Exhibit 10.27.1
AMENDED AND RESTATED PROJECT SERVICES AND DEVELOPMENT AGREEMENT
by and between
GRAYS FERRY COGENERATION PARTNERSHIP
as OWNER,
and
PHILADELPHIA UNITED POWER CORPORATION
as OPERATOR
dated as of September 17, 1993
SCHUYLKILL STATION PROJECT
AMENDED AND RESTATED PROJECT SERVICES AND DEVELOPMENT AGREEMENT
Index
ARTICLE 1 3
DEFINITIONS 3
ARTICLE 2 9
SCOPE OF OPERATOR'S SERVICES 9
2.1 Phase I Mobilization 9
2.2 Phase II Mobilization 9
2.3 Continuous Operation 10
2.4 Proper Maintenance 10
2.5 Compliance 11
2.6 Site Maintenance 11
2.7 Maximum Efficiency 11
2.8 Safety Procedures 11
2.9 Scope of Services 12
2.10 Revise Manuals 12
2.11 Provisions 12
2.12 Mobilization Period Fees 13
2.13 Project Manager 13
ARTICLE 3 13
OWNER'S RESPONSIBILITIES 13
3.1 Acceptance of Project 13
3.2 Spare Parts Inventory 14
3.3 Provision of Project Facilities 14
3.4 Site Services 14
3.5 Approvals and permits 14
3.6 Access to Project Documents 14
3.7 SCR System 15
3.8 CO Catalyst System 15
ARTICLE 4 15
OPERATION OF THE PROJECT 15
4.1 Party Representatives 15
4.2 Visits and Reviews by Owner 15
4.3 Annual Operating Plan 16
4.4 Management Coordination and Planning 17
4.5 Unscheduled Maintenance 17
4.6 Maintenance During Warranty 17
ARTICLE 5 18
TERM: TERMINATION AND DEFAULT 18
5.1 Initial Term and Renewal 18
5.2 Default by Owner 18
5.3 Default by Operator 18
5.4 Remedy Upon Default by Owner 19
5.5 Remedies for Failure to Achieve Performance Standards 20
5.6 Termination for Uncontrollable Circumstances 21
5.7 Rights and Remedies 21
5.8 Determination of Performance Standards and Liquidated
Damages 21
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ARTICLE 6 22
OPERATOR'S ANNUAL FEES 22
6.1 Annual Fee 22
6.2 Adjustment of Annual Fee for Steam Purchased 24
6.3 Time for Payment 26
6.4 Electric Capacity Fee 27
ARTICLE 7 27
INTENTIONALLY OMITTED 27
ARTICLE 8 27
REIMBURSEMENT 27
8.1 Reimbursement Costs 27
8.2 Time for Payment 28
ARTICLE 9 28
EQUITY DISTRIBUTION LIMITATIONS 28
9.1 Equity Distribution Limitations 28
ARTICLE 10 29
BILLING AND PAYMENTS 29
10.1 Invoices 29
10.2 Owner's Dispute 29
10.3 Operator's Dispute 29
10.4 Dispute Resolution 29
ARTICLE 11 30
FORCE MAJEURE; STRIKES 30
11.1 Effect of Force Majeure 30
11.2 Strikes 30
ARTICLE 12 30
INSURANCE 30
12.1 Insurance Coverage 30
12.2 Waiver of Subrogation 31
ARTICLE 13 31
DISPUTE RESOLUTION 31
13.1 Procedure 31
13.2 Binding Arbitration 32
ARTICLE 14 33
PAYMENT OF FINES AND PENALTIES 33
ARTICLE 15 33
DEFECTIVE WORK 33
15.1 Work to be Fit 33
15.2 Consequence of Breach 33
15.3 Vendor Warranties 34
ARTICLE 16 34
OPERATOR'S REPRESENTATIONS 34
16.1 Corporate Standing; Authorization 34
16.2 Enforceability 34
16.3 No Violation of Law 34
16.4 Litigation 34
16.5 Qualifications 34
16.6 Waiver of Liens 35
16.7 Approvals and Permits 35
16.8 General 35
ARTICLE 17 35
OWNER'S REPRESENTATIONS 35
17.1 Good Standing; Authorization 35
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17.2 Enforceability 35
17.3 No Violation of Law 36
17.4 Litigation 36
17.5 Approvals and Permits 36
17.6 Contracts 36
17.7 General 36
ARTICLE 18 36
INDEMNIFICATION 36
18.1 Operator Indemnity 36
18.2 Owner Indemnity 37
18.3 Cooperation Regarding Claims 37
ARTICLE 19 38
OPTION TO PURCHASE 38
19.1 Option to Acquire Interest 38
19.2 Effect on Annual Fee 39
19.3 Option to Acquire Entire Project 39
19.4 Right of First Purchase 40
19.5 Ownership Limitations 40
19.6 Status 41
19.7 Dividend Restriction 41
ARTICLE 20 41
MISCELLANEOUS PROVISIONS 41
20.1 Entire Agreement 41
20.2 Further Assurances 41
20.3 Amendments 42
20.4 Joint Effort 42
20.5 Terminology 42
20.6 Notice 42
20.7 Severability 43
20.8 Assignment 43
20.9 No Waiver 43
20.10. Applicable Law 43
20.11 Successors and Assigns 43
20.12. Appendices 44
20.13 Relationship of Parties 44
20.14 Survival of Agreements 44
20.15 Dollar Amounts 44
20.16 Business Days 44
20.17 Counterparts 44
20.18 Overdue Obligations to Bear Interest 45
20.19 Proprietary Information 45
20.20 No Consequential Damages 45
20.21 Environmental Liability 46
20.22 Owner's Approval 47
APPENDICES
Appendix 1 Scope of Services
Appendix 2 Availability Standards (to be attached)
Appendix 3 Intentionally Deleted
Appendix 4 Penn Event: Adjustment in Minimum Take
Appendix 5 Fair Market Value
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AMENDED AND RESTATED PROJECT SERVICES AND DEVELOPMENT AGREEMENT
THIS AMENDED AND RESTATED PROJECT SERVICES AND DEVELOPMENT AGREEMENT
is dated as of September 17, 1993, by and between GRAYS FERRY COGERNERATION
PARTNERSHIP, a Pennsylvania general partnership having its principal place
of business at ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇,
hereinafter called "Owner," and PHILADELPHIA UNITED POWER CORPORATION, a
formerly known as UNITED THERMAL DEVELOPMENT CORPORATION, a Delaware
corporation having its principal place of business at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, hereinafter called "Operator" or "PUPCO".
BACKGROUND TO RESTATEMENT
Philadelphia Thermal Energy Corporation ("PTEC"), PUPCO, Adwin
Equipment Company ("Adwin"), O'Brien Environmental Energy Systems, Inc.
("O'Brien") and Owner are parties to some or all of a series of agreements,
each dated November 11, 1991, as follows (collectively, "Original
Agreements"):
(1) Steam Venture Agreement by and among O'Brien, Adwin, PUPCO and
PTEC ("Original Venture Agreement");
(2) Site Lease by and between PTEC and Owner ("Original Lease");
(3) Steam Purchase Agreement by and among PTEC, Adwin, O'Brien and
Owner ("Original Purchase Agreement");
(4) Project Services and Development Agreement by and between Owner
and PUPCO ("Original Development Agreement");
(5) Penn Selection Agreement by and among PTEC, PUPCO, Adwin, O'Brien
and Owner ("Original Penn Agreement"); and
(6) Dock Facilities by and among PTEC, Owner and Philadelphia Thermal
Development Corporation ("Original Dock Agreement").
The Original Agreements set forth the terms and conditions under which
Adwin and O"Brien formed Owner for the purposes of constructing and owning
a Cogeneration Facility (as defined hereafter), which will be located on a
portion of PTEC's Schuylkill Station site. The Cogeneration Facility will
produce steam and electrical power, and will be operated and maintained by
PUPCO. Steam from the Cogeneration Facility will be purchased by PTEC for
use in PTEC's steam distribution system. The parties have subsequently
agreed to terminate the Original Penn Agreement.
The Original Agreements contemplated that the Cogeneration Facility
would consist of a Frame 7 Gas Turbine, a Heat Recovery Steam Generator, a
steam turbine and a high pressure auxiliary boiler with a minimum 5000,000
lbs/hour of capacity (No. 6 oil rating) which would be capable of burning
both No. 6 oil and natural gas. The Original Agreements further
contemplated that the auxiliary boiler would, under certain circumstances,
be constructed on an accelerated basis prior to the remainder of the
equipment described above.
Adwin and O'Brien have now requested, and PTEC and PUPCO have agreed,
that the installation of the Cogeneration Facility ("Project") be
restructured in certain ways, including the development of the Project in
two discrete phases, consisting of (i) installation in Phase I of a high
pressure auxiliary boiler with a 40 megawatt steam turbine ("Phase I
Project"), and (ii) installation in Phase II of the Frame 7 Gas Turbine and
related equipment ("Phase II Project"). The parties intend that the Phase
I Project be completed on an expedited basis.
The parties have further agreed to amend certain of the Original
Agreements and to restate those Original Agreements, as so amended, in
their entirety, to reflect the changes to the Project described above.
Now, therefore, intending to be legally bound hereby, the parties
hereby amend the Original Development Agreement and restate the Original
Development Agreement in its entirety, as follows:
RECITALS
Owner is a general partnership created by a subsidiary of O'Brien
Energy Systems, Inc., a Delaware corporation, and Adwin, and Pennsylvania
corporation, for purposes of designing, constructing and owning a
cogeneration facility to produce steam and electricity ("Project"). The
steam will be sold to PTEC, an affiliate of Operator, pursuant to an
amended and Restated Steam Purchase Agreement of even date herewith
("Amended Steam Purchase Agreement"), and Owner is leasing space for the
cogeneration facility in PTEC's Schuylkill Station plant at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ pursuant to an Amended and Restated
Site Lease between Owner and PTEC of even date herewith. Owner now wishes
to retain Operator to operate and maintain the cogeneration facility.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and agreement
of the Parties herein expressed, and intending to be legally bound, the
Parties hereby agree as follows:
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ARTICLE 1
DEFINITIONS
In construing this Agreement and the Appendices hereto, the following
terms shall have the meanings herein assigned to them:
"Acceptance Schedule" means the schedule indicating defects in the
Project and setting out the achieved levels of performance under the
applicable tests contained in the Turnkey Construction Agreement, as
further described in Section 3.1.
"Agreement" shall mean this Amended and Restated Project Services and
Development Agreement (including all Appendices hereto), as it may be
amended, restated or supplemented from time to time in accordance herewith.
"Agreement Date" means the date appearing on the first page of this
Agreement, as of which date this Agreement was executed.
"Agreement Year" means (i) in the case of the first Agreement Year,
the period commencing on the Phase I Project Acceptance Date and ending on
the first anniversary of the Phase I Project Acceptance Date, and (ii) in
the case of each succeeding Agreement Year, the twelve-month period
beginning on an anniversary date of the Phase I Project Acceptance Date and
ending on the next succeeding anniversary date of the Phase I Project
Acceptance Date.
"Annual Operating Plan" means the annual plan for the operation and
maintenance of the Project as described in Section 4.3 hereof.
"Applicable Agreement Year" has the meaning set forth in Section
6.1(e).
"Approvals and Permits" means all approvals, permits, licenses,
certificates, inspections and authorizations required by any Governmental
Authority arising out of, incident to or related to the operation and
maintenance of the Project.
"Auxiliary Boiler" means the high-pressure boiler to be constructed
by Owner as Phase I of the Project pursuant to the Steam Venture Agreement.
"Change in Law" means (a) the adoption, promulgation or modification
after the Agreement Date of (i) any federal statute, regulation, ruling or
executive order not adopted, promulgated or modified or officially
published in The Congressional Record or The Federal Register on or before
the Agreement Date, or (ii) any State, local or administrative statute,
ordinance, regulation or executive order that was not so adopted,
promulgated or modified on or before the Agreement Date, or (b) the
imposition by a Governmental Authority of any material conditions in
connection
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with the issuance, renewal, or modification of any official permit, license
or approval after the Agreement Date, which in the case of either (a) or
(b) establishes requirements affecting the operation or maintenance of the
Project materially more burdensome than the most stringent requirements (x)
in effect as of the Agreement Date, (y) agreed to in any applications of
Owner for official permits, licenses or approvals pending as of the
Agreement Date or (z) contained in any official permits, licenses or
approvals with respect to the Project obtained as of the Agreement Date;
provided, however, that a change in any income tax law shall not constitute
a Change in Law hereunder.
"Claims" has the meaning set forth in Section 20.21(d) hereof.
"Consumer Price Index Percentage" means the percentage increase in
index points in the Consumer Price Index, All Urban Consumers (CPI-U),
Philadelphia, All Items (1982-84-100) for the period beginning on the last
month of one Agreement Year and ending on the last month of the next
succeeding Agreement Year.
"Construction Contractor" means the contractor retained by owner to
install the cogeneration facility.
"Credit Agreement" is the agreement between Owner and Lender setting
forth the terms of the construction and permanent financing for the
Project.
"Debt Service" means for any period, the amount of principal, interest
and other fees and expenses payable with respect to the indebtedness of
Owner under the Credit Agreement or with respect of any other indebtedness
incurred by Owner to refinance the loan evidenced by the Credit Agreement.
"Dispute" means any claim, dispute, disagreement or other matter in
question between Operator and Owner that arises with respect to the terms
and conditions of this Agreement or with respect to the performance,
nonperformance or breach by Operator or Owner of their respective
obligations under this Agreement.
"Electricity Purchase Agreement" means the agreement between the
Electricity Purchaser and Owner for the sale of the electric output of the
Project, as such agreement may be amended, restated or supplemented from
time to time.
"Electricity Purchaser" means the Philadelphia Electric Company or
another electric utility.
"Energy Revenues" means, for any Agreement Year or other referenced
period, the sum of (a) gross revenues received during such Agreement Year
or other referenced period from all sales of electricity and steam
generated by the Project, and (b) any amount recovered pursuant to any
judgment against, or settlement with, the Electricity Purchaser or the
Steam Purchaser in such
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Agreement Year or other referenced period in respect of any dispute
regarding the amounts due to Owner pursuant to the Electricity Purchase
Agreement or the Steam Purchase Agreement, net of all reasonable costs of
collecting such amounts.
"Equity Purchase Option" has the meaning set forth in Section 19.1.
"Final Acceptance" shall mean the acceptance of each Phase of the
Project by Owner upon the completion of all Work (except for the furnishing
and installation of Punchlist Items) and receipt from the Construction
Contractor of a true and correct Final Acceptance Certificate, and the
release and waiver by Owner of all claims against the Construction
Contractor relating to the performance of the Work except those claims
arising from or consisting of (a) unsettled claims, (b) claims for breach
of any warranty or guarantee set forth in the Turnkey Construction
Contract, (c) liens or other title exceptions respecting the facility or
any components of the Project or (d) any material breach by the
Construction Contractor of any of the terms of the Turnkey Construction
Contract.
"Final Performance Tests" means the final series of acceptance tests
required by the Turnkey Construction Contract to be completed prior to
Final Acceptance.
"Force Majeure" means the following acts, events or occurrences to the
extent such acts, events or occurrences are beyond the reasonable control
of the affected party and prevent, reduce or materially interfere with the
operation or maintenance of the Project: act of God; war, declared or
undeclared; reasonably unforeseeable Change in Law; fire; labor strike,
walkout or similar labor dispute (official or unofficial) (but excluding a
strike by the employees of Operator limited to the Site); sabotage; the act
of, or failure to act in accordance with the terms hereof by, the other
Party to this Agreement; breakings of or accidents to machinery or
equipment caused directly by an act of God or by the act or omission of a
third party (other than Operator's subcontractor(s)) over whom the affected
party has no control, or any other cause reasonably unforeseeable; provided
that any such act, event or occurrence resulting from the negligence (by
commission or omission) of the affected Party or any of its subcontractors
shall not constitute Force Majeure.
"Fuel" means the oil or natural gas necessary for the formal operation
and maintenance of the Project.
"Fuel Operation Date" means the Phase II Project Acceptance Date
unless construction of the Phase II Project has not been initiated (as
described in Section 9 of the Steam Venture Agreement) within one (1) year
after the Phase I Acceptance Date, in which event the Full Operation Date
will be the Phase I Project Acceptance Date.
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"Gas Turbine" means the Frame 7 combustion turbine portion of the
Project.
"Governmental Authority" means any Federal, state, local, regulatory,
administrative or other governmental authority including any department,
subdivision, commission, board, bureau, agency or instrumentality thereof.
"Heating Degree Days" means the heating degree days for Philadelphia
International Airport as reported by the National Weather Service.
"Interconnection Facilities" means the portions of the interconnection
equipment and other facilities required to connect the Project to the
Electricity Purchaser's electrical supply system which are maintained and
operated by the Electricity Purchaser and any electrical transformers and
associated equipment even if not maintained by Electricity Purchaser.
"Lender" means the institutional lender holding the most senior debt
of the Project from time to time.
"Manuals" means the manuals to be provided by Owner, as the same may
be updated from time to time by Operator pursuant to Section 2.9 hereof,
and such other manual and similar materials as may be required to be
prepared and maintained by Operator with respect to the Project in order to
comply with Requirements of Law.
"Mobilization Period" means the period of initial staffing for
equipment start up and testing preceding the date reasonably estimated by
Owner to be the Project Acceptance Date.
"Operator" means Philadelphia United Power Corporation.
"Owner" means Grays Ferry Cogeneration Partnership.
"Partners" has the meaning set forth in Section 9.2, provided that if
Owner is at any time hereafter a corporation, the term "Partners" as used
throughout this Agreement shall be deemed to refer to Owner's shareholders.
"Party" or "Parties" means Owner and/or Operator.
"Penn Event" means the termination of steam service to the service
location for the University of Pennsylvania at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ (Account
No. 06-1705-3).
"Person" means an individual, corporation, partnership, business
trust, joint venture, company, firm, unincorporated association,
governmental body or any other entity.
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"Phase I" or "Phase I Project" refers to that portion of the Project
which consists of the installation and operation of the Auxiliary Boiler.
"Phase II" or "Phase II Project" refers to that portion of the Project
which consists of the installation and operation of the Gas Turbine and
HSRG, with related equipment.
"Phase I Availability" means the percentage of time the Phase I
Project is available to operate at the capacity established by the Phase I
Final Performance Test, as adjusted for temperature, as determined in
accordance with the formula set forth in Appendix 2A.
"Phase II Availability" means the percentage of time the Gas Turbine
and HRSG components of the Phase II Project are available to operate
together at the capacity established by the Final Performance Test, as
adjusted for temperature, as determined in accordance with the formula set
forth in Appendix 2B.
"Phase I Minimum Take Requirement" means 3.0 million Mlbs., as defined
in, and adjusted pursuant to, the Steam Purchase Agreement.
"Phase II Minimum Take Requirement" means 3.3 million Mlbs., as
defined in, and adjusted pursuant to, the Steam Purchase Agreement.
"Phase I Project Acceptance Date" shall have the meaning assigned to
such term in Section 3.1.
"Phase II Project Acceptance Date" shall have the meaning assigned to
such term in Section 3.1.
"Prime Rate" refers to the rate publicly announced from time to time
by Lender as its prime rate or as that rate offered to its most favored
commercial customers.
"Project" has the meaning given it in the Recitals and includes the
buildings and other structures, fixtures, machinery, equipment, materials
and things of all kinds used in connection with the cogeneration facility
at the Site, and all substitutes, additions, replacements and modifications
thereto. As used herein, the term "Project" refers initially to the Phase
I Project, and, if the Phase II Project is completed, thereafter to the
Phase I Project and the Phase II Project respectively.
"Project Agreements" means the Amended and Restated Steam Purchase
Agreement, the Amended and Restated Steam Venture Agreement, this Agreement
and the Amended and Restated Site Lease.
"PTEC" means Philadelphia Thermal Energy Corporation, the Steam
Purchaser.
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"Punchlist Items" shall mean those finishing items which must be
completed by the Construction Contractor after the Final Acceptance Date,
without which the Project is nonetheless commercially operable.
"Reimbursable Costs" means the costs to be reimbursed by Owner to
Operator pursuant to Section 8.1 hereof.
"Requirements of Law" shall mean any statute, rule, regulation, code,
standard, ordinance or other law of any Governmental Authority and any
order, including an injunction, judgment, writ, award, determination or
decree of any arbitrator, court or other Governmental Authority, in each
case applicable to or binding upon the Project (including the use,
maintenance and operation thereof) or any Party or to which the Project
(including the use, maintenance and operation thereof) or any Party is
subject, including those relating to building, environmental (including
those relating emissions, discharges, disposals and hazardous wastes or
materials), health and safety matters, the giving of notices and access to
the Project.
"Site" means the real property in Philadelphia, Pennsylvania on which
the Project is to be constructed, operated and maintained, as more fully
described in the Site Lease.
"Site Lease" means the Amended and Restated Site Lease, dated the same
date as this Agreement, between Owner and PTEC, as such agreement may be
amended, restated or supplemented from time to time.
"Steam Purchase Agreement" means the Amended and Restated Steam
Purchase Agreement dated the same date as this Agreement between the Steam
Purchaser and Owner for the sale of the steam output of the Project, as
such agreement may be amended, restated or supplemented from time to time.
"Steam Purchaser" means Philadelphia Thermal Energy Corporation.
"Steam Venture Agreement" means the Amended and Restated Steam Venture
Agreement dated the same date as this Agreement among Owner, Operator, and
PTEC, as such agreement may be amended, restated or supplemented from time
to time.
"Substantially Completed" means the stage in the progress of the
construction of the Project when such construction is sufficiently complete
in accordance with the Turnkey Construction Contract to permit normal
commercial operation of the Project for the generation of steam and
electricity.
"Subordinated Annual Fee" has the meaning set forth in Section 6.2.
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"Term" means the term of this Agreement as provided in Section 5.1
hereof and any extensions or renewals thereof.
"Turnkey Construction Contract" means the construction contract
pursuant to which Owner has retained Construction Contractor to install the
Project at the Site.
"Work" shall mean all obligations, duties and responsibilities
assigned to or undertaken by the Construction Contractor pursuant to the
Turnkey Construction Contract.
ARTICLE 2
SCOPE OF OPERATOR'S SERVICES
2.1 Phase I Mobilization. The Phase I Mobilization Period shall
begin on a date specified by Owner to Operator at least six (6) months
prior to the projected Phase I Project Acceptance date, and shall continue
until the Phase I Project Acceptance Date. During the Phase I Mobilization
Period, Operator shall, subject to Owner's review and in conjunction with
the Construction Contractor consistent with the terms of the Phase I
Turnkey Construction Contract, take all actions reasonably necessary or
desirable to prepare the Phase I Project for commercial operation on the
Phase I Project Acceptance Date, including, without limitation:
2.1.1 Hiring the temporary staff and recruiting, hiring
and training the permanent staff and specialists required for the normal
operation and maintenance of the Phase I Project in accordance with this
agreement;
2.1.2 Establishing a system for maintaining the
inventory of spare parts and a system for the provision of all consumables
(other than those to be provided by Owner pursuant to Section 3.4 hereof),
equipment and supplies;
2.1.3 Performing start-up of the Phase I Project during
the start-up phase under the direction of the start-up supervisor and start-
up technicians provided by Construction Contractor under the Phase I
Turnkey Construction Agreement or by Owner, as the case may be; and
2.1.4 Preparing monthly progress reports of such
preparation in a format mutually acceptable Operator and Owner.
2.2 Phase II Mobilization. The Phase II Mobilization period shall
begin on a date specified by Owner to Operator at least six (6) months
prior to the projected Phase II Project Acceptance Date, and shall continue
until the Phase II Project Acceptance Date. During the Phase II
Mobilization Period, Operator shall, subject to Owner's review and in
conjunction with
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the Construction Contractor consistent with the terms of the Phase II
Turnkey Construction Contract, take all actions reasonably necessary or
desirable to prepare the Phase II Project for commercial operation on the
Phase II Project Acceptance Date, including, without limitation:
2.2.1 Hiring the temporary staff and recruiting, hiring
and training the permanent staff and specialists required for the normal
operation and maintenance of the Phase I Project in accordance with this
agreement;
2.2.2 Establishing a system for maintaining the
inventory of spare parts and a system for the provision of all consumables
(other than those to be provided by Owner pursuant to Section 3.4 hereof),
equipment and supplies;
2.2.3 Performing start-up of the Phase II Project during
the start-up phase under the direction of the start-up supervisor and start-
up technicians provided by Construction Contractor under the Phase I
Turnkey Construction Agreement or by Owner, as the case may be; and
2.2.4 Preparing monthly progress reports of such
preparation in a format mutually acceptable to Operator and Owner.
2.3 Continuous Operation. Beginning on each Project Acceptance Date
and throughout the Term of this Agreement, Operator shall operate and
maintain the Project, according to the terms of this Agreement and each
Annual Operating Plan, in such a manner as to maximize operating hours and
net Energy Revenues giving due consideration to (a) avoiding excessive fuel
consumption and other excessive variable costs of electricity and steam
production, (b) generally accepted and sound operating practices, (c) the
design parameters of the Project and (d) the Manuals. Operator shall
arrange schedule maintenance during such periods as will both reasonably
minimize the loss of Energy Revenues and comply with the equipment
manufacturer's recommendations and service bulletins together with the
requirements of the Project Agreements.
2.4 Proper Maintenance. Operator shall maintain the entire Project
at all times properly and in good, clean, orderly condition, and shall
perform all necessary maintenance and clean-up implement necessary repairs
and replacements and purchase and install necessary replacement equipment
or parts of the Project, subject to reimbursement pursuant to Article 8.
Operator shall maintain inventories of replacements, spare parts and
consumables as specified in the Annual Operating Plan. Operator shall
perform normal and customary overhauls of the Project including (after the
Phase II Project Acceptance Date) major overhauls of the Gas Turbine as
prescribed by the equipment manufacturer or as otherwise may be required.
Operator shall contract out the major overhauls of the Gas Turbine through
a competitive bid process to
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a contractor acceptable to owner, Operator and Lender's independent
engineer (if any). Operator shall not make any additions, alterations or
other changes to the Project which would cause a material deviation from
the Annual Operating Plan, or increase operating costs above those set
forth in the Annual Operating Plan, without the written approval of Owner.
Operator covenants that it shall not through its acts or omissions,
knowingly operate or maintain the Project in any manner that impairs
Owner'' ability to obtain recourse against Construction Contractor pursuant
to either Turnkey Construction Agreement, provided that the foregoing
covenant shall not be deemed to expand any rights of recourse which Owner
may have against Construction Contractor pursuant to either Turnkey
Construction Agreement.
