of this
Agreement, or the application of it to any person or circumstance, shall be
invalid or unenforceable, the remainder of this Agreement, or the application of
that term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected and every other term,
covenant, condition and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law.
ARTICLE 27
INTERPRETATION
Section 27.01. Wherever the singular number is used in this Agreement
the same shall include the plural, and the masculine gender shall include the
feminine and neuter genders, and vice versa, as the context shall require. This
Agreement may be executed in several counterparts, each of which shall be an
original, but all of which shall constitute one and the same instrument.
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ARTICLE 28
BINDING EFFECT
Section 28.01. Except as expressly provided otherwise in this
Agreement, the covenants, conditions and agreements contained in this Agreement
shall bind and inure to the benefit of Owner and Operator and their respective
successors and assigns.
ARTICLE 29
NO ORAL MODIFICATION - ENTIRE AGREEMENT
Section 29.01. All prior understandings and agreements between the
parties with respect to the subject matter of this Agreement (including the
Prior Agreement) are merged within this Agreement, which alone fully and
completely sets forth the understanding of the parties with respect to such
subject matter. Operator is not relying on any representation or agreement other
than those set forth in the Agreements. This Agreement may not be changed or
terminated orally or in any manner other than by a written agreement signed by
the party against whom enforcement is sought. No mutual termination or mutual
cancellation of this Agreement or termination of this Agreement by Operator
shall be of any force or effect unless approved in writing by the holders of a
Permitted Mortgage, as defined in Article 23 of the Lease Agreement.
ARTICLE 30
HEADINGS AND TABLE OF CONTENTS
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Section 30.01. The headings of the Articles and Sections of this
Agreement are for convenience of reference only and do not define, limit or
describe the intent of this Agreement or in any way affect this Agreement or the
interpretation of it.
Section 30.02. The table of contents preceding this Agreement is for
the purpose of convenience of reference only and is not to be deemed, construed
or interpreted in any way to be part of this Agreement.
ARTICLE 31
WAIVER OF JURY TRIAL AND COUNTERCLAIMS
Section 31.01. The parties waive a trial by jury of any and all issues
in any action or proceeding between them or their successors or assigns
connected with or arising out of this Agreement or any of its provisions.
ARTICLE 32
MEMORANDUM OF AGREEMENT
Section 32.01. The parties will, at the request of either one,
promptly execute duplicate originals of an instrument, in recordable form,
setting forth a description of the Existing Plant, the terms and any other
portions of this Agreement, except the user charges, as either party may
request.
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ARTICLE 33
TERMINATION
Section 33.01. If the guaranty by the Approved Operator required by
Section 7.01 of this Agreement shall not be delivered to Owner by March 15,
1990, Owner may, upon fifteen days written notice to Operator, terminate this
Agreement.
Section 33.02. The obligations of the parties under this Agreement are
contingent upon the approval of this Agreement by the Board of Trustees of
Owner. If such approval is not
granted by March 5, 1990, either party may terminate this Agreement upon fifteen
days written notice to the other.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers.
SYRACUSE UNIVERSITY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
___________________________________
PROJECT ORANGE ASSOCIATES, L.P.
By: G.A.S. Orange Partners, L.P.,
its general partner
By: G.A.S. Orange Development, Inc.
its general partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
___________________________________
Title: President
_______________________________
-▇▇-
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ )
) ss.:
COUNTY OF ONONDAGA )
On this ____ day of February, 1990, before me personally came ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇ to me known, who being by me duly sworn, did depose and say that he
resides in Cazenovia, New York, that he is a Senior Vice President of SYRACUSE
UNIVERSITY, the corporation described in and which executed the above
instrument; that he knows the seal of the corporation; that the seal affixed to
the instrument is the corporate seal; and that he signed his name to the
instrument.
__________________________
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF _________)
On this ____ day of February, 1990, before me personally came ▇▇▇▇
▇▇▇▇▇▇ to me known, who being by me duly sworn, did depose and say that he
resides in New York, New York, that he is the President of G.A.S. ORANGE
DEVELOPMENT, INC., the General Partner of G.A.S. Orange Partners, L.P., which is
the General Partner of Project Orange Associates L.P., the partnership described
in this instrument, and that he had authority to sign this instrument and he
acknowledged to me that he executed the instrument as the act and deed of the
partnership.
__________________________
Notary Public
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