Exhibit 10.12
OPERATION AND MAINTENANCE AGREEMENT
by and between
LSP ENERGY LIMITED PARTNERSHIP
as Owner
and
COGENTRIX BATESVILLE OPERATIONS, LLC
as Operator
Dated as of August 24, 1998
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS......................................................1
ARTICLE II - SCOPE; PROJECT AGREEMENTS; REPRESENTATIVES......................8
SECTION 2.1 - SCOPE OF WORK..................................................8
SECTION 2.2 - EXAMINATION OF PROJECT AGREEMENTS, PROJECT PERMITS AND SITE....8
SECTION 2.3 - COMPLIANCE WITH PROJECT AGREEMENTS AND PERMITS.................9
SECTION 2.4 - PARTY REPRESENTATIVES..........................................9
ARTICLE III - OPERATOR RESPONSIBILITIES......................................9
SECTION 3.1 - INDEPENDENT CONTRACTOR.........................................9
SECTION 3.2 - PRE-COMMENCEMENT PHASE SERVICES................................9
SECTION 3.3 - SITE PROCEDURES...............................................11
SECTION 3.4 - OPERATIONAL PHASE SERVICES....................................12
SECTION 3.5 - STANDARDS OF PERFORMANCE......................................13
SECTION 3.6 - PRE-COMMENCEMENT PHASE BUDGET.................................14
SECTION 3.7 - ANNUAL OPERATING BUDGET AND PLAN; THREE YEAR PROJECTION.......15
SECTION 3.8 - PROCUREMENT OF MATERIALS AND SERVICES.........................16
SECTION 3.9 - INVENTORY.....................................................17
SECTION 3.10 - PERSONNEL....................................................18
SECTION 3.11 - TRAINING PROGRAMS............................................19
SECTION 3.12 - REPORTS......................................................20
SECTION 3.13 - EMERGENCY AND OUTAGE PROCEDURES..............................21
SECTION 3.14 - IMPROVEMENTS.................................................21
SECTION 3.15 - ANNUAL REVIEW................................................21
SECTION 3.16 - NOT USED.....................................................21
SECTION 3.17 - ADMINISTRATION...............................................22
SECTION 3.18 - TAXES........................................................22
SECTION 3.19 - FACILITY PERFORMANCE.........................................22
SECTION 3.20 - LOAN AGREEMENT...............................................22
SECTION 3.21 - FUEL SUPPLY..................................................22
SECTION 3.22 - SAFETY.......................................................23
SECTION 3.23 - BOOKS AND RECORDS............................................23
SECTION 3.24 - SCHEDULING MAINTENANCE.......................................24
SECTION 3.25 - COOPERATION WITH OTHERS......................................24
SECTION 3.26 - ACCESS.......................................................24
SECTION 3.27 - OPERATOR LICENSES; PERMITS...................................24
SECTION 3.28 - ENFORCEMENT OF WARRANTIES....................................24
SECTION 3.29 - COMPLIANCE WITH LAWS.........................................25
SECTION 3.30 - NO LIENS OR ENCUMBRANCES.....................................25
SECTION 3.31 - NO ACTION....................................................25
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TABLE OF CONTENTS
SECTION 3.32 - LITIGATION; PERMIT LAPSES....................................25
ARTICLE IV - OWNER RESPONSIBILITIES.........................................25
SECTION 4.1 - FUEL SUPPLY...................................................25
SECTION 4.2 - REASONABLE ACCESS.............................................26
SECTION 4.3 - ACCOMMODATIONS................................................26
SECTION 4.4 - UTILITIES.....................................................26
SECTION 4.5 - MANUALS AND DRAWINGS..........................................26
SECTION 4.6 - TAXES.........................................................26
SECTION 4.7 - MAINTENANCE OF PERMITS........................................27
SECTION 4.8 - PAYMENT.......................................................27
ARTICLE V - LIMITATIONS ON AUTHORITY........................................27
SECTION 5.1 - GENERAL LIMITATIONS...........................................27
ARTICLE VI - PAYMENT AMOUNT AND TERMS.......................................28
SECTION 6.1 - PAYMENT.......................................................28
SECTION 6.2 - REIMBURSABLE COSTS............................................28
SECTION 6.3 - FEES..........................................................30
SECTION 6.4 - NOT USED......................................................30
SECTION 6.5 - NOT USED......................................................30
SECTION 6.6 - DISPUTES......................................................30
SECTION 6.7 - EXCLUSION.....................................................31
SECTION 6.8 - AUDIT RIGHTS..................................................31
SECTION 6.9 - PAYMENT OF FINES AND PENALTIES................................31
SECTION 6.10 - INTEREST.....................................................32
SECTION 6.11 - PAYMENT ADJUSTMENT...........................................32
ARTICLE VII - INSURANCE.....................................................32
SECTION 7.1 - GENERAL REQUIREMENTS..........................................32
SECTION 7.2 - OPERATOR PROVIDED INSURANCE...................................33
SECTION 7.3 - OWNER PROVIDED INSURANCE......................................35
SECTION 7.4 - OPTIONAL INSURANCE RESPONSIBILITIES...........................37
ARTICLE VIII - DISPUTE RESOLUTION...........................................37
SECTION 8.1 - PROCEDURE.....................................................37
SECTION 8.2 - ARBITRATION PROCEDURE.........................................37
SECTION 8.3 - QUALIFICATIONS OF ARBITRATORS; EXPENSES.......................38
SECTION 8.4 - INDEPENDENT ARBITRATION AGREEMENT.............................39
SECTION 8.5 - CONTINUATION OF WORK..........................................39
ARTICLE IX - COMMENCEMENT AND TERMINATION...................................39
SECTION 9.1 - COMMENCEMENT OF WORK..........................................39
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TABLE OF CONTENTS
SECTION 9.2 - TERM..........................................................39
SECTION 9.3 - RENEWALS......................................................40
SECTION 9.4 - EARLY TERMINATION.............................................40
SECTION 9.5 - TERMINATION PROCEDURE.........................................41
SECTION 9.6 - SUSPENSION OF PERFORMANCE.....................................41
ARTICLE X - REPRESENTATIONS.................................................42
SECTION 10.1 - REPRESENTATIONS AND WARRANTIES...............................42
ARTICLE XI - CONFIDENTIALITY................................................43
SECTION 11.1 - GENERAL......................................................43
SECTION 11.2 - EXCEPTIONS...................................................43
SECTION 11.3 - REQUIRED DISCLOSURE..........................................43
SECTION 11.4 - RETURN OF CONFIDENTIAL INFORMATION...........................44
ARTICLE XII - DEFAULT.......................................................44
SECTION 12.1 - EVENTS OF DEFAULT............................................44
SECTION 12.2 - RIGHTS UPON DEFAULT..........................................45
ARTICLE XIII - INDEMNITY....................................................46
SECTION 13.1 - OPERATOR'S INDEMNITY.........................................46
SECTION 13.2 - OWNER'S INDEMNITY............................................46
SECTION 13.3 - SURVIVAL OF INDEMNITY........................................47
SECTION 13.4 - LITIGATION...................................................47
ARTICLE XIV - LIABILITY OF THE PARTIES......................................48
SECTION 14.1 - LIMITATION OF LIABILITY......................................48
SECTION 14.2 - SURVIVAL.....................................................49
SECTION 14.3 - NO WARRANTIES OR GUARANTEES..................................49
ARTICLE XV - FORCE MAJEURE..................................................49
SECTION 15.1 - FORCE MAJEURE; EVENTS LIMITATION.............................49
ARTICLE XVI - TITLE, DOCUMENTS AND DATA.....................................50
SECTION 16.1 - MATERIALS AND EQUIPMENT......................................50
SECTION 16.2 - REVIEW BY OWNER..............................................50
ARTICLE XVII - HAZARDOUS MATERIALS..........................................50
SECTION 17.1 - OWNER'S INDEMNITY............................................50
SECTION 17.2 - COLLECTION AND REMOVAL.......................................51
SECTION 17.3 - MATERIAL SAFETY DATA SHEETS..................................51
SECTION 17.4 - OPERATOR'S INDEMNITY.........................................51
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TABLE OF CONTENTS
ARTICLE XVIII - MISCELLANEOUS PROVISIONS....................................52
SECTION 18.1 - ENTIRE AGREEMENT.............................................52
SECTION 18.2 - CHANGES TO PROJECT AGREEMENTS................................52
SECTION 18.3 - AMENDMENTS...................................................52
SECTION 18.4 - JOINT EFFORT.................................................52
SECTION 18.5 - CAPTIONS.....................................................53
SECTION 18.6 - NOTICE.......................................................53
SECTION 18.7 - EFFECTIVE DATE OF NOTICE.....................................53
SECTION 18.8 - PARTIAL INVALIDITY...........................................54
SECTION 18.9 - ASSIGNMENT...................................................54
SECTION 18.10 - NO WAIVER...................................................54
SECTION 18.11 - COUNTERPARTS................................................55
SECTION 18.12 - PUBLICITY...................................................55
SECTION 18.13 - APPLICABLE LAW..............................................55
SECTION 18.14 - SUCCESSORS AND ASSIGNS......................................55
SECTION 18.15 - EXHIBITS AND SCHEDULES......................................55
SECTION 18.16 - THIRD PARTY BENEFICIARIES...................................55
SECTION 18.17 - OPERATOR LIENS AND ENCUMBRANCES.............................55
SECTION 18.18 - EFFECT OF APPROVAL RIGHTS...................................56
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ATTACHMENTS
A. Description of Facility and Site
B. Typical List of Site Procedures
C. Typical Pre-Commencement Phase and Annual Operating Budget
D. Services Included with Pre-Commencement and Management Fees
E. Project Agreements and Project Permits Delivered to Operator
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OPERATION AND MAINTENANCE AGREEMENT
This OPERATION AND MAINTENANCE AGREEMENT dated as of August 24, 1998 (the
"Effective Date"), is by and between LSP Energy Limited Partnership, a Delaware
limited partnership ("Owner"), and Cogentrix Batesville Operations, LLC, a
Delaware limited liability company ("Operator").
RECITALS:
1. Owner intends to construct, own and operate the Facility (as
hereinafter defined) to be located in Batesville, Mississippi.
2. Owner has entered into a Construction Contract (as hereinafter defined)
for the design and construction of the Facility.
3. Operator, by itself and through suppliers and subcontractors, desires
to provide certain operation, maintenance and management services for the
Facility.
4. Operator is knowledgeable in the operation and maintenance of thermal
energy equipment and electrical generation equipment of the types to be used at
the Facility, and has reviewed certain Project Agreements (as hereinafter
defined) and has determined it is able and willing to perform the services
described herein.
5. Owner desires to engage Operator to perform such work as is necessary
to operate and maintain the Facility in accordance with the terms and conditions
expressed in this Agreement (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants and promises set
forth herein, IT IS AGREED:
ARTICLE I - Definitions
"Affiliate" means, in relation to any Person, any Person which directly or
indirectly controls, or is under common control with, or is controlled by such
other Person. As used in this definition, "control" (including, with its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate
of a Person solely by reason of his or her being a director, committee member,
officer or employee of such Person.
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"Agreement" means this Operation and Maintenance Agreement (including all
exhibits and schedules attached hereto), as it may be amended, supplemented, or
otherwise modified from time to time.
"Annual Operating Budget" shall have the meaning as set forth in Section
3.7.
"Annual Operating Plan" shall have the meaning as set forth in Section
3.7.
"Commencement Date" means the date of Substantial Completion (as such term
is defined in the Construction Contract) of the first Unit to achieve
Substantial Completion.
"Construction Contract" means the Turnkey Engineering, Procurement and
Construction Agreement for the Project dated as of July 22, 1998 by and between
Owner and Contractor for the engineering, procurement, construction and start-up
of the Facility, as amended, supplemented, or otherwise modified from time to
time.
"Contractor" means BVZ Power Partners - Batesville, a joint venture
between Black & ▇▇▇▇▇▇ Construction, Inc., a Missouri Corporation, and ▇. ▇.
▇▇▇▇▇▇ Company, a Delaware Corporation, including its representatives,
successors and permitted assigns acting in its capacity as contractor pursuant
to the Construction Contract.
"Day" shall mean a calendar day, unless otherwise specified. In the event
that any monetary obligation or obligation to deliver any report or budget falls
due on a Saturday, Sunday or legal holiday in the locality where such Work is
being performed, such obligation shall be deemed due on the next business day
thereafter.
"Effective Date" means the date on which this Agreement is entered into by
Owner and Operator, as first above written.
"Electrical Interconnection Agreements" means collectively the
Interconnection and Operating Agreement dated May 18, 1998, as amended by the
Letter of Amendment dated August 18, 1998 between Owner and Entergy Mississippi,
Inc. ("Entergy") and the Interconnection Agreement between Owner and the
Tennessee Valley Authority ("TVA") dated July 22, 1998, as such agreements may
be amended, supplemented or otherwise, modified from time to time.
"Emergency" means any event or condition relating to or affecting the
Facility which may result in injury to persons or damage to property, including,
without limitation, any person or property at the Facility.
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"Facility" means the natural gas fired combined cycle power generation
facility, as more fully described in Exhibit A, having an intended nominal net
rating of approximately 830 MW to be constructed on the Site pursuant to the
Construction Contract, including without limitation, all equipment and machinery
integral or related to the operation of the facility, the Facility Equipment
including without limitation the gas pipeline and interconnection equipment
referred to in the Fuel Agreements, the electrical interconnection facilities
referred to in the Electrical Interconnection Agreements, the water supply
pipeline, pumping and associated facilities, and the wastewater discharge
pipeline and associated facilities (each to the extent owned by or operated by
Owner pursuant to any Project Agreement), and all other equipment, systems, and
facilities associated therewith.
"Facility Equipment" means all equipment owned or leased by Owner or which
Owner has the responsibility to operate under any Project Agreement, and used in
the operation and maintenance of the Facility.
"Force Majeure" shall have the meaning as set forth in Article XV.
"Fuel Agreements" means collectively the Facilities Agreement between
Owner and Tennessee Gas Pipeline Company, dated June 23, 1998 and the
Interconnection Agreement between Owner and ANR Pipeline Company, dated July 29,
1998 along with all agreements as shall be in effect from time to time between
Owner and any other entity for the provision, sale, transportation, balancing or
delivery of fuel to the Facility as such agreements shall be amended,
supplemented, or otherwise modified from time to time.
"Governmental Authority" means the United States of America, the State of
Mississippi, or any local or special district agency, department, authority,
political subdivision, court, judicial or administrative authority or
instrumentality of either.
"Hazardous Materials" means asbestos or any "hazardous substance" as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. Sections 9601 et seq.), the Hazardous
Materials Transportation Act as amended (49 U.S.C. Sections 1801 et seq.),
"hazardous wastes" as defined in the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sections 9601 et seq.), "toxic substances" as defined in the
Toxic Substance Control Act as amended (15 U.S.C. Section 2601 et seq.), and in
the regulations adopted and publications promulgated pursuant thereto, or in any
other federal, state or local environmental governmental requirements.
"Inducement Agreement" means the Inducement Agreement to be entered into
among the Mississippi Department of Economic and Community Development
("MDECD"), acting for and on behalf of the State of Mississippi ("State"); the
Mississippi Business Finance Corporation
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("MBFC"); the Mississippi Major Economic Impact Authority ("Authority"), a
division of the MCECD also acting for and on behalf of the State; Panola County,
Mississippi ("County"), acting through the Board of Supervisors; the City of
Batesville, Mississippi ("City"), acting by and through its Mayor and Board of
Aldermen; the Panola Partnership, Inc. a Mississippi corporation
("Partnership"); the Industrial Development Authority of the Second Judicial
District of Panola County, Mississippi, acting for and on behalf of the County
("▇▇▇") and Owner, as amended, supplemented or otherwise modified from time to
time.
"Infrastructure Use Agreement" means the Infrastructure Use Agreement to
be entered into among the State of Mississippi, Panola County, Mississippi, City
of Batesville, Mississippi, Industrial Development Authority of the Second
Judicial District of Panola County, Mississippi and Owner, as amended,
supplemented or otherwise modified from time to time.
"Interconnecting Utilities" shall mean Entergy and TVA.
"Law(s)" means any constitution, charter, act, statute, law, ordinance,
code, rule, regulation, order, permit, condition, specified standards or
criteria contained in any applicable permit, approval, order, decision,
determination or ruling of any Governmental Authority having jurisdiction, all
as in effect from time to time, including without limitation, environmental laws
pertaining to air and water emissions relating to the Facility and the operation
thereof, which standards or criteria must be met in order for the Facility to be
operated lawfully, or other legislative, administrative or judicial action,
final decree, judgment or order of any Governmental Authority having
jurisdiction relating to the Facility.
"Loan Agreement" means the promissory notes, loan agreements, guarantees,
assignments, security agreements, mortgages and other agreements between Owner
and any Project Lender for the development, construction and/or permanent
financing or refinancing of the Facility, and any documents relating thereto, as
the same may be amended, supplemented, or otherwise modified from time to time.
"Major Equipment" means the combustion turbine generator, steam turbine
generator and heat recovery steam generator.
"Major Maintenance" means the Major Equipment disassembly, inspections,
overhauls, reassembly and significant capital improvements which require an
outage of the Major Equipment.
"Management Fee" means the amount that Owner shall pay to Operator as
provided in Section 6.3(b).
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"Materials" means all supplies, spare parts, materials, tools,
consumables, chemicals and equipment (excluding fuel oil and natural gas)
necessary for the operation and maintenance of the Facility.
"Milestone Schedule" shall have the meaning set forth in Section 3.2
(a)(8).
"Notice to Proceed" means the written notice from Owner to Operator
requesting commencement of the Pre-Commencement Phase Services.
"Notice to Proceed Date" means the date that Owner issues the Notice to
Proceed.
"Operating Account" means the account established by Owner pursuant to
Section 6.2(b) for the payment by Operator of Reimbursable Costs.
"Operating Year" means the period commencing on the Commencement Date and
ending on the first anniversary of the Commencement Date, and each succeeding
year thereafter.
"Operation and Maintenance Manuals" means the operating manuals for the
Facility provided by Contractor pursuant to the Construction Contract, and the
operating data, design drawings, specifications, vendor manuals, and similar
materials provided by Owner to Operator with respect to the Facility.
"Operational Phase" means the period beginning on the Commencement Date
and ending on the earlier of the expiration or termination date of this
Agreement.
"Operational Phase Services" means the services to be performed by the
Operator pursuant to Section 3.4.
"Operator" means Cogentrix Batesville Operations, LLC, its successors
and/or assigns.
"Owner" shall mean LSP Energy Limited Partnership, its successors and/or
assigns.
"Party" means Owner or Operator and in the plural, both Owner and Operator
together.
"Person" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"Personnel" means the persons employed by the Operator and assigned to the
Site to operate and maintain the Facility and generally to perform the Work, as
described in Section 3.10.
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"Plant Manager" shall mean the individual designated by Operator and
approved by Owner pursuant to Section 3.10 (c) that is empowered by Operator to
direct and manage the Work and with whom Owner may consult at all reasonable
times. Such individual shall not be empowered to execute any amendments to this
Agreement.
"Power Purchase Agreements" means collectively the Power Purchase
Agreement dated as of May 18, 1998, as amended by the First Amendment to Power
Purchase Agreement dated as of July 22, 1998 and the Second Amendment to Power
Purchase Agreement dated as of August 11, 1998 between Virginia Electric and
Power Company and Owner, and the Power Purchase Agreement dated May 21, 1998, as
amended by the letter agreement dated July 16, 1998, between Aquila Power
Corporation and Utilicorp United, Inc. and Owner and any other power purchase
agreement entered into by Owner for the sale by Owner and the purchase by a
Power Purchaser of all or any portion of the net electric energy and/or capacity
produced by the Facility such agreements may be amended, supplemented, or
otherwise modified from time to time.
"Power Purchasers" means Virginia Electric and Power Company and/or Aquila
Power Corporation and Utilicorp United, Inc., and such other entities as may
enter into power purchase agreements with Owner, and their successors and/or
assigns, each acting pursuant to its agreement with Owner for the purchase and
sale of electrical power generated by the Facility.
"Pre-Commencement Phase" means the period from the Notice to Proceed Date
to the Commencement Date.
"Pre-Commencement Phase Budget" shall have the meaning as set forth in
Section 3.6.
"Pre-Commencement Phase Services" shall have the meaning as set forth in
Section 3.2.
"Pre-Commencement Phase Services Fee" shall have the meaning as set forth
in Section 6.3 (a).
"Project" means the Facility, the Site, the Project Permits, the Project
Agreements and other real or personal property interests relating to the
Facility and/or the Site which are owned by Owner or in which Owner has any
rights.
"Project Agreements" means, collectively, the collective reference to the
Construction Contract, the Water Supply Storage Agreement, the Infrastructure
Use Agreement, the Inducement Agreement, the Electrical Interconnection
Agreements, the Fuel Agreements, the Power Purchase Agreements, this Agreement,
the Loan Agreement and any other agreement relating to the Facility or its
operation, maintenance or servicing designated by Owner as a Project Agreement
to the extent Operator has been provided notice and a copy thereof. "Project
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Agreement" shall include any amendment, modification, supplement or addition to
any Project Agreement and any new agreements designated by Owner as a Project
Agreement, executed after the date of this Agreement to the extent Operator has
been provided notice and a copy thereof.
"Project Lender" or "Lender" means any bank, financial institution or
other Person providing development, construction or permanent financing or
refinancing, working capital financing and/or other credit enhancements for the
Facility, whether such financing is provided directly to the Owner or to any
Affiliate thereof.
"Project Permits" means any permit, license, exception, action, order,
authorization, assent, consent or approval for the Facility and any amendments,
modifications, supplements or additions thereto, of which Operator has been
provided notice by Owner.
"Prudent Operating Practice" means those practices, methods,
specifications and standards of safety and performance, as the same may change
from time to time, as are commonly used by experienced, knowledgeable and
professional firms performing operation and maintenance services on facilities
of the type and size similar to the Facility in the electric generation
industry, which in the exercise of reasonable judgment and in the light of the
facts known at the time decisions are made, are considered good, safe and
prudent practice in connection with the operation and maintenance of electrical,
steam generating and other related equipment, facilities and improvements, with
commensurate standards of safety, performance, dependability, efficiency and
economy.
"Reference Rate" means the interest rate established by The Chase
Manhattan Bank, N.A. from time to time as its "prime rate" plus one percent
(1%).
"Reimbursable Costs" shall have the meaning as set forth in Section 6.2.
"Scheduled Commencement Date" means July 1, 2000.
"Services" means those services to be provided by Subcontractors in
connection with Owner's obligations under Section 2.1 ( c ) of this Agreement.
"Site" means the site where the Facility is located as described in
Exhibit A.
"Site Procedures" means those on-Site rules, regulations and procedures to
which Operator shall adhere in the performance of its obligations pursuant to
this Agreement, as prepared or revised and approved pursuant to Section 3.3.
"Standards of Performance" means the standards for Operator's performance
of the Work as set forth in Section 3.5.
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"Subcontractor" means a person or entity having a direct contractual
relationship with Owner to provide Materials and Services.
"Unit" means each of the three (3) combined cycle trains comprising the
Project.
"Unscheduled Outage" means an unplanned Facility failure or other
condition that requires either (i) the Facility to be removed from service, or
from a state in which the Facility is available for service but not in service,
or, (ii) the load of the Facility (or the Facility's capacity level) available
for dispatch to be reduced but does not require that the Facility be removed
from service.
"Water Supply Storage Agreement" means the Water Supply Storage Agreement
dated June 8, 1998 between Owner and the United States of America, as amended,
supplemented and otherwise modified from time to time.
"Work" shall have the meaning as set forth in Section 2.1.
ARTICLE II - Scope; Project Agreements; Representatives
Section 2.1 - Scope of Work.
(a) Operator will operate and maintain the Facility and perform
certain other duties, including certain activities during construction, start-up
and testing of the Facility, as hereinafter set forth (the "Work").
(b) Without limiting the generality of Section 2.1(a), the Work is
divided into two separate phases - the Pre-Commencement Phase and the
Operational Phase. During the Pre-Commencement Phase, Operator shall provide the
Pre-Commencement Phase Services. During the Operational Phase, Operator shall
provide the Operational Phase Services. All Work shall be performed in
accordance with the Standards of Performance set forth in Section 3.5.
(c) Owner shall, at its expense during the term of this Agreement,
provide Operator with the information, services, Materials and authorizations as
Operator may reasonably require from Owner to perform the Work in accordance
with this Agreement.
Section 2.2 - Examination of Project Agreements, Project Permits and Site.
Prior to the Effective Date, Owner has provided Operator with copies of the
Project Agreements and Project Permits listed in Exhibit F. Upon execution
and/or receipt by Owner of any new Project Agreements, Project Permits, or any
amendments to Project Agreements or Project Permits previously transmitted to
Operator, Owner shall provide Operator with executed copies thereof. Operator
represents that, prior to signing this Agreement, it has carefully examined the
Site and each of the Project Agreements and the Project Permits, or applications
relating thereto,
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which it has been provided and has determined the acceptability of each of the
foregoing for the purposes of Operator's performance of its obligations
hereunder. Such Project Agreements and Project Permits given to Operator as of
the Effective Date are listed in Exhibit F. The Parties hereto recognize and
agree that this Agreement is intended, in part, to fulfill Owner's operating and
maintenance obligations under the Project Agreements and, consistent with the
Project Permits, to optimize the operation of the Facility consistent with
Owner's objective to maximize its net profit reasonably attainable under the
Project Agreements.
Section 2.3 - Compliance with Project Agreements and Permits.
Operator shall abide by all terms and conditions of the Project Agreements and
Project Permits applicable to the operation and maintenance of the Facility in
performing any part of the Work. If Operator's compliance with this Agreement
would cause Owner to be in default or otherwise in breach or violation of any of
its obligations under any Project Agreement or any Project Permit, the
requirements of such agreements shall control Operator's performance hereunder
to the extent necessary to avoid such default, breach or violation, subject to
Operator's obligation to comply with all Laws. Each Party shall notify the other
as soon as it knows or believes that compliance with this Agreement will result
in such a default, breach or violation.
Section 2.4 - Party Representatives.
Within thirty (30) Days after the Notice to Proceed Date, Owner and Operator
shall each notify the other in writing of its designation of an individual to
act as its representative with respect to matters which may arise during the
performance of the Work. 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. After such time as the Plant Manager
has been approved pursuant to Section 3.10 (c), such Plant Manager shall be
Operator's representative and shall be located at the Site.
ARTICLE III - Operator Responsibilities
Section 3.1 - Independent Contractor.
In performing the Work hereunder, Operator is and shall remain an independent
contractor. As such, Operator shall not be entitled or eligible to participate
in any benefits or privileges given or extended by Owner to its employees and
shall be responsible for all employer tax, withholding, insurance, and other
payments and filings required as a result of the performance of Operator's
obligations pursuant to this Agreement. Nothing contained in this Agreement
shall be construed as creating a joint venture or partnership relationship
between Operator and Owner.
Section 3.2 - Pre-Commencement Phase Services.
(a) Commencing on the Notice to Proceed Date and subject to the approval
by Owner of the necessary budget pursuant to Section 3.6, Operator shall perform
the services necessary to
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provide for the efficient and safe transition of the Facility from construction
through the Commencement Date including the following services (the
"Pre-Commencement Phase Services"):
(1) prepare a staffing plan and schedule for hiring the Personnel
within ten (10) Days after the Notice to Proceed Date;
(2) recruit and provide orientation for the Personnel to insure that
each of the Personnel satisfactorily completes the training required under
Section 3.11; such Personnel shall be hired and trained by the date required to
enable such Personnel to perform their respective roles in start-up, testing,
and subsequent operation and maintenance of the Facility. No later than the
Commencement Date, the staff shall be comprised of fully trained, qualified and
licensed Personnel meeting the requirements of Section 3.11;
(3) develop a list of Site Procedures, similar to Exhibit B, within
thirty (30) Days after the Notice to Proceed Date;
(4) prepare an initial draft of each of the Site Procedures in
accordance with Section 3.3 and transmit to Owner within one hundred eighty
(180) Days after the Notice to Proceed Date;
(5) not later than one hundred twenty (120) Days prior to the
Scheduled Commencement Date, staff the on-Site office provided by Owner;
(6) respond in a timely manner (but in no event shall the time to
make such a response exceed five (5) Days) to written requests by Owner for
information about the Work;
(7) perform the operation and maintenance for the Facility (that are
not the obligation of Contractor to perform) during the Pre-Commencement Phase
including providing support for the start-up and testing of the Facility under
the direct supervision of the Contractor;
(8) provide the Owner with a written schedule for the performance of
the Pre-Commencement Phase Services within thirty (30) Days after the Notice to
Proceed Date; such schedule to be updated periodically to incorporate changes
requested by the Owner and those requested by the Contractor as necessitated due
to changes in the schedule prepared by Contractor pursuant to the Construction
Contract (the "Milestone Schedule");
(9) provide monthly progress reports on the first of each month in a
format reasonably acceptable to Owner;
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(10) prepare, not later than thirty (30) Days following the Notice
to Proceed Date a proposed Pre-Commencement Phase Budget in accordance with
Section 3.6;
(11) interface with Contractor to coordinate the performance of this
Agreement with Contractor's performance of the Construction Contract. To that
end, Operator shall review the Milestone Schedule, as the same may be modified
from time to time, and appropriately coordinate its duties hereunder with such
Milestone Schedule. Operator shall review any revisions of such Milestone
Schedule and the monthly progress reports generated by Contractor under the
Construction Contract and provided to Operator and Operator shall adjust its
performance of its obligations hereunder accordingly and provide Owner with
written adjustments to the Schedule, together with any change to the
Pre-Commencement Phase Budget, pursuant thereto;
(12) prepare, not later than one hundred twenty (120) Days after the
Notice to Proceed Date a preliminary list of Materials and Services needed to be
procured. The list should identify the approximate date when an item is needed;
(13) arrange for the procurement of Materials and Services in
accordance with Section 3.8 to assure they are available when needed to support
the start-up, operation, and maintenance of the Facility;
(14) with Owner and Contractor develop a "punch list" of
Contractor's uncompleted and/or deficient work; and
(15) review Contractors' training program and Operation and
Maintenance Manuals and provide comments and a recommendation to Owner within
one hundred eighty (180) Days after the Notice to Proceed Date.
Items 1, 2, 3, 4, 8, 9, 10, 11, 12, 13, 14, and 15 shall each be subject
to the review and approval of Owner, which approval shall not be unreasonably
withheld. If Operator is notified that any such item is unsatisfactory, it will
promptly prepare a revision based on Owner's comments and the requirements of
this Agreement.
(b) No review or approval by Owner under this Section 3.2 shall relieve or
limit Operator's responsibility and liability as set forth in this Agreement for
the item so reviewed or approved.
Section 3.3 - Site Procedures.
Operator shall prepare, pursuant to Section 3.2(a)(3), detailed Site Procedures
to be applicable after the Commencement Date and, as necessary, during the
Pre-Commencement Phase.
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Operator shall submit such documents to Owner for review, comment and approval,
and to Contractor for review and comment for purposes of maintaining
Contractor's warranty obligations pursuant to the Construction Contract, within
one hundred eighty (180) Days after the Notice to Proceed Date. Owner's review,
comment, and approval of any proposed Site Procedures presented to it by
Operator shall not be unreasonably withheld or delayed. Owner shall notify
Operator in writing of its comments or approval of each Site Procedure within
thirty (30) Days following Operator's submittal of such proposed Site Procedure
to Owner. In addition, Owner may require Operator to prepare additional Site
Procedures as Owner deems necessary. Subsequent modifications to Site
Procedures, including any revisions required by Owner's rejection of such Site
Procedures, shall likewise be submitted to Owner and Contractor for approval and
comment, as applicable, prior to implementation.
Section 3.4 - Operational Phase Services.
On and after the Commencement Date and subject to the approval by Owner of
the necessary budget pursuant to Section 3.7, the Operator shall be responsible
for the operation and maintenance of the Facility, including the following
services (the "Operational Phase Services"). Operator shall:
(a) perform all operation and maintenance of the Facility, and, in
accordance with Section 3.8, arrange for the procurement of all Materials and
Services required to operate and maintain the Facility in accordance with the
provisions of this Agreement (except as expressly reserved to Owner under
Article IV and subject to the limitations on Operator's authority set forth in
Article V).
(b) perform or coordinate and supervise the performance of all
maintenance in such a manner to minimize the loss of electrical output and
damage to the Facility to optimize the operation of the Facility consistent with
the Owner's objective to maximize its net profit. Furthermore, Operator shall,
consistent with the other terms of this Agreement and with such objective,
maintain the Facility to optimize its useful life and to minimize down-time
because of maintenance.
(c) perform the daily administration and coordination of the Power
Purchase Agreements and Electrical Interconnection Agreements including, but not
limited to, daily communication with the Power Purchasers and the
Interconnecting Utilities and preparation of monthly invoices and supporting
data for the Owner's review and submittal under such agreements.
(d) identify the need for, schedule, arrange for the procurement,
coordinate and supervise the Subcontractor's performance of Services or other
work.
(e) perform the daily administration and coordination of the fuel
supply in accordance with Section 3.21;
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Batesville O&M Agreement Page 12
(f) provide, for submittal by Owner with the appropriate Person, all
reports, data and other information required by the Project Permits and Project
Agreements;
(g) provide the Annual Operating Budget and the Annual Operating
Plan and the Three year Projection in accordance with Section 3.7;
(h) provide periodic technical and administrative reports in
accordance with Section 3.12;
(i) maintain, update as necessary, and comply with the Site
Procedures;
(j) respond in a timely manner (but in no event shall the time to
make such a response exceed five (5) Days) to written requests by Owner for
information about the Work; and
(k) verify completion of items on "punch list" compiled pursuant to
Section 3.2.
Section 3.5 - Standards of Performance.
Operator shall perform each item of the Work in a careful, clean, safe,
professional, prudent, efficient and environmentally acceptable manner in
accordance with the following requirements (collectively, "Standards of
Performance"):
(a) Prudent Operating Practice;
(b) the terms of the Operation and Maintenance Manuals and other
operating instructions provided by Contractor pursuant to the Construction
Contract or provided by any other vendors, suppliers or contractors (and, with
regard to any Facility Equipment acquired subsequent to the Commencement Date,
in accordance with the operating instructions provided by the respective
equipment suppliers, vendors or manufacturers);
(c) all operational and maintenance obligations imposed on the Owner
pursuant to any Project Agreement;
(d) the requirements of the providers of insurance described in
Article VII, and any and all insurance coverage documents maintained by Owner
for the protection of the Facility and its revenues, copies of which are
provided to Operator;
(e) any and all warranties received from Contractor or any
manufacturer of the Facility Equipment or Materials, which are not part of any
Project Agreements, but which copies have been provided to Operator;
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Batesville O&M Agreement Page 13
(f) the Project Permits and all applicable Laws;
(g) the Site Procedures; and
(h) to operate the Facility consistent with Owner's objective to
maximize its net profits from the operation of the Facility.
In the case of any conflict between any such standards, the most stringent
applicable standard shall govern.
Section 3.6 - Pre-Commencement Phase Budget.
Within thirty (30) Days after the Notice to Proceed Date, Operator
shall submit a proposed budget for the Pre-Commencement Phase Services,
substantially in the form of Exhibit C, for Owner's review and approval. The
Pre-Commencement Phase Budget shall contain an itemized estimate by month of all
Reimbursable Costs, Management Fee costs, the cost for all Materials and
Services needed to be procured in accordance with Section 3.8, and supporting
data and assumptions, if any. The proposed Pre-Commencement Phase Budget shall
be based on Operator's assessment of the required Pre-Commencement Phase
Services and reflects the most economical and reasonable means of performing
such Services in accordance with the Standards of Performance. Such assessment
by Operator shall take into consideration those items of goods and services that
are to be supplied by the Contractor under the Construction Contract. Within
thirty (30) Days after receipt of the proposed Pre-Commencement Phase Budget,
Owner shall notify Operator in writing of its approval or any proposed
additions, deletions or modifications as Owner may deem necessary or
appropriate. Operator shall promptly either confirm to Owner its ability to
perform the Pre-Commencement Phase Services during such period in accordance
with Owner's proposed changes, or object to Owner's proposed changes, stating in
detail the reasons for such objection. Owner and Operator shall use their best
efforts to agree upon a Pre-Commencement Phase Budget, which shall be approved
in writing by both Parties, which approval shall not be unreasonably withheld.
If Owner and Operator are unable to agree upon a Pre-Commencement Phase Budget,
Owner and Operator shall present the dispute for dispute resolution in
accordance with Article VIII hereof. If the Operator determines that the
Pre-Commencement Phase Budget needs to be changed after the Notice to Proceed
Date, or that any category within an Annual Operating Budget will vary for such
Operating Year by more than ten percent (10%) or twenty-five thousand dollars
($25,000), whichever is greater, Operator shall immediately notify Owner and
shall follow Owner's instructions regarding further expenditures for the
operation and maintenance of the Facility pursuant to this Agreement. Until such
time as Operator receives such instructions, Operator shall continue to perform
the Pre-Commencement Phase Services according to the terms of this Agreement as
permitted under the Pre-Commencement Phase Budget then in effect. At no time,
without Owner consent, shall Operator be entitled to make expenditures in any
Annual Operating Budget which exceed the amount
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Batesville O&M Agreement Page 14
allocated for such category; provided, however, that the foregoing limitation
shall not apply in the case of Emergencies, which shall be governed by Section
3.13.
Section 3.7 - Annual Operating Budget and Plan; Three Year Projection.
(a) Annual Operating Budget. No later than one hundred twenty
(120) Days prior to the beginning of each Operating Year, Operator shall submit,
for Owner's review and approval, a proposed budget on a monthly basis for the
Operational Phase Services to be performed in the next succeeding Operating
Year, substantially in the form of Exhibit C (the "Annual Operating Budget").
The proposed Annual Operating Budget shall be based on Operator's assessment of
such Services for such Operating Year and shall reflect the most economical and
reasonable means of performing such activities in accordance with the Standards
of Performance. The proposed Annual Operating Budget shall include:
(i) the proposed amount to be spent annually for Reimbursable
Costs and the Management Fee then in effect;
(ii) the proposed amounts to be spent for the purchase of Materials
and Services in accordance with Section 3.8, identifying the
items to be purchased; and
(iii) a proposed inventory plan.
Each proposed Annual Operating Budget shall identify and list separately capital
items.
Within thirty (30) Days after Owner receives Operator's proposal for
such Annual Operating Budget, Owner shall notify Operator in writing of Owner's
approval or any proposed changes to the Annual Operating Budget, and projections
reflected therein as Owner may deem necessary or appropriate. Within fifteen
(15) Days following receipt of any such notice of proposed changes from Owner,
Operator shall either confirm to Owner its ability to perform the Work during
such period in accordance with Owner's proposed changes, or object to Owner's
proposed changes, stating in detail the reasons for such objection. Owner and
Operator shall use their best efforts to agree upon an Annual Operating Budget,
which shall be approved in writing by both Parties, which approval shall not be
unreasonably withheld. If Owner and Operator are unable to agree upon an Annual
Operating Budget, Owner and Operator shall present the dispute for dispute
resolution in accordance with Article VIII. Each Annual Operating Budget shall
remain in effect throughout the applicable Operating Year, subject to updating,
revision and amendment as may be proposed by either Party and consented to in
writing by the other Party, which consent may not be unreasonably withheld.
If, during any Operating Year, Operator determines that any category
within an Annual Operating Budget will vary for such Operating Year by more than
ten percent (10%) or
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twenty-five thousand dollars ($25,000), whichever is greater, Operator shall
immediately notify Owner and shall follow Owner's instructions regarding further
expenditures for the operation and maintenance of the Facility pursuant to this
Agreement. Until such time as Operator receives such instructions, Operator
shall continue to operate and maintain the Facility according to the terms of
this Agreement as permitted under the Annual Operating Budget then in effect. At
no time, without Owner consent, shall Operator be entitled to make expenditures
in any Annual Operating Budget category which exceed the amount allocated for
such category; provided, however, that the foregoing limitation shall not apply
in the case of Emergencies, which shall be governed by Section 3.13.
(b) Annual Operating Plan. With the Annual Operating Budget
submitted in accordance with this Section 3.7(a), Operator shall submit to Owner
for Owner's approval Operator's proposed operating plan for the next Operating
Year (the "Annual Operating Plan") in a form reasonably acceptable to Owner.
Such plan shall describe in detail acceptable to Owner the annual operation and
maintenance plan for the Facility including, without limitation, a summary of
the items in the Annual Operating Budget, hours of operation, holidays to be
observed, schedule of Services, consumption of fuels, purchased electricity,
data regarding expected environmental performance, projected electricity
generated for sale, and any other matters as Owner may require. All such items
shall be set forth on a monthly basis. The proposed Annual Operating Plan shall
be accompanied by all underlying assumptions necessary for its evaluation. All
actions proposed under the Annual Operating Plan shall comply with the Standards
of Performance. Owner shall indicate in writing any proposed revisions,
corrections, deletions or additions to Operator's proposed Annual Operating Plan
within thirty (30) Days after each such submission. The final form of the Annual
Operating Plan shall be approved in writing by both Parties, such approval not
to be unreasonably withheld. In the event of any disagreement, the Parties shall
promptly meet and resolve in good faith any areas of disagreement. If Owner and
Operator are unable to agree upon an Annual Operating Plan, Owner and Operator
shall present the dispute for dispute resolution in accordance with Article VIII
hereof.
(c) Three Year Projection. In addition, with the Annual Operating
Plan, Operator shall submit to Owner for approval a written proposal describing
in detail reasonably acceptable to Owner a proposed operation and maintenance
plan, including scheduled outages, and budget for the next three (3) Operating
Years, including anticipated Major Maintenance (the "Three Year Projection").
Owner shall indicate in writing any proposed revisions, corrections, deletions
or additions to Operator's proposed Three Year Projection within thirty (30)
Days after each such submission.
Section 3.8 - Procurement of Materials and Services.
Operator shall arrange for the procurement of Materials and Services (excluding
natural gas) necessary for the operation and maintenance of the Facility
pursuant to the following provisions.
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(a) All Materials and Services shall be purchased directly by Owner
from Subcontractors, except as otherwise provided in the Site Procedures for
small local purchases and purchases necessary to handle Emergencies. At any
other time that Operator desires to subcontract directly to obtain materials or
services, Operator shall obtain the prior written approval of Owner. In no event
shall Operator be relieved of any of its obligations under this Agreement or of
any of its responsibilities due to faulty performance of any Work performed by
subcontractors.
(b) Operator shall identify Materials and Services needed, establish
technical and commercial requirements, develop qualified bid lists, request
bids/proposals from prospective Subcontractors, evaluate bids/proposals received
and provide a recommendation for award and purchase order to Owner for approval
and execution. In no event shall Operator take title to any Materials. All
purchase orders and bills of lading with respect to Materials shall specify that
Owner shall take title to the Materials directly from Subcontractors.
(c) In evaluating and selecting prospective Subcontractors, Operator
shall make reasonable attempts to optimize Facility costs in consideration of
Facility availability and reliability and to otherwise minimize procurement
costs.
(d) Operator shall receive, inspect, inventory and resolve defects
or deficiencies found in Materials delivered by Subcontractors, and shall sign
all invoices for the Materials indicating Operator's acceptance of the material
as meeting the purchase order. If Operator is unable, using reasonable efforts,
to resolve defects or deficiencies discovered, Operator shall promptly notify
Owner. Operator shall administer on behalf of Owner any claim or dispute arising
under a purchase order. Owner shall provide for direct payment due each
Subcontractor in accordance with the applicable purchase order.
(e) Operator shall be responsible for supervising, coordinating, and
administering all Subcontractors providing Services, including maintenance or
construction services.
Section 3.9 - Inventory.
(a) Operator shall comply with the provisions for maintaining an
inventory of Materials set forth in the Site Procedures.
(b) Operator shall maintain an inventory of Materials adequate to
support the continuous, successful, and reliable operation of the Facility. The
procurement of such inventory, including replacement Materials, shall be made in
accordance with the provisions of Section 3.8.
(c) Operator shall provide security for such inventory.
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Section 3.10 - Personnel.
(a) Operator shall employ at the Facility the appropriate number of
properly qualified and trained Personnel to staff the Facility 24 hours a day, 7
days a week and in a manner consistent with Prudent Operating Practice and to
perform the Operator's obligations under this Agreement as approved under the
Pre-Commencement Phase Budget and Annual Operating Budget.
(b) All Personnel shall be qualified (including, holding all
appropriate valid licenses required by Law) and fully trained for their
respective positions. At least one member of the Personnel shall hold a first
class engineer's license as required under Law. All individuals utilized by
Operator to perform Work shall be employees of the Operator or, subject to
Owner's approval, workers or independent contractors under Operator's direction.
Working hours, rates of compensation, and all other matters relating to such
Personnel shall be determined by Operator (subject to Owner's approval with
respect to budget items).
(c) Owner shall approve the selection of the Plant Manager and
Operator shall consult with Owner regarding the selection of all other
Personnel. Owner shall inform Operator of any objection to any Plant Manager
selection as soon as possible, but in no event later than ten (10) Days after
receipt of notice of Operator's proposed Personnel selection. Operator shall
retain sole responsibility and control of labor matters pertaining to the
Personnel. Operator shall provide Owner with such information regarding the
selection of the Personnel, as Owner may reasonably request. With respect to
hiring of Personnel and its employment policy, Operator shall comply with all
applicable federal and state labor and employment Laws and shall exercise
control over labor relations in a reasonable manner consistent with the intent
and purpose of this Agreement. If in Owner's opinion, the Plant Manager is not
adequately performing the requirements of the job function to the Owner's
satisfaction, including fostering a positive working relationship with the
Owner's staff, the Power Purchasers, and other project participants, then upon
the request of Owner, Operator shall replace the Plant Manager, if, within sixty
(60) days following such request, Operator has not modified the Plant Manager's
performance to the satisfaction of Owner. Owner may also request Operator to
replace any other Personnel, provided, that Owner presents Operator with
reasonable justification therefor, which request shall not be unreasonably
rejected. Operator shall either accept Owner's request or provide Owner with the
reasons for rejection within five (5) Days after receipt of such request. Costs
required to be incurred by Operator as a result of the replacement of such
Personnel pursuant to Owner's exercise of its rights under this Section 3.10(c)
shall be eligible for treatment as Reimbursable Costs, in accordance with the
other requirements of this Agreement.
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(d) Either Owner or Operator may request changes to the job titles,
duties and positions of the Personnel described in this Agreement, subject to
the approval of the other Party, which approval shall not be unreasonably
withheld provided that such change does not have a material adverse impact on
the other Party.
Section 3.11 - Training Programs.
Operator shall require its Personnel to participate in and satisfactorily
complete the following training programs:
(a) Initial Training. Prior to Operator assuming responsibility for
the operation and maintenance of the Facility and in accordance with the
provisions of Section 3.2(a)(2), Operator shall make Personnel available for
"hands on" training to be provided by Contractor pursuant to the Construction
Contract. Operator shall verify that the initial training instructs the
Personnel in the areas of the design, construction, operation and maintenance of
the Facility and shall include normal equipment operation, safety precautions,
routine maintenance, and emergency procedures with respect to all equipment
installed in the Facility. Operator shall promptly notify Owner in the event
Operator determines that any training provided by Contractor fails to meet the
requirements of the Construction Contract. Operator shall insure that the
Personnel are trained in a satisfactory manner so as to enable each of the
Personnel to perform their assigned functions and as required to enable Operator
to comply with its obligations under this Agreement. The initial training will
be videotaped by the Operator at Owner's cost and expense.
(b) Ongoing Training. Within ninety (90) Days following the
Commencement Date, Operator shall establish and maintain a regular ongoing
training program for the Personnel. This training program shall be designed to
train new Personnel, keep existing Personnel familiar with all existing Site
Procedures and informed of all new revisions thereto. Owner may at any time,
upon reasonable notice, review Operator's regular training program in order to
assess its adequacy and compliance with this Section 3.11.
(c) Operator Training Upon Termination. If this Agreement is
scheduled to terminate for any reason, the Operator will cooperate with