2.5 Compliance.
2.5.1 Operator shall operate and maintain the Project in
compliance with all applicable Requirements of Law and all Approvals and
Permits upon each Project Acceptance. Operator furthermore covenants to
perform its obligations hereunder so that Owner is able to comply with its
obligations under the Site Lease and the other Project Agreements.
2.5.2 Owner shall be responsible for ensuring that each Phase
of the Project is capable of complying with all environmental emission
Requirements of Law and all Approvals and Permits prior to Project
Acceptance for each Phase (as hereinafter defined). If the Owner elects to
accept or occupy either Phase of the Project from Construction Contractor
in less than Substantially Completed condition, Owner shall bear the
responsibility, and all costs associated therewith, for bringing that Phase
of the Project into compliance with such Requirements of Law and Approvals
and Permits.
2.6 Site Maintenance. Operator shall maintain the Site in a good,
safe, clean and orderly condition in accordance with the requirements and
restrictions of the Site Lease, to the extent within Operator's control
under the terms of the Site Lease.
2.7 Maximum Efficiency. Consistent with the Manuals, sound operating
and engineering practice and Owner's objective of maximizing the economic
efficiency of Project operations, Operator shall operate and maintain the
project so as to maximize the useful life of the equipment and minimize
downtime for repairs.
2.8 Safety Procedures. Operator shall comply with all safety
procedures whether contained in the Manuals, required by insurance
companies or required by applicable Requirements of Law or the terms of any
Approvals and Permits, reasonably necessary or appropriate to minimize the
likelihood of accidents or injuries to Persons or damage to property on or
about the Site.
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2.9 Scope of Services. Operator shall provide, subject to
reimbursement pursuant to Article 8, full-time office services, including
bookkeeping and secretarial services, together with office equipment,
facilities and supplies as well as other services, according to the
requirements described in Appendix 1 hereto which shall be prepared within
sixty (60) days after execution of the Electricity Purchase Agreement.
2.10 Revise Manuals. Operator shall, as often as necessary in
Operator's reasonable judgment but not less often than annually, revise and
update the Manuals.
2.11 Provisions. In order to satisfy Operator's obligations, Operator
shall provide, or cause to be provided by subcontractors:
2.11.1 All permanent staff, temporary staff and specialists
for the operation and maintenance of the Project. Operator shall be solely
responsible for the screening, hiring, assignment and supervision of all
such personnel.
2.11.2 All spare parts (other than spare parts supplied by
Owner under Section 3.2) required for the operation and maintenance of the
Project, subject to reimbursement pursuant to Article 8. Spare parts shall
be held in inventory for immediate replacement of parts required to
maintain the operation of the Project. The inventory of spare parts shall
be specified in the Annual Operating Plan which is approved by Owner.
Owner may inspect inventory upon 24 hours prior notice to evaluate the
quality of goods and stock levels.
2.11.3 All consumables (other than consumables supplied by
Owner under Section 3.4) required for the operation and maintenance of the
Project, subject to reimbursement pursuant to Article 8. The inventory of
consumables shall be specified in the Annual Operating Plan which is
approved by Owner.
2.11.4 Policies of insurance in accordance with Article 12
hereof, subject to reimbursement pursuant to Article 8.
2.11.5 The repair and/or replacement of any broken or damaged
parts or components of the Project, including the installation and
replacement of spare parts.
2.11.6 The preparation, generation, maintenance and storage at
the Site of all operating and maintenance logs, performance data, records,
cost data and scheduled reports on behalf of owner, such information to be
prepared, generated and maintained in accordance with the applicable
requirements of the Project Agreements.
2.11.7 Performance of the obligations of the Project Operator
as described in Section 2(c) of the Dock Facility
12
Service Agreement of even date herewith among Owner, PTEC and Philadelphia
Thermal Development Corporation.
2.12 Mobilization Period Fees.
2.12.1 During the each of the Phase I Mobilization Period and
the Phase II Mobilization Period, Owner shall be responsible for
reimbursing Operator for all costs of staffing and start-up in accordance
with a phased staffing plan to be agreed between the Parties and for a fee
equal to Twenty-five Thousand Dollars ($25,000) per month to a maximum
aggregate total fee for each Mobilization Period of One Hundred Fifty
Thousand $(150,000) Dollars.
2.12.2 Notwithstanding the foregoing, Operator shall only be
entitled to both Mobilization Fees set forth above if the Phase II
Mobilization Period does not begin within six (6) months after the
conclusion of the Phase I Mobilization Period.
2.13 Project Manager. Operator shall have the right to hire a project
manager for the Project (the "Project Manager") beginning on a date up to
nine (9) months prior to the projected Phase I Project Acceptance Date.
Owner shall be responsible for all costs associated with the hiring and
employing, including, but not limited to, recruitment costs, salary,
benefits and any applicable relocation expenses or bonuses, of the Project
Manager by Operator that are incurred by the Operator prior to the Phase I
Project Acceptance Date. Owner shall have the right to approve the Project
Manager, such approval not to be unreasonably withheld or withheld for
reasons other than the qualifications of the individual.
ARTICLE 3
OWNER'S RESPONSIBILITIES
3.1 Acceptance of Project. The responsibility for the continuous
operation of the Project, as provided in Section 2.2, shall belong to
Operator, and Operator shall accept and shall be deemed to have accepted
such responsibility for each Phase of the Project, (i) on the date ("Phase
I Project Acceptance Date") which is the date of Phase I final Acceptance
Date") which is the date of Phase I Final Acceptance, or in the event Phase
I Final Acceptance under the Phase I Turnkey Construction Agreement does
not occur, the date Owner takes over the operation of the Phase I Project
and commences to utilize the Phase I Project for its intended use after the
termination of the Phase I Turnkey Construction Agreement by Owner ("Phase
I Project Acceptance"), and (ii) on the date ("Phase II Project Acceptance
Date") which is the date of Phase II Final Acceptance, or in the event
Phase II Final Acceptance under the Phase II Turnkey Construction Agreement
does not occur, the date Owner takes over the operation of the Phase II
Project and commences to utilize the Phase II Project for its intended use
after the termination of the Phase II Turnkey Construction Agreement by
Owner ("Phase II
13
Project Acceptance"). Any defects in either Phase of the Project and the
performance levels achieved in each set of Final Performance Tests of the
Project shall be noted on a schedule (the "Acceptance Schedule") to be
executed by Owner and Operator as of the date of Final Acceptance of each
Phase. If Owner elects to accept or occupy either Phase of the Project
from Construction Contractor in a less than Substantially Completed
condition, appropriate adjustments may be made in the Annual Operating
Plans to reflect increased costs reasonably expected to be incurred by
Operator in operating the Project in a less than Substantially Completed
condition and such adjustments shall be included on the Acceptance
Schedule. Execution of the Acceptance Schedule shall not constitute a
waiver or release of any claim, right or remedy which Owner may have
against Construction Contractor pursuant to either Turnkey Construction
Agreement nor shall it otherwise affect the obligations of the Parties
pursuant hereto.
3.2 Spare Parts Inventory. Owner will establish and provide an
inventory of spare parts containing such items and quantities thereof as
are reasonably recommended by the equipment vendor consistent with the
objectives of the Annual Operating Plan and are reasonably acceptable to
Operator.
3.3 Provision of Project Facilities. Owner shall provide Operator
with the facilities described in the Site Lease and with customary office
and related facilities. The facilities shall be furnished and equipped by
Owner to recognized standards to enable Operator to fulfill its obligations
under this Agreement.
3.4 Site Services. Owner shall provide the following site services
as necessary for the operation and maintenance of the Project in accordance
with Section 2.6, at no cost to Operator: ingress and egress to the Site;
fuel; demineralized water; waste water disposal; standby power;
electricity; and other Site services and materials of a similar nature
reasonably required for the operation and maintenance of the Project and
not required to be provided by Operator under Article 2 hereof. Operator
shall provide one, some or all of the Site services described in this
Section as requested in writing by Owner, provided that Owner shall
reimburse Operator for the actual cost incurred by Operator in providing
such Site services.
3.5 Approvals and permits. Owner shall be responsible for obtaining
and maintaining all Approvals and permits necessary for the Project to be
legally authorized to operate. Operator shall provide full and reasonable
continuing cooperation in obtaining and maintaining all Approvals and
Permits necessary to permit it to operate the Project. Operator shall
review Owner's applications for accuracy if requested.
3.6 Access to Project Documents. Owner will grant Operator access to
all Project related documents required for the perfor-
14
▇▇▇▇▇ of Operator's responsibilities hereunder. These shall be maintained
in confidence by Operator.
3.7 SCR System. If an SCR System is required for the Project for Nox
control, Owner shall pay for all spare parts and replacement components of
the SCR System and all off-site refurbishment repairs to the SCR System
pursuant to separate agreement with the vendor of the SCR System, such
agreement to be reasonably acceptable to Operator. At Owner's option,
Operator shall accept an assignment of the agreement(s) with the vendor of
the SCR System and shall perform the obligations of Owner thereunder from
and after the effective date of such assignment, provided that (i) Owner
shall reimburse Operator for the actual costs incurred by Operator in
performing such obligations and (ii) Owner shall be entitled to require
Operator to reassign the SCR System Agreement(s) to Owner at any time upon
reasonable notice to Operator.
3.8 CO Catalyst System. If a CO Catalyst System is required for the
Project for CO control, Owner shall pay for all spare parts and replacement
components of the CO Catalyst System and all off-site refurbishment repairs
to the CO Catalyst System pursuant to separate agreement with the vendor of
the CO Catalyst system, such agreement to be reasonably acceptable to
Operator. At Owner'' option, Operator shall accept an assignment of the
agreement(s) with the vendor of the CO Catalyst System and shall perform
the obligations of owner thereunder from and after the effective date of
such assignment, provided that (i) Owner shall reimburse Operator for the
actual costs incurred by Operator in performing such obligations and
(ii) Owner shall be entitled to require Operator to reassign the CO
Catalyst System Agreement(s) to Owner at any time upon reasonable notice to
Operator.
ARTICLE 4
OPERATION OF THE PROJECT
4.1 Party Representatives. Within five (5) days after the beginning
of each Mobilization Period, each Party shall notify the other in writing
of its designation of an individual to act as its representative with
respect to matters which may arise with respect to the operation of the
Project. At any time after the initial designation by any Party of its
representative, such Party may designate a successor representative by
similar written notice to the other Party.
4.2 Visits and Reviews by Owner. With reasonable prior notice, Owner
shall have the right to regularly inspect the Site and the right to inspect
the Gas Turbine during periods of extended maintenance. Owner shall also
have the right, at least once annually, or, more frequently with reasonable
prior notice during hours which any designated representative of Operator
is on the Site, to inspect the Site and any part or component of the
15
Project, and all other things pertaining to the operation of the Project,
and to receive a complete tour and briefing on the Project and Project
operations by Operator. Owner and its representative shall also have the
right to take visitors, after reasonable notice to Operator, on the Site
and into the Project to observe the various services which Operator
performs, provided that such visits shall be pre-approved by the Operator
and conducted in a manner so as to minimize interference with Operator's
obligations hereunder. Operator will provide daily production reports
which will include steam and electrical production and fuel and water
consumption.
4.3 Annual Operating Plan. Not later than forty-five (45) days prior
to the first day of each Agreement year, Operator shall submit to Owner for
approval a proposed Annual Operating Plan for the upcoming Agreement Year.
For the purpose of developing the first Annual Operating Plan, within
thirty (30) days of receipt of the Electricity Purchase Agreement and
equipment warranties from Owner, Operator shall use its best efforts to
develop and submit to Owner the first Annual Operating Plan for Owner's
approval. Owner shall provide Operator necessary additional information on
a timely basis. Operator and Owner shall use their best efforts to reach
agreement on the first Annual Operating Plan within ninety (90) days after
Operator's submittal of the first Annual Operating Plan to Owner. If no
agreement can be reached within such ninety (90) day period, then the first
Annual Operating Plan shall be subject to arbitration in accordance with
Section 13.2. The Annual Operating Plan shall describe in detail projected
maintenance and overhaul schedules, capital expenditure requirements,
equipment acquisitions and spare parts and consumables inventories
(including a breakdown of capital items and expense items), hours of
operation, purchase electricity, projected Fuel usage and other variable
costs, projected electricity and steam generated for sale, projected Energy
Revenues, staffing plans, data regarding expected environmental performance
and such other matters as Owner may reasonably require. The proposed
Annual Operating Plan shall also include a budget for operation and
maintenance of the Project, including the estimated prices based on time
and materials for all anticipated operating and maintenance costs for the
upcoming Agreement year. Owner shall indicate in writing its approval or
disapproval of the Annual Operating Plan within fifteen (15) days of such
submission, and in the event of disapproval, the parties shall meet and
resolve in good faith any areas of disagreement. If a new Agreement Year
begins without an Annual Operating Plan having been accepted by both Owner
and Operator, the Annual Operating Plan for the prior Agreement year shall
continue in effect, with all costs set forth therein increased monthly by
the Consumer Price Index Percentage for the most recent month for which the
Consumer Price Index is available. Any actions proposed under the Annual
Operating Plan shall be consistent with the Manuals and Operator's
obligations as described in Section 2.2. Operator shall notify Owner as
soon as reasonably possible of any significant deviations or
16
discrepancies from the projections contained in the Annual Operating Plan.
Any material adjustment to total labor costs proposed by Operator shall be
subject to Owner's prior written approval.
4.4 management Coordination and Planning. Operator shall meet with
Owner at least quarterly for the first two (2) years following the Project
Acceptance Date, and thereafter at least semiannually to review and discuss
Project performance, maintenance and costs. Prior to each scheduled
meeting, Operator shall provide owner, in a form reasonably acceptable to
Owner, a summary of all operating and maintenance activities performed by
Operator during the previous quarter, together with all costs (by category)
which make up the Reimbursable Costs associated therewith, and a comparison
of the current total of such costs for the Agreement year with the budget
prepared pursuant to the Annual Operating Plan.
4.5 Unscheduled Maintenance. Operator shall perform all maintenance,
repair and replacement requirements of the Project (excluding only the
Interconnection Facilities) notwithstanding that the same were not
anticipated or included in the approved Annual Operating Plan. Owner shall
reimburse Operator for such work, subject to the provisions of Article 8.
Operator will not commence any work under this section without the approval
of Owner except (i) in the event that such work shall be required in an
emergency, Operator shall undertake such work and notify Owner as soon as
such notice is reasonably practicable, and (ii) Operator shall be
authorized to perform all maintenance, repair and replacement necessary to
back-up or redundant systems in order to maintain maximum Phase I
Availability and Phase II Availability. The selection of subcontractors to
perform unscheduled maintenance beyond the capability of Operator shall be
at the reasonable discretion of Operator, subject to Owner's approval.
4.6 Maintenance During Warranty. Operator shall maintain the Project
in accordance with the requirements of all manufacturer's warranties, and
shall be assigned to Operator at Operator's request for purposes of
enforcement (provided that the warranties shall be reassigned to Owner if
Operator does not enforce the warranties promptly). Owner shall require
each major component manufacturer (including, without limitation, the
manufacturer of the Gas Turbine, the HRSG, the Auxiliary Boiler and all
rotating equipment such as pumps) as part of its contract, to perform a
warranty inspection with Owner, Operator and Contractor at no additional
cost prior to the expiration of the component's warranty. Operator shall
be responsible for the cost of any repairs that would have been covered by
such warranties but for which the manufacturer disclaims coverage due to
Operator's failure to comply with reasonable warranty requirements.
17
ARTICLE 5
TERM: TERMINATION AND DEFAULT
5.1 Initial Term and Renewal. The Term of this Agreement shall
commence on the Full Operation Date, and shall conclude on the last day of
the twenty fifty (25th) anniversary of the Full Operation Date, provided,
Owner shall have the option to extend the Term of this Agreement under the
terms and conditions set forth in Section 5 of the Amended Steam Venture
Agreement, subject to extension of all of the Amended Project Agreements
pursuant to Section 5 thereof. Notwithstanding the foregoing, the
provisions of Article 2 regarding the Mobilization Periods shall be
effective as of the dates set forth therein.
5.2 Default by Owner. Each of the following shall constitute a
Default by Owner:
(a) The failure or refusal by Owner to fulfill its
obligations under this Agreement, unless excused by Force Majeure;
provided, however, that such failure or refusal shall not constitute a
Default unless and until:
(i) Operator has given written notice to Owner
specifying Owner's default or defaults; and
(ii) Owner either has not corrected such default, or
has not initiated reasonable steps to correct the
same, within thirty (30) days of its receipt of
such notice, and thereafter does not continue to
take all reasonable steps necessary to
expeditiously correct such default.
(b) The failure or refusal by Owner to make any payment due
Operator under the terms of this Agreement as and when the same becomes
due.
5.3 Default by Operator. Each of the following shall independently
constitute a Default by Operator:
(a) The failure or refusal by Operator, unless excused, in
any case, by Force Majeure (i) to operate, repair and maintain the Project
in accordance with this Agreement; (ii) to achieve at least the Performance
Standards pursuant to Section 5.8 for any Agreement Year, except that
during the first Agreement Year and during any Agreement Year in which a
major overhaul occurs, the Performance Standards will be adjusted pursuant
to Section 5.8; (iii) to comply with applicable
18
Requirements of Law or Approvals and permits; or 9iv) to fulfill any of its
other obligations, whether designated as agreements, covenants or
otherwise, under this Agreement; provided, however, that a failure or
refusal under (i), (iii) or (iv) shall not constitute a Default unless and
until:
(A) Owner has given notice to Operator specifying
Operator's default or defaults; and
(B) Operator either had not corrected such default, or
has not initiated reasonable steps to correct the
same within 30 days of its receipt of such notice
and thereafter does not continue to take all
reasonable steps necessary to expeditiously
correct such default.
(b) The commencement by Operator of a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or the consent by Operator to the entry of an order for relief
in an involuntary case under any such law, or the consent by Operator to
the appointment of, or taking possession by, a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or similar official) of
Operator or of any substantial part of its properties, or the making by
Operator of any general assignment for the benefit of creditors, or the
failure by Operator generally to pay its debts as they become due or any
corporate action in furtherance of any of the foregoing.
(c) The issuance by a court having jurisdiction over
Operator of a decree or order for relief in respect of Operator of a decree
or order for relief in respect of Operator in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the appointment by any such court of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of
Operator or any substantial part of its property, or the ordering by any
such court of the winding up or liquidation of the affairs of Operator if
such decree or order shall remain unstayed and in effect for a period of
sixty (60) consecutive days.
5.4 Remedy Upon Default by Owner. Upon the occurrence of a Default
by Owner, if such Default by owner continues for thirty (30) days' after
notice to Owner and Lender, Operator shall have the right to terminate this
Agreement, and (a) if the Default by Owner arises from Owner's failure to
pay the portion of the Annual Fee due under Section 6.1(e) or (h), as the
case may be, plus interest, within one year after the due date thereof (an
"Owner Major Default"), Operator shall have the right to acquire the
Project for $1.00 (which right shall be freely assignable by Operator
subject to any consent required by Lender), subject only to then-existing
debt, within thirty (30) days following expiration of such 30-day grace
period, or (b) if the Default by
19
Owner involves a failure to pay any other sum due and owing hereunder,
Operator shall have the right to initiate legal action to collect such sum
with interest thereon at the Prime Rate plus two percent (2%).
5.5 Remedies for Failure to Achieve Performance Standards.
(a) The operation and maintenance provisions of this
Agreement and the portions of the Annual Fee described in Section 6.1 (c)
and (d), or (f) and (g) as the case may be, may be terminated by the Owner
if the project fails to achieve the minimum acceptable average annual
Availability (eighty-five percent) established pursuant to Section 5.8 and
specified in Appendix 2A and 2B (for Phase I and Phase II, respectively)
(the average annual Availability for Phase I and for Phase II are
hereinafter collectively referred to as "performance Standards").
Termination, however, shall not affect any payments under this Agreement
that have become due and payable (such as the portion of the Annual Fee
described in Section 6.1 (c) and (D), or (f) and (g) as the case may be,
for services rendered during the year immediately preceding the termination
of the operation and maintenance provisions of this Agreement), and in no
case shall such termination affect the portions of Annual Fee described in
Section 6.1(e) and (h), as the case may be. If the Owner does terminate
the operation and maintenance provisions of this Agreement pursuant to this
Section 5.5(a), PUPCO shall have the right to approve Owner's selection of
any new operator for the Project with such approval not to be unreasonably
withheld.
(b) In the event that Operator shall fail to achieve the
Performance Standards in any Agreement year, then Operator shall pay to
Owner liquidated damages ("Liquidated Damages") as provided in Section 5.8.
the maximum amount of Liquidated Damages which could potentially be
assessed against Operator based upon Operator's inability to meet the
Performance Standards shall be equal to the portion of the Annual Fee
described in Section 6.1(d) or (g), as the case may be. The actual amount
of Liquidated Damages owed ("Liquidated Damages Owed") shall be a function
of the actual performance of the Project as measured against the
Performance Standards as set forth in Appendix 2. Liquidated Damages and
Debt Service coverage shall, except for Owner's right to terminate this
Agreement pursuant to Section 5.5(a), be the sole remedy of Owner and the
sole liability of Operator for Operator's failure to meet the Performance
Standards.
(c) Not later than twenty (20) days after the end of each
Agreement year, Operator shall render a statement to Owner, with all
necessary and appropriate supporting documentation, calculating the amount
of Liquidated Damages due to Owner, in accordance with Section 5.5(b), for
the period from the beginning of the Agreement Year through the end of such
Agreement Year. Any amounts due to Owner on account of Liquidated Damages
shall be paid by Operator simultaneously with the delivery of a
20
statement therefor, but Owner's acceptance of such amounts shall not
preclude it from disputing under Section 10.2 the accuracy of the amount of
Liquidated Damages owed as set forth on this statement.
5.6 Termination for Uncontrollable Circumstances. In the event of
material damage to or destruction of the Project not caused by the
negligence of Owner, which materially impairs the operation of the Project
for at least one hundred eighty (180) consecutive days, or if any part of
the Project or the Site is taken by eminent domain and such taking
materially impairs the operation of the Project, or in the event a Change
of Law which renders operation of the Project as intended illegal,
uneconomical or otherwise undesirable, Owner and Operator shall each have
the option in any of such circumstances to terminate this Agreement, and
the obligations of the Parties shall cease except for obligations that have
accrued prior to the effective date of such termination.
5.7 Rights and Remedies. Except as otherwise provided herein, all
rights and remedies of the Parties under any provision of this Agreement
shall be cumulative, and may, to the extent permitted by law, be exercised
concurrently or separately, and the exercise of any one right or remedy
shall not operate to preclude or waive the exercise of any other right or
remedy. With respect to equitable remedies, the Parties acknowledge that
any condition which incapacitates the operation of the Project or any part
thereof, constitutes immediate, imminent, substantial and irreparable harm
to owner and the Parties hereto consent to the entry of temporary immediate
injunctive relief to restrain such harm, where appropriate.
5.8 Determination of Performance Standards and Liquidated Damages.
The Performance Standards and Liquidated Damages for each Phase (the
"Standards") shall be jointly established by Owner and Operator based on
(i) the specific components selected by Owner, (ii) the manufacturers'
performance warranties for each component, (iii) the Electricity Purchase
Agreement between Owner and Electricity Purchaser, (iv) the Lender's
requirements, and (v) industry standards for the specific equipment
selected. Such Standards shall be reviewed and approved by Lender's
independent engineer. The Standards shall be prepared jointly by the
parties within sixty (60) days after execution of the Electricity Purchase
Agreement and receipt of the performance warranties, but in any event no
later than thirty (30) days after receipt of the commitment letter for
Project financing; if the Standards are not agreed by that time, the
provisions of Section 13.2 shall apply. The Standards shall include
adjustments for Force Majeure and for an Agreement Year in which a major
overhaul occurs. The Standards shall be affixed to this Agreement as
Appendix 2.
21
ARTICLE 6
OPERATOR'S ANNUAL FEES
6.1 Annual Fee.
(a) Subject to the terms and conditions hereof (and in
particular the provisions of Article 19), Owner shall pay to Operator an
annual fee for the Agreement Year beginning on the Phase I Project
Acceptance Date, and each Agreement Year thereafter during the Term hereof,
as follows ("Phase I Annual Fee"):
Agreement Year Annual Fee
1-3 $ 900,000
4-15 $1,500,000
16-25 $1,900,000
(b) Subject to the terms and conditions hereof, in lieu of
the Phase I Annual Fee, Owner shall pay to Operator an annual fee for the
Agreement Year in which the Phase II Project Acceptance Date occurs, and
for each Agreement Year thereafter during the Term hereof as follows
("Phase II Annual Fee"):
Agreement Year Annual Fee
1-3 $2,100,000
4-15 $3,600,000
16-25 $4,600,000
In illustration and not limitation of the foregoing, if the Phase II
Project Acceptance Date occurs during the third Agreement Year, the Phase
II Annual Fee for that Agreement Year will be $2,100,000, and the Phase II
Annual Fee for the next succeeding Agreement Year will be $3,600,000.
(c) The first One Hundred Thousand Dollars ($1,000,000) of
each Phase I Annual Fee shall be payable prior to payment of any Debt
Service for that Agreement Year.
(d) The next Two Hundred Thousand Dollars ($2,000,000) of
each Phase I Annual Fee shall be increased annually by a percentage equal
to the Consumer Price Index Percentage and shall be payable prior to
payment of any Debt Service for that Agreement Year.
(e) Payment of the remainder of each Phase I Annual Fee
shall be subordinate to payment of Debt Service (with any amounts unpaid to
be cumulative without interest), and the amount thereof shall be adjusted
as set forth below:
(i) During Agreement Years 1 through 3, the
remaining Six Hundred Thousand Dollars ($600,000)
of the Annual
22
Fee shall be increased by five percent (5%)
for each Agreement Year; and
(ii) During Agreement Years 4 through 25, Four
Hundred Thousand Dollars ($400,000) of the Annual
Fee shall be increased annually by the Consumer
Price Index Percentage.
In no event shall the portion of the Phase I Annual Fee described in
subsections (i) and (ii) above payable in any Applicable Agreement Year (as
defined below) be less than thirty percent (30%) of the equity distribution
made by Owner to its Partners for such Applicable Agreement Year. If any
equity distribution would exceed such portion of the Annual Fee, Owner
shall pay an amount equal to the excess to Operator at the time the
distribution is made to the Partners. For purposes of this Agreement, the
term "Applicable Agreement Year" shall mean any Agreement Year during the
period beginning on the Phase I Project Acceptance Date and ending on the
Full Operation Date.
(f) The first Two Hundred Thousand Dollars ($200,000) of
each Phase II Annual Fee shall be payable prior to payment of any Debt
Service for that Agreement Year.
(g) The next Four Hundred Thousand Dollars ($400,000) of
each Phase II Annual Fee shall be increased annually by a percentage equal
to the Consumer Price Index Percentage and shall be payable prior to
payment of any Debt Service for that Agreement Year.
(h) Payment of the remainder of each Phase II Annual Fee
shall be subordinate to payment of Debt Service (with any amounts unpaid to
be cumulative without interest), and the amount thereof shall be adjusted
as set forth below:
(i) During Agreement Years 1 through 3, the
remaining One Million Five Hundred Thousand
Dollars ($1,500,000) of the Annual Fee shall be
increased by five percent (5%) for each Agreement
Year; and
(ii) During Agreement Years 4 through end of Term,
One Million Dollars ($1,000,000) of the Annual Fee
shall be increased annually by the Consumer Price
Index Percentage.
All portions of the Phase II Annual Fee that escalate over time shall
use as their base year for calculating such escalations the Phase I Project
Acceptance Date.
23
6.2 Adjustment of Annual Fee for Steam Purchased.
(a) The portions of the Phase I Annual Fee payable pursuant
to Section 6.1(h) hereof (collectively, "Subordinated Annual Fee") shall be
adjusted according to the following schedule which reflects the amount of
steam purchased by PTEC pursuant to the Amended Steam Purchase Agreement:
Percentage of
Subordinated Annual
Amount of Steam Purchased by PTEC Fee Payable
(in million Mlbs.)
4.6 or greater 100.00
4.5 - 4.599 96.15
4.4 - 4.499 92.30
4.3 - 4.399 88.45
4.2 - 4.299 84.60
4.1 - 4.199 80.75
4.0 - 4.099 76.90
3.9 - 3.999 73.05
3.8 - 3.899 69.20
3.7 - 3.799 65.35
3.6 - 3.699 61.50
3.5 - 3.599 57.65
3.4 - 3.499 53.80
3.3 - 3.399 50.00
(b) If any reduction of the Phase II Annual Fee is required
pursuant to Section 6.2(a), the reduction shall be applied first to those
portions of the Annual Fee described in Section 6.1(h)(i) or (ii). Any
adjustment in the Phase I Minimum Take Requirement or the Phase II Minimum
Take Requirement pursuant to a Penn Event shall also adjust the foregoing
table in accordance with sixty (60) days after execution of the Electricity
Purchase Agreement. Such adjustment ("Penn Event Adjustment") shall
include the effect, if any, of the loss to Operator of either or both the
34th and Civic Center Boulevard Account (Account No. 17-0255-0) that may
occur in conjunction with a Penn Event.
(c) (i) In the event that, in any Agreement Year, the
actual Heating Degree Days are less than the target Heating Degree Days of
4,866, the amount of steam which PTEC must purchase pursuant to Section
6.2(a) for PUPCO to obtain 100% of the Subordinate Annual Fee shall be
adjusted in accordance with the following formula:
24
Adjusted Target Mlbs =
(Actual HDDs x 50% of Target Mlbs) + 50% Target Mlbs Target HDDs
Where:
Target Mlbs = 4.6 million Mlbs
Target HDDs = 4,866 Heating Degree Days ("HDDs") (the 20
year average HDDs for the Philadelphia
International Airport, 1969-1988 as reported by
the U.S. Weather Service)
Actual HDDs = Actual total year HDDs as reported by the
U.S. Weather Service for Philadelphia
International Airport
50% = Approximately one-half of PTEC's Target Mlb is
base load and not weather related
(ii) The adjusted target Mlbs will be substituted
in the table above for 4.6 million Mlb 100%
minimum payable range. The reduced payment
minimums will decrease from the adjusted target by
the same 100 thousand Mlbs increments identified
above.
(iii) The target 4.6 million Mlbs or the
adjusted target Mlbs shall also be adjusted
downward each Agreement Year to account for
reductions in steam output from the Project as a
result of Force Majeure, including system failures
at the Site not attributable to PTEC's or
Operator's negligence.
(iv) The minimum take levels shall also be
adjusted each Agreement Year to account for
reductions in steam output from the Project as a
result of Force Majeure, including system failures
at the site not attributable to PTEC's or
Operator's negligence.
(v) If PTEC purchases or pays for less than 3.3
million Mlbs in any Agreement Year, Operator will
not receive an Annual Fee for that year
25
subject to a Penn Event Adjustment or an
adjustment for Force Majeure or other failures not
attributable to PTEC's or Operator's negligence.
(d) If during any Agreement Year prior to the Phase II
Acceptance Date the total steam purchased by PTEC exceeds 3,200,000 Mlbs.,
Operator shall also receive an amount realized by Owner for the sale of
such excess steam, as determined by Owner's accountants, based on line
items of Project expenditures and Debt Service as identified in the pro
forma utilized for Project financing. Such amount shall be payable within
ninety (90) days following the end of each Agreement Year.
(e) If during any Agreement Year prior to the Phase II
Acceptance Date the total steam purchased by PTEC exceeds 4,800,000 Mlbs.,
Operator shall also receive an amount equal to one-third (1/3) of the
incremental pre-tax profit realized by Owner for the sale of such excess
steam, as determined by Owner's accountants, based on line items of Project
expenditures and Debt Service as identified in the pro forma utilized for
Project financing. Such amount shall be payable within ninety (90) days
following the end of each Agreement Year.
6.3 Time for Payment.
(a) The portion of the Annual Fee due under Section 6.1(e)
or (h), as the case may be, shall be due and payable quarterly beginning at
the end of the first quarter (i.e., the first 3-month calendar period)
following the Project Acceptance Date and each quarter (i.e., each three-
month period) thereafter for the Term of this Agreement. The portion of
the Annual Fee due under Section 6.1(c) and (d), or (f) and (g) as the case
may be, shall be due and payable in equal monthly installments on or before
the tenth day of each month.
(b) Annual Fees or portions thereof which remain unpaid
will bear interest from the due date at the Prime Rate plus two percent
(2%).
(c) Failure to make payments described in Sections 6.1(c),
(d), (f) or (g), plus interest, within sixty (60) days of due date, after
thirty (30) days' written notice from Operator and opportunity to cure by
Owner and Lender, shall be a Default by owner pursuant to Sections 5.2 and
5.4.
(d) Failure to make payments described in Section 6.1(e) or
(h), as the case may be, plus interest, within one year of due date, after
thirty days' written notice from Operator and opportunity to cure by Owner
and Lender, shall entitle Operator to exercise Operator's right to purchase
the Project pursuant to Section 5.4(a).
26
(e) Thirty (30) days prior to the end of each Agreement
Year, Owner shall forecast Project cash flow for the succeeding Agreement
Year using all assumptions as established and relied upon by Lender at the
time of Project financial closure but as adjusted to reflect actual Fuel,
fixed, variable, and debt costs for each of the previous twelve months. If
the pre-tax cash flows after all Debt Service for the Agreement Year are
projected to be less than two (2) times the portions of the Annual Fee
described in Section 6.1(e) or (h), as the case may be, due at the end of
the Agreement Year, the Owner shall pay one twelfth (1/12) of the portion
of the Annual Fee described in Section 6.1(d) to Operator at the end of
each month in the Agreement Year.
6.4 Electric Capacity Fee. In addition to the Phase I Annual Fees
set forth above, if Owner sells to PECO or another utility the additional
electric capacity to be created by the Phase I Project, Owner shall pay
PUPCO thirty percent (30%) of all payments received by Owner for such
capacity, payable within five (5) days after Owner receives each such
payment.
ARTICLE 7
INTENTIONALLY OMITTED
ARTICLE 8
REIMBURSEMENT
8.1 Reimbursement Costs. In addition to the Phase I and Phase II
Annual Fee, Owner shall pay the following Reimbursable Costs:
8.1.1 The actual cost of recruitment and employment of
permanent and temporary staff and specialists from and after the beginning
of the Phase I Mobilization Period, such costs to include employment-
related benefits applicable to such staff and specialists, provided that
such employment and employment-related benefits costs shall not exceed
those in effect for PTEC during the term of this Agreement, except that in
special cases where particular expertise is required, employment and
employment-related benefits costs in excess of those then in effect at PTEC
shall be included as Reimbursable Costs so long as such costs are in
conformity with then current market conditions for employment of people
with such expertise;
8.1.2 The actual cost of consumables, spare parts and repairs
and/or replacement components supplied by Operator in accordance with the
provisions of Sections 2.10.2, 2.10.3 and 4.5 hereof;
8.1.3 Any other direct costs incurred by Operator, such as
any Federal, state or other sales, use, value-added,
27
gross receipts or similar tax with respect to the operation and maintenance
of the Project (such as a sales tax on direct cost of replacement parts
used by Operator), any insurance premium paid by Operator, subject to the
terms of Article 12, interest carrying costs (at a per annum rate not to
exceed the Prime Rate plus 2%) on any overdue payments due Operator by
Owner and the cost of water or chemicals shall be reimbursed to Operator
upon demand, if Operator is required to pay same, or paid directly by
Owner; provided, Operator shall pay the income and franchise taxes arising
out of any payments made hereunder to Operator.
8.1.4 Owner's obligation to pay Reimbursable Costs shall be
conditional only upon the total Reimbursable Costs for an Agreement Year
not exceeding the aggregate Reimbursable Costs shown on the Annual
Operating Plan for that Agreement Year. Any excess Reimbursable Costs in
any category over those shown on the annual Operating Plan may be offset by
Operator against savings in other categories.
8.2 Time for Payment. Reimbursable Costs shall be payable in
accordance with Article 10.
ARTICLE 9
EQUITY DISTRIBUTION LIMITATIONS
9.1 Equity Distribution Limitations.
(a) In the event that Owner intends to make distributions
to its general partners ("Partners"), Owner must do so on a quarterly basis
and must pay one-quarter of the portion of the Annual Fee described in
Section 6.1(e) or (h), as the case may be, to Operator for that Agreement
Year at the time of such distributions. Estimated quarterly payments of
the Annual Fee will be based on the prior year steam purchases by PTEC.
Overpayments and underpayments will be reconciled within sixty days
following the end of the Agreement Year.
(b) Owner agrees to limit distributions to Partners during
the first Agreement Year after the Full Operation Date to two-thirds
(66.66%) of Owner's profits (after payment of any taxes payable directly by
Owner). If Owner makes distributions to Partners in excess of two-thirds
of such profits, Owner will first post a letter of credit, naming the
Project as beneficiary, in the face amount of one-third (33.34%) of Owner's
profits. That letter of credit will become payable upon the exercise of
the Equity Purchase Option. The term of the letter of credit shall expire
upon the expiration of the Equity Purchase Option.
(c) All first Agreement Year equity earnings may be
distributed to the Partners and the Operator in proportion to their
respective ownership interests once Operator exercises its Equity Purchase
Option pursuant to Section 19.1.
28
(d) Notwithstanding anything to the contrary set forth
herein, if Operator acquires the Acquired Interest in the Phase I Project,
and (i) the amount payable to Operator as an Annual Fee for the Phase I
Project in any Applicable Agreement Year, plus the capacity fee payable
under Section 6.4 (if applicable) (collectively, "Phase I Payment"),
exceeds (ii) the equity distribution received by Operator following such
acquisition, Operator shall be entitled to receive the excess of the full
amount of the Phase I Payment over the equity distribution.
ARTICLE 10
BILLING AND PAYMENTS
10.1 Invoices. Operator shall render invoices to Owner monthly for
Reimbursable Costs. All invoices shall be accompanied by all relevant
documentation including payroll data and benefits computations for the
relevant staff and specialists and all relevant invoices for consumables,
spare parts and replacement components. Each invoice shall be paid by
Owner, subject to Section 10.2, within thirty days following receipt of
each invoice, and unpaid invoices shall bear interest pursuant to Section
20.18 if unpaid after such 30 day period. Each invoice shall be paid by
Operator, subject to Section 10.3, not later than thirty (30) days after
receipt thereof by Operator. Fuel invoices shall be paid directly by
Owner.
10.2 Owner's Dispute. Owner may, within fifteen (15) days after
receiving any invoice or statement rendered pursuant to Sections 5.5(c),
10.1 or 8.1, by written notice to Operator, dispute any amount set forth in
such invoice or statement; provided that Owner shall pay undisputed amounts
notwithstanding the existence of any dispute with respect to the balance of
such payment.
10.3 Operator's Dispute. Operator may, within fifteen (15) days after
receiving an invoice from Owner, by written notice to Owner, dispute any
amount set forth in such invoice; provided that Operator shall pay
undisputed amounts notwithstanding the existence of any dispute with
respect to the balance of such payment.
10.4 Dispute Resolution. Operator and Owner shall, as soon as
practicable after either Party's receipt of any notice of a dispute
pursuant to Section 10.2 or 10.3 above, attempt in good faith to resolve
all disputed items described therein. If all such disputed items are not
so resolved within thirty (30) days after receipt by either Party of such
notice, either Party may, after sixty (60) days but within ninety (90) days
thereafter, commence dispute resolution procedures pursuant to Article 13,
in accordance therewith. In the event that such dispute resolution
procedures result in an award in favor of either Party, the other
29
Party shall pay any balance owed with interest as provided in Section
20.18.
ARTICLE 11
FORCE MAJEURE; STRIKES
11.1 Effect of Force Majeure. In the event that either Operator or
Owner shall be prevented by Force Majeure from performing or fully
performing its obligations under this Agreement (other than obligations to
make payments required herein, which may not be excused by Force Majeure),
the Party unable to perform or fully perform shall promptly notify the
other Party and shall keep the other Party informed of the situation for
the duration of such event. Upon the giving of such notice, the
obligations of the Party giving the notice shall be reduced during, but no
longer than, the continuance of the Force Majeure, provided such
obligations shall be reduced only to the extent the affected party's
performance is adversely affected solely by the Force Majeure, and only to
the extent such adverse effects cannot be mitigated by the Affected Party's
best efforts. The affected Party shall use its best efforts to resume
performance as quickly as possible and shall suspend or operate at less
than full performance only for such period of time as is necessary as a
result of the Force Majeure.
11.2 Strikes. In the event of a whole or partial non-operation of the
Project due to a strike or other form of labor action by Operator's
personnel, Owner shall have the right to continue operating the Project and
to retain such other personnel or agents as Owner in its sole discretion
deems necessary or advisable for such purposes. If any strike or labor
stoppage continues for a period beyond thirty (30) days, Owner shall be
entitled to terminate this Agreement.
ARTICLE 12
INSURANCE
12.1 Insurance Coverage.
(a) During the Term of this Agreement, Operator shall
provide and maintain such policies of insurance as may be requested by
Owner in compliance with the Credit Agreement. The terms of all such
policies shall comply with the provisions of the Credit Agreement. The
cost of all such insurance shall be Reimbursable Costs as described in
Article 8.
(b) Certificates of Insurance evidencing the coverages
provided by Operator and copies of such policies shall be delivered to
Owner prior to the beginning of the Phase I Mobilization Period. Owner,
the Lender, Steam Purchaser, and any
30
Person who owns an interest (as mortgagee, secured party, or otherwise) in
the Site or who has the right (present or contingent) to own the Project,
and any of their respective successors and assigns, shall be named as
additional insureds under specified policies. These certificates as well
as all insurance policies required by this Article shall contain a
provision that the policy will not be canceled or allowed to expire or
amended in any material manner (including as to scope, type or limits of
coverage), until at least ten (10) days prior written notice or such
additional advance notice as may be required under the Credit Agreement has
been given to Owner and all others Persons named as additional insiders.
Should Operator fail to provide or maintain insurance coverage pursuant to
this Section, Owner shall have the right but not the obligation to provide
or maintain such coverage.
(c) All insurance provided by Operator shall be with
reputable and solvent insurance carriers which are reasonably satisfactory
to Owner and Lender and licensed to do business in the Commonwealth of
Pennsylvania.
12.2 Waiver of Subrogation. Operator and Owner hereby waive any and
every claim for recovery from the other for any and all loss or damage
resulting from the performance of this Agreement, to the extent such loss
or damage is recovered under the insurance policies described herein.
ARTICLE 13
DISPUTE RESOLUTION
13.1 Procedure. Except as expressly set forth in Section 13.2 below,
in the event a dispute arises between Owner and Operator regarding the
application or interruption of any provision of this Agreement, the
aggrieved Party shall promptly notify the other Party to this Agreement of
the dispute within ten (10) business days after such dispute arises. If
the parties shall have failed to resolve the dispute within ten (10)
business days after delivery of such notice, each Party shall, within five
(5) business days thereafter, nominate a senior officer of its management
to meet at the Site, or at any other mutually agreed location, to resolve
the dispute. Should the Parties be unable to resolve the dispute to their
mutual satisfaction within ten (10) business days after such nomination,
each Party shall have the right to pursue any and all remedies available at
law or in equity. Without limiting the validity of the foregoing
covenants, the failure or inability of either Party to give the required
notice or make the required nomination shall never be construed to stop or
deny such Party's right to pursue any and all remedies otherwise available
to such Party at law or in equity.
31
13.2 Binding Arbitration
(a) In the event that any claim, controversy or dispute
arises between the Owner and the Operator concerning Subsections 2.1.2,
3.2, 4.3, 4.5, 5.5, 5.8, 6.1(d), 6.1(g), 6.2(a), 8.1.1 or 8.1.2
(collectively, "Arbitration Subsections") or any approvals, agreements or
concurrence required under any of the Arbitration Subsections shall not
have been timely given then the Owner and the Operator shall undertake in
good faith to resolve the dispute amicably as described in Section 13.1.
(b) Irrespective of any other provision of this Agreement,
if the Owner and the Operator cannot agree within a two (2) week period of
time after written notice respecting the formulation or performance of any
obligation relating to the proposed Annual Operating Plan, the Performance
Standards, or the Reimbursable Costs pursuant to any of the Arbitration
Subsections, such failure to agree shall be deemed a dispute and, exclusive
of any other remedy (subject however to State law), the Owner or the
Operator may, following the two (2) week period, by written notice to the
other party hereto, bring the dispute to an arbitration panel selected
pursuant to Subsection (c) below. The arbitration panel shall assume
exclusive jurisdiction over the dispute and shall be required to make a
final determination, including specific findings of fact required to reach
such determination, within twenty (2) days from the selection of the panel
as to each specific dispute contemplated above, and, if appropriate,
findings of what remedies are due to the Owner and the Operator, if any,
pursuant to the terms of this Agreement. The Owner and the Operator shall
prepare in writing a statement of their positions with supporting facts and
data for the arbitration panel within ten (10) days after receipt of
written notice of the dispute being brought to arbitration, and shall
submit statement to the arbitration panel when it is selected.
(c) The arbitration panel shall consist of representatives
of three independent engineering firms, one of which shall be selected by
the Owner, one of which shall be selected by the Operator, each within ten
(10) days of the notice of arbitration, the third shall be selected by the
first two within ten (10) days of their selection. In the event that any
arbitrator shall resign or otherwise fail to perform his duties, his
successor shall immediately be selected by the party who selected such
arbitrator in the first instance.
(d) The decision of the arbitration panel shall be binding
and enforceable on both parties. The decision of the panel shall be based
solely of findings of fact and shall be based on the following standards:
(1) Consistently with competitive Operation and Maintenance
Contracts in the marketplace;
32
(2) Consistency with standard practice as may reasonably be
required to obtain Project financing; and
(3) Where available, consistency with the specific
components selected by the Owner, the Manufacturer's
Performance Warranties, and the Project Acceptance Tests.
(e) The costs of arbitration shall be borne equally by the
parties for the first three (3) arbitrations in any calendar year, and
thereafter by the party initiating the arbitration.
(f) Persons other than the Owner and the Operator may be
joined in such proceedings to the extent that they consent to the
jurisdiction of the arbitration panel.
(g) The Owner and the Operator shall continue to perform
their respective obligations under this Agreement during any arbitration or
court proceeding.
(h) Any proceedings held by the arbitration panel shall be
held in Philadelphia, Pennsylvania.
ARTICLE 14
PAYMENT OF FINES AND PENALTIES
14.1 Payment of Fines and Penalties. Payment at any time of any fine
or penalties payable to any state or the United States as a result of the
Operator's gross negligence in failing to operate and maintain the Project
in accordance with Requirements of Law or Approvals and Permits applicable
to the operation and maintenance of the Project shall be the sole
responsibility of Operator and such fines or penalties shall not result in
any increase of the costs to be borne by Owner.
ARTICLE 15
DEFECTIVE WORK
15.1 Work to be Fit. Operator warrants that the operation and
maintenance services described in Article 2 will be performed properly, in
a competent, cost-conscious manner and by qualified personnel, in
accordance with sound and generally accepted operating and engineering
practices, and that such services will be generally fit for their
prescribed purpose.
15.2 Consequence of Breach. In the event Operator fails to perform
its work as required by this Agreement, Operator shall re-perform any
defective service, replace any unfit or unquali-
33
fied personnel and repair or replace any components of the Project damaged
as a consequence of such failure (but only the components damaged by
Operator, excluding consequential damage for lost revenues).
15.3 Vendor Warranties. Operator shall obtain, when available on
commercially reasonable terms, one-year vendor warranties for all spare
parts and replacement parts, other than parts having a useful life of less
than one year and parts supplied by Owner pursuant to Section 3.2 or 3.4.
Any warranties received from outside vendors or subcontractors shall be
passed through to Owner, but Operator shall maintain, administer and assist
Owner in the enforcement of such warranties.
ARTICLE 16
OPERATOR'S REPRESENTATIONS
Operator represents and warrants that:
16.1 Corporate Standing; Authorization. Operator is a corporation
duly organized, validly existing and in good standing under the laws of
Pennsylvania. The execution, delivery and performance of this Agreement
are within Operator's corporate powers. The execution, delivery and
performance of this Agreement (i) has been duly authorized by all requisite
corporate action; and (ii) does not violate any existing Requirement of Law
or any agreement, certificate, undertaking, commitment, instrument or other
document to which it is a party or by which it or any of its assets may be
bound or affected.
16.2 Enforceability. This Agreement constitute Operator's legal,
valid and binding obligation enforceable against it in accordance with its
terms, except as such enforcement may be limited by bankruptcy, moratorium,
insolvency and similar debtor rights laws, and has been executed and
delivered by its duly authorized officers.
16.3 No Violation of Law. Operator is not in violation of any
Requirement of Law which could materially affect Operator's performance of
any obligations under this Agreement.
16.4 Litigation. Operator is not a party to any legal,
administrative, arbitration, investigatorial or other proceeding or
controversy pending, or, to the best of its knowledge, threatened, which
could materially adversely affect its ability to perform its obligations
under this Agreement.
16.5 Qualifications. Operator (i) has examined each of the Project
Agreements thoroughly and is very familiar with their terms; (ii) is fully
qualified to operate and maintain the Project in accordance with the terms
hereof; and (iii) has thoroughly familiarized itself with the conditions
under which
34
the obligations entered into hereunder are to be performed and correlated
its observations with the requirements hereof.
16.6 Waiver of Liens. Operator will cause such subcontractor retained
by Operator to waive and release, to the extent it may do so, any and all
liens and/or encumbrances which it or they have or may have against Owner
or the Project on account of work to be performed by Operator pursuant to
this Agreement. Before any subcontractor retained by Operator performs any
work pursuant to this Agreement, Operator shall (i) obtain the consent of
each such subcontractor to such a waiver of liens and encumbrances; and
(ii) file a copy of such a waiver of liens and encumbrances with
Governmental Authorities required by Owner.
16.7 Approvals and Permits. Operator is, or will be prior to the
Phase I Project Acceptance Date, the holder of all material Approvals and
Permits generally required to conduct its business in the Commonwealth of
Pennsylvania. Except for Approvals and Permits required to be maintained
by owner pursuant to Section 3.5, or to be provided by the Construction
Contractor pursuant to either Turnkey Construction Agreement, no consent
(except consents, if any, obtained prior to the date hereof) of any Person,
an no Approval and Permit of, exemption by, notice or report to, or
registration, filing or declaration with, any Person, is or will be
required, in connection with its execution, delivery and performance of
this Agreement.
16.8 General. No representation or warranty by Operator contained
herein contains any untrue statement of any material fact or any omission
of any material fact necessary to make such representation or warranty not
misleading in light of the circumstances under which it was made.
ARTICLE 17
OWNER'S REPRESENTATIONS
Owner represents and warrants as follows:
17.1 Good Standing; Authorization. Owner is a general partnership
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. The execution, delivery and performance of
this Agreement are within Owner's partnership powers. The execution,
delivery and performance of this Agreement (i) has been duly authorized by
all requisite corporate action; and (ii) does not and will not violate any
Requirement of Law or any agreement, certificate, undertaking, commitment,
instrument or other document to which it is a party or by which it or any
of its assets may be bound or affected.
17.2 Enforceability. This Agreement constitutes Owner's legal, valid
and binding obligation, enforceable against it in
35
accordance with its terms, except as such enforcement may be limited by
bankruptcy, moratorium, insolvency and similar debtor rights laws, and has
been executed and delivered by its duly authorized officers.
17.3 No Violation of Law. Owner is not in violation of any
Requirement of Law which could materially affect Owner's performance of any
obligations under this Agreement.
17.4 Litigation. Owner is not a party to any legal, administrative,
arbitration, investigatorial or other proceeding or controversy pending,
or, to the best of its knowledge, threatened, which could materially
adversely affect its ability to perform its obligations under this
Agreement.
17.5 Approvals and Permits. Owner is, or will be prior to the Phase I
Project Acceptance Date, the holder of all material Approvals and Permits
generally required to conduct its business will acquire all Approvals and
Permits necessary to operate the Project. Except for the Approvals and
Permits to be maintained by Owner pursuant to Section 3.5 hereof or to be
provided by the Construction Contractor pursuant to either Turnkey
Construction Agreement, no consent (except consents, if any, obtained prior
to the date hereof) of any person, and no Approval and Permit of, exemption
by, notice or report to, or registration, filing or declaration with, any
Person, is or will be required, in connection with its execution, delivery
and performance of this Agreement.
17.6 Contracts. Owner has obtained, or will obtain prior to the Phase
I Project Acceptance Date, all necessary contracts for Fuel and electricity
to operate the Project.
17.7 General. No representation or warranty by Owner contained herein
contains any untrue statement of any material fact or any omission of any
material fact or any omission of any material fact necessary to make such
representation or warranty not misleading in light of the circumstances
under which it was made.
ARTICLE 18
INDEMNIFICATION
18.1 Operator Indemnity. Operator shall indemnify, defend and
harmless Owner and its officials, officers, employees and agents (all of
the aforementioned being hereinafter referred to as the "Owner Indemnified
Parties") from and against any Claims arising out of, incident to or
related to the Operator's operation of the Project, made by any Person
(other than the Owner Indemnified Parties), whether based on contract
(including any breach of any agreement respecting any subcontractor but
specifically excluding any breach of the Project Agreements), strict
liability or otherwise (except to the extent any such
36
Claims arise out of, are incident to or related to the negligence of or the
breach of this Agreement by any of the Owner Indemnified Parties, in which
event the Claims shall be borne by the Parties in proportion to the
respective fault of each Party) including (i) any claims by or otherwise
involving any employee of Operator, any subcontractor, any person directly
or indirectly employed by any of them and any other person for whose acts
they may be liable or otherwise responsible, and (ii) any claims respecting
or made by any Governmental Authority, infringement of proprietary rights,
non-payments of amounts due subcontractors, bodily injury, sickness, death,
injury, and injury or destruction of tangible property of any Person. The
indemnification obligations under this Article 18.1 shall not be limited by
an limitation on the amount or type of damages, compensation or other
employee benefit acts or insurance policies. The indemnity provisions
contained in this Article 18.1 shall in no manner amend or otherwise modify
or limit any other of Operator's obligations expressed elsewhere in this
Agreement except as expressly provided.
18.2 Owner Indemnity. Owner shall indemnify, defend and hold harmless
Operator and its officials, officers, employees and agents (the "Operator
Indemnified Parties") from and against any Claims arising out of, incident
to or related to Owner's ownership of the Project, made by any Person
(other than Operator and the Operator Indemnified Parties) whether based on
contract, tort (including negligence, by commission or omission), strict
liability or otherwise (except to the extent any such Claims arise out of,
are incident to or related to the negligence of or the breach of this
Agreement by any of the Operator Indemnified Parties, in which event the
Claims shall be borne by the Parties in proportion to the respective fault
of each Party) including (i) any claims by or otherwise involving any
employee of Owner, any subcontractor, any person directly or indirectly
employed by any of them and any other person for whose acts they may be
liable or otherwise responsible, and (ii) any claims respecting or made by
any Governmental Authority, infringement or proprietary rights, non-
payments of amounts due subcontractors, bodily injury, sickness, death,
injury, and injury or destruction of tangible property of any Person. The
indemnification obligation under this Article 18.2 shall in no manner amend
or otherwise modify or limit any other of Owner's obligations expressed
elsewhere in this Agreement.
18.3 Cooperation Regarding Claims. If any Party hereto (each an
"Indemnified Party") shall receive notice or have knowledge of any Claim
that may result in a claim under this Article 18, such Indemnified Party
shall, as promptly as possible, give the indemnifying Party notice of such
Claim,
37
including a reasonably detailed description of the facts and circumstances
relating to such Claim, and a complete copy of all notices, pleadings and
other papers related thereto, and the basis for its potential claim for
indemnification with respect thereto, and the basis for its potential claim
for indemnification with respect thereto in reasonable detail; provided
that failure promptly to give such notice or to provide such information
and documents shall not relieve the indemnifying Party or any obligation of
indemnification it may have under this Article 18 unless such failure
materially diminishes the ability of such indemnifying Party to respond to
or to defend the Indemnified Party failing to give such notice against such
Claim. The Indemnified Parties shall consult with each other regarding,
and cooperate in respect of, the response to and the defense of any such
Claim, and the Party against whom indemnification is claimed shall, upon
its acknowledgment in writing of its obligation to indemnify the
Indemnified Party seeking indemnification, be entitled to assume the
defense or to represent the interests of the Indemnified Party seeking
indemnification in respect of such Claim, which shall include the right to
select and direct legal counsel and other consultants, appear in
proceedings on behalf of such Indemnified Party, and to propose, accept or
reject offers of settlement, all at its sole cost.
ARTICLE 19
OPTION TO PURCHASE
19.1 Option to Acquire Interest.
(a) Operator shall have the option ("Equity Purchase
Option"), in Operator's sole discretion, to acquire a one-third (1/3)
interest ("Acquired Interests") in either the Phase I Project alone, if the
Phase II Project is terminated, or in the entire Project, Phase I and Phase
II ("Entire Project"), if the Phase II Project is completed.
(b) Operator may elect to acquire the Acquired Interest in
the Phase I Project by giving notice to Owner ("Phase I Option Notice") at
any time during the sixty (60) day period ("Phase I Option Period")
beginning on the later to occur of (i) the first anniversary of the Phase I
Acceptance Date (provided that construction of Phase II has not then been
commenced), or (ii) termination of Phase II, as described in Section 9 of
the Amended Steam Venture Agreement. If Operator gives the Phase I Option
Notice during the Phase I Option Period, the purchase price for the
Acquired Interest shall be Five Hundred Thousand Dollars ($500,000.00),
payable by certified check or wire transfer no later than one hundred
eighty (180) days after delivery of the Phase I Option Notice. At least
sixty (60) days prior to the beginning of Phase I Option Period, Owner
shall provide Operator with financial projections and pro forma
calculations for the Phase I Project, subject to Operator's prior execution
of a reasonable confidentiality agreement. Failure by
38
Owner to provide such information by the time specified herein shall
automatically extend the commencement of the Phase I Option Period until
sixty (60) days after such information is provided.
(c) Operator may further elect to acquire the Acquired
Interest in the Entire Project by giving notice to Owner ("Entire Project
Option Notice") at any time during the sixty (60) day period ("Entire
Project Option Period") beginning on the first (1st) anniversary of the
Phase II Acceptance Date. If Operator gives the Entire Project Option
Notice during the Entire Project Option Period, the purchase price for the
Acquired Interest in the Entire Project shall be Two Million Dollars
(2,000,000.00), payable by certified check or wire transfer no later than
one hundred eighty (180) days after delivery of the Entire Project Option
Notice. At least sixty (60) days prior to the beginning of the Entire
Project Option Period, Owner shall provide Operator with financial Project,
subject to Operator's prior execution of a reasonable confidentiality
agreement. Failure by Owner to provide such information by the time
specified herein shall automatically extend the commencement of the Entire
Project Option Period until sixty (60) days after such information is
provided.
(d) If first Agreement Year pre-tax cash flow after the
Phase II Project Acceptance Date is less than $4.5 million after Debt
Service has been paid, then in the event that Operator exercises its Phase
II Equity Purchase Option under Section 19.1(b), (i) the portion of the
first Agreement Year Annual Fee described in Section 6.1(h)(i) shall be
adjusted to equal one third of the first Agreement Year pre-tax cash flow
and (ii) the cost to Operator to exercise its Phase II Equity Purchase
Option pursuant to Section 19.1(b) shall be $500,000 plus the amount of the
first Agreement Year Annual Fee under Section 6.1(h)(i) as adjusted.
19.2 Effect on Annual Fee. Upon Operator's acquisition of the
Acquired Interest pursuant to Section 19.1, the portion of the Annual Fee
described in Section 6.1(e) or (h) (as the case may be) shall no longer be
due or payable. Notwithstanding anything to the contrary contained herein,
Operator shall have no claim to any portion of the purchase price paid for
the Acquired Interest.
19.3 Option to Acquire Entire Project. Operator shall have the
option, in Operator's sole discretion, to acquire the Entire Project
Project (or any portion thereof not then owned by Operator) by giving
notice to Owner at any time during the thirty (30) day period beginning on
the twenty-fifth (25th) anniversary of the Full Operation Date. The
purchase price for the Project shall equal ninety percent (90%) of the Fair
market Value of the outstanding equity in the Project still held by Owner
at that time, as determined pursuant to Appendix 5 of this Agreement.
39
19.4 Right of First Purchase.
(a) In the event that Owner or its Partners elect to offer
any interest in the Project or Owner for sale to any party, Owner and/or
its Partners shall first offer such interest to Operator for a period of
thirty (30) days, and shall offer such interest to a third party only if
Operator fails during such thirty (30) day period to notify Owner of
Operator's intent to purchase the interest.
(b) If Owner or its Partners thereafter reach an agreement
to sell an interest in the Project or the Owner to a third party, Owner
and/or its Partners shall offer Operator the option to purchase the
interest on the same terms and conditions by notice to Owner within five
(5) business days following receipt of such agreement.
(c) In the event Owner or its Partners receive a written
offer to acquire all or any portion of the Project, or any interest therein
or its Owner, Owner or its Partners shall immediately provide Operator with
a copy of such offer. Operator shall have thirty days following receipt of
such offer to give Owner or the Partners, as the case may be, notice of
Operator's intention to acquire the interest under the same terms and
conditions as contained in the offer. Failure by Operator to give such
notice to Owner or the Partners within such thirty (30) day period shall
constitute a waiver of this right. If Operator does not elect to acquire
the interest under the terms of the offer, Owner or the Partners, as the
case may be, may complete the sale of the interest to the purchaser in
strict accordance with the terms and conditions of the offer. In the event
that any change is made in the offer, or that the purchaser under the offer
fails to complete closing in accordance with the terms of the offer, this
right of first refusal shall once again become fully operative.
19.5 Ownership Limitations.
(a) Operator's right to acquire an interest in the Project
or the Owner pursuant to this Article 19 shall be limited to those levels
of investment which will not cause the Project to become subject to
regulation under the Federal Public Utilities Holding Company Act
("PUHCA"), or to lose its qualifying facilities ("QF") status under the
Federal Power Act ("FPA"), as each such Act may be amended from time to
time. If, in order for Operator to exercise the Equity Purchase Option set
forth in Sections 19.1 and 19.2, a reduction in equity ownership is
required to avoid Federal regulation under PUHCA or loss of QF status under
the FPA, Operator and Owner shall share proportionately the obligation to
reduce their respective equity positions in the Project to 25% each.
Subsequent to the expiration of the Phase I Option Period or the Entire
Project Option Period (as defined in Section 19.1), if any party takes
action that subjects the Project to Federal regulation under PUHCA or to
losing QF
40
status under the FPA, such party shall immediately reduce its interest in
the Project as required to avoid such consequences.
(b) In the event any reduction of equity ownership is
required pursuant to the foregoing paragraph, the Party not causing such
failure shall have the first right to negotiate the purchase of such equity
on a pro rata basis within thirty (30) days of the tender of such offer.
If an agreement cannot be reached within the thirty (30) day period, the
Party who is required to reduce its ownership shall be free to negotiate
the sale of the equity to a non-affiliated third party. In the event that
any equity owner of the Project at any time sells all or any portion of its
interest in the Project to an electric utility, so that PUHCA or QF status
is violated, that owner shall immediately, and on an ongoing annual basis,
compensate the other owners for the losses incurred as a result of
regulation under PUHCA or loss of QF status.
19.6 Status. Owner agrees to identify Operator as a co-developer of
the Project in all publications, news releases, and other communications
with the public, until the Phase I Option Period or the Entire Project
Option Period has expired without Operator exercising its Equity Purchase
Option under Section 19.1. The identification of Operator as co-developer
of the Project will not give Operator any rights not otherwise provided
herein or in the Project Agreements.
19.7 Dividend Restriction. Owner shall make no dividend distributions
to any of its Partners, incur any debts to any of its Partners or make any
payments of any kind to any of its Partners unless such distributions,
debts or payments are either (i) expressly authorized by the Credit
Agreement, (ii) budgeted in the final financial pro forma, or (iii) agreed
to in writing in advance by Operator. Pursuant to Section 9.1, one-third
(33.34%) of all profits of the Project shall be held in escrow by owner
until the expiration of the Equity Purchase Option (if Operator does not
exercise the Equity Purchase Option) or the day after Operator acquires the
Acquired Interest (if Operator exercises the Equity Purchase Option).
ARTICLE 20
MISCELLANEOUS PROVISIONS
20.1 Entire Agreement. This Agreement and the other Project
Agreements together contain the entire understanding of the Parties with
respect to the subject matter hereof and supersede any and all prior
agreements and commitments with respect thereto.
20.2 Further Assurances. Each Party agrees that upon request of any
other Party, it shall, from time to time, do any and all other acts and
things as may reasonably be required to
41
carry out its obligations hereunder and to consummate the transactions
contemplated hereby, including the execution and delivery of documents.
20.3 Amendments. No change, amendment of modification of this
Agreement shall be valid or binding upon the Parties unless made in a
writing signed by all Parties.
20.4 Joint Effort. Preparation of this Agreement has been a joint
effort of the Parties and this Agreement shall not be construed more
severely against one of the Parties.
20.5 Terminology. All personal pronouns used in this Agreement,
whether used in masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and vice versa.
Titles of Articles and Sections are for convenience only, and neither limit
nor amplify the provisions of this Agreement. This "Agreement" shall
always be deemed to mean this Agreement and the Appendices hereto. All
references herein to Articles, Sections or subsections shall refer to the
corresponding Articles, Sections or subsections of this Agreement unless
specific reference is made to Articles, Sections or subsections of another
document. Use of the words "hereby", "herein", "hereof" and similar words
shall be deemed to refer to this Agreement in its entirety and not merely
to the Article, Sections or subsections thereof wherein any such word may
appear.
20.6 Notice. Any notice, demand, offer, consent, report, approval or
other written instrument required or permitted to be given pursuant to this
Agreement shall be in writing signed by the Party giving such notice and
shall be hand delivered or sent by overnight delivery service or by
certified mail to the other Party at the following address:
(a) if delivered to Owner:
Grays Ferry Cogeneration Partnership
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ 1906
Attention:
(b) if delivered to Operator:
President
Philadelphia United Power Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Each Party shall have the right to change the place to which notice shall
be sent or delivered by similar notice sent or like manner to the other
Parties. The effective date of notice issued
42
pursuant to this Agreement shall be as of the addressee's receipt of such
notice.
20.7 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance(s) shall be invalid or
unenforceable to any extent, (a) the remainder of this Agreement and the
application of such provisions to other Person(s), entity(ies) or
circumstance(s) shall not be affected thereby and (b) each such provisions
shall enforced to the greatest extent permitted by law.
20.8 Assignment. Except for an assignment or subcontract to PTEC,
which Operator may elect in its sole discretion, Operator shall neither
assign nor otherwise transfer this Agreement (or written consent of Owner
and Lender (if Lender requires that its consent to be obtained) and any
such assignment, subletting or other transfer without such consent shall be
void. Owner shall have the right to assign this Agreement (i) as security
for or as required by any lender of funds to Owner or (ii) in connection
with a sale or transfer of the Project and/or the Site Lease.
20.9 No Waiver. No consent, or waiver, express or implied, by a Party
to or of any breach or default by the Party in the performance by it of any
of its obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance by such
Party of the same or any other obligation of such Party hereunder. Except
as otherwise provided herein, failure on the part of a Party to complain of
any act or failure to act of the other Party or to declare such other Party
in default, irrespective of how long such failure continues, such not
constitute a waiver by a Party of its rights hereunder.
20.10. Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania, exclusive of conflicts of laws provisions. For the purposes
of any suit, action or proceeding arising out of the Project, this
Agreement, or any of the Project Agreements, Owner and Operator hereby
consent and submit to the exclusive jurisdiction and venue of any of the
courts of the Commonwealth of Pennsylvania, and irrevocably agree that
service of process by certified mail, return receipt requested addressed as
provided in Section 20.6 shall be deemed in every respect effective and
valid personal service of process. Owner and Operator irrevocably waive
any objection which they may nor or hereafter have to the laying of venue
in such courts and any claim that such suit, action or proceeding has been
brought in an inconvenient forum.
20.11 Successors and Assigns. Subject to the restrictions on
transfers set forth herein, this Agreement shall inure to the
43
benefit of, be binding upon and be enforceable by and against the Parties
and their respective successors and assigns.
20.12. Appendices. All Appendices referred to in this Agreement
shall be fully incorporated into this Agreement by such reference and shall
be deemed to be an integral part of this Agreement.
20.13 Relationship of Parties.
(a) Nothing contained in this Agreement shall be construed
as constituting a joint venture or partnership between Operator and Owner.
Operator shall be deemed to be an independent contractor. Operator's
creditors shall not be third party beneficiaries under this Agreement.
(b) Operator hereby declares that it is engaged in an
independent business and agrees to perform the services as an independent
contractor not as the agent, employee or servant of Owner. Operator has
and hereby retains the right to exercise full control and supervision of
its services and full control over the employment, direction, compensation
and discharge of all persons assisting it in the performance of this
Agreement. Operator agrees to be solely responsible for all matters
relating to the payment of its employees, including compliance with social
security, withholding and all other regulations governing such matters.
Operator agrees to be responsible for its own actions and those of its
subordinates, employees and subcontractors during the life of this
Agreement. Without Owner'' approval, Operator shall have no authority to
make any statements representations or commitment or take any actions which
shall be binding upon Owner.
20.14 Survival of Agreements. All of the representations,
warranties, covenants and agreements of each of the Parties shall survive
the execution and delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby except as provided
herein.
20.15 Dollar Amounts. All amounts of money in this Agreement are
denominated in United States Dollars.
20.16 Business Days. In the event that an obligation to be
performed under this Agreement falls due on a Saturday, Sunday or legal
holiday in the Commonwealth of Pennsylvania, the obligation shall be deemed
due on the next business day thereafter.
20.17 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one agreement. If shall not be
necessary that any counterpart be signed by all Parties so long as each
Party have executed two counterparts.
44
20.18 Overdue Obligations to Bear Interest. Except as set forth
in Section 6.3(b), all amounts due hereunder, whether as damages, credits,
revenue or reimbursements, that are not paid when due shall bear interest
at 1% over the Prime Rate on the amount outstanding from time to time, on
the basis of a 365-day year, counting the actual number of days elapsed,
and all such interest accrued at any time shall, but only to the maximum
extent permitted by applicable law, be deemed added to the amount due, as
accrued.
20.19 Proprietary Information.
(a) If either Party transmits to the other any information
(including, without limitation, drawings, technology, reports and designs)
which the disclosing Party designated in writing as "proprietary
information", the receiving Party shall receive and hold such proprietary
information in confidence, shall use it exclusively in connection with the
Project (including necessary disclosures on a proprietary basis to others
directly engaged in the operation or financing of the Project such as
consultants, trustees and lenders engaged for that purpose provided that
such third Party shall consent in writing to be bound by the provision of
this Section 20.19, but in any event avoiding disclosure to other Project
suppliers) and shall not publish or otherwise disclose it to others.
(b) Notwithstanding the foregoing restrictions, either
Party will have the right to disclose proprietary information furnished
hereunder to a Governmental Authority to the extent required by such
Governmental Authority; provided, however, that if such Party undertakes to
so use such proprietary information, it agrees to give the other Party
advance written notice of such undertaking, to make reasonable efforts to
secure confidential treatment of such proprietary information by the
Governmental Authority in question and to permit such other Party to
participate in discussions with such Governmental Authority with regard to
such confidential treatment are unsuccessful, the owner of the proprietary
information shall have the right, if legally permissible, to revise such
proprietary information to make it nonproprietary or to minimize the loss
of its proprietary value.
20.20 No Consequential Damages. In no event shall either Party be
liable (whether based on contract, indemnity, warranty, tort, strict
liability or otherwise) for any special, incidental, exemplary, indirect or
consequential damages, including but not limited to, loss of profits or
revenues arising from the performance or non-performance of such Party's
obligations under this Agreement.
45
20.21 Environmental Liability.
(a) In no vent shall Owner be responsible for present or
future "Claims" (hereinafter defined) directly or indirectly related to or
arising out of the actual or alleged existence, generation, use,
collection, treatment, storage, transportation, recovery, removal,
discharge or disposal of "Hazardous Material" (hereinafter defined) at the
Site and/or adjacent areas, arising out of the period prior to the
commencement of start-up of the Project pursuant to the Turnkey
Construction Contract. If a Claim arises from an act or omission of
Operator of PTEC subsequent to PTEC's acquisition of the Site, Operator
shall defend, indemnify and hold Owner harmless against such Claim; if a
Claim arises from an act or omission that occurred prior to PTEC's
acquisition of the Site or any act or omission of PECO or any third party,
neither Owner nor Operator shall have any liability to each other for such
Claim and both parties shall fully cooperate in any action against PECO or
the third party.
(b) In no event shall Operator be responsible for present
or future Claims directly or indirectly related to or arising out of the
actual or alleged existence, generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of
Hazardous Material at the Site and/or adjacent areas arising out of the
negligent acts, omissions or other conduct of Owner or any of its
officials, agents or employees, contractors or subcontractors of any tier
and Owner shall defend, indemnify and hold Operator harmless against, and
shall reimburse Operator for such Claims; provided, however, that nothing
contained herein shall be construed as requiring Owner to take any
corrective action with respect to any Hazardous Material in existence prior
to the start-up of the Project unless directed to do so by a Governmental
Authority, in which case the corrective actions so undertaken shall be
deemed a Claim within the contemplation of paragraph (a) of this Section
20.21.
(c) In no event shall Owner be responsible for present or
future Claims directly or indirectly related to or arising out of the
actual or alleged existence, generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of
Hazardous Material at the Site and/or adjacent areas arising out of the
negligence acts, omissions or other conduct of Operator or any of its
officials, agents or employees, contractors or subcontractors of any tier
and Operator shall defend, indemnify and hold Operator harmless against,
and shall reimburse Operator for such Claims; provided, however, that
nothing contained herein shall be construed as requiring Operator to take
any corrective action with respect to any Hazardous Material in existence
prior to the start-up of the Project unless directed to do so by a
Governmental Authority, in which case the corrective actions so undertaken
shall be deemed a Claim within the contemplation of paragraph (a) of this
Section 20.21.
46
(d) As used in this Agreement, "Claims" shall mean any and
all claims, demands, causes of action, suits, proceedings, administrative
proceedings, lawsuits, judgments, decrees, debts, damages, liabilities,
court costs and reasonable attorneys' fees including, but not limited to,
the cost of civil fines or penalties or other expenses incurred, assessed
or sustained by or against the affected Party whether asserted under a
theory of strict liability or otherwise.
(e) As used in this Section 20.21, "Hazardous Materials"
shall mean materials defined as "hazardous substances," "hazardous wastes"
or "solid wastes" in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. SS 9601-9657, and any amendments
thereto, or in the Resource Conservation and Recovery Act, 42 U.S.C. SS
6901-6987, and any amendments thereto; and any other substance, the
existence of which on the Site imposes any liability or responsibility on
any Person under any present or future applicable federal, state, local or
common law relating to the protection of the environment or public health
and safety, whether similar or dissimilar to the foregoing.
20.22 Owner's Approval. Wherever in this Agreement Owner's
approval is set forth as a condition, such approval shall not be
unreasonably withheld.
IN WITNESS WHEREOF, the Parties have hereto set their hands and seals
as of the date first above written.
GRAYS FERRY COGENERATION
PARTNERSHIP
By: O'Brien Environmental Energy, Inc.
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By: Adwin Equipment Company
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
PHILADELPHIA UNITED POWER
CORPORATION
By:/s/ ▇. ▇. ▇▇▇▇▇
Title: President
47
APPENDIX 1 to PROJECT SERVICES AND DEVELOPMENT AGREEMENT
[SCOPE OF SERVICES]
TO BE ADDED AFTER EXECUTION
APPENDIX 2 to PROJECT SERVICES AND DEVLEOPMENT AGREEMENT
[AVAILABILITY STANDARDS AND LIQUDATED DAMAGES]
TO BE ADDED AFTER EXECUTION
APPENDIX 3 to PROJECT SERVICES AND DEVELOPMENT AGREEMENT
INTENTIONALLY DELETED
APPENDIX 4 to PROJECT SERVICES AND DEVELOPMENT AGREEMENT
PENN EVENT: ADJUSTMENT IN MINIMUM TAKE REQUIREMENT
APPENDIX 4
The occurrence of a Penn Event will reduce each maximum and minimum number
of Mlbs of Steam appearing in the "Amount of Steam Purchased by PTEC"
column of the table appearing in Section 6.2(a).
The reduction will be calculated as follows:
R = [ (UP - B) X HDD Target HDD Actual ] + B
where:
R = Mlbs deducted from all maximum and minimum number
of Mlbs appearing in the table. (A maximum and
minimum appears in each range listed.)
UP = Mlbs consumed by the University of Penn during the
twelve (12) months prior to the month in which the
Penn Event occurs.
B = Mlbs consumed by the University of Penn during the
months of June through September prior to the
month in which the Penn Event occurs.
HDD 4,866 Heating Degree Days ("HDD's"), the 20 year
average HDD's for the Philadelphia International
Airport, 1969 - 1988 as reported by the U.S.
Weather Service.
HDD The total Heating Degree Days for the Philadelphia
International Airport during the twelve (12)
months prior to the month in which the Penn Event
occurs.
APPENDIX 5 to PROJECT SERVICES AND DEVELOPMENT AGREEMENT
"Fair Market Value" means the value which would be obtained for the Project
in an arm's length transaction between an informed and willing buyer, under
no compulsion to buy, and an informed and willing seller, under no
compulsion to sell, acting within a reasonable time, based upon the market
value of the Project utilizing generally recognized professional criteria
for the appraisal of industrial equipment and machinery. If the parties
cannot agree on a Fair Market Value of the Project within fifteen (15) days
after any event requiring determination of Fair Market Value, then the Fair
Market value shall be mutually determined in an appraisal prepared and
delivered by two disinterested, certified and licensed industrial equipment
and machinery appraisers, each holding the highest then-recognized
professional certification for such appraisers. One of the appraisers
shall be appointed by Owner and the other shall be appointed by Operator,
each of which appointments shall be made within twenty-five (25) days after
the event requiring determination of Fair Market Value of the Project. If
the appraisers thus appointed cannot mutually agree upon the Fair Market
Value of the Project within sixty (60) days after the appointment of the
second appraiser, the two appraisers shall appoint, within five (5) days
thereafter, a third disinterested certified and licensed equipment and
machinery appraiser who shall, within sixty (60) days after the
appointment, determine the Fair Market Value of the Project in accordance
with generally recognized criteria for the appraisal of industrial
equipment and machinery.
If a second appraiser shall not have been appointed within the time
period set forth above, the first appraiser shall determine the Fair Market
Value of the Project.
If the two appraisers fail to agree upon the appointment of a third
appraiser within the time period set forth above, the parties shall jointly
appoint a third appraiser who shall individually determine the Fair Market
Value in accordance with the provisions of this section.
The appraiser of appraisers, as the case may be, shall give written
notice to the parties stating the determination of Fair Market Value and
shall furnish to each party a signed copy of such determination. In the
event of the failure, refusal, or inability of any appraiser or appraisers
to act, a new appraiser or appraisers shall be appointed, which
appointment(s) shall be made in the same manner as provided for the
appointment of the appraiser or appraisers who failed, refused or were
unable to act. The expense of any appraisal conducted in accordance with
the provisions of this section shall be born equally by the parties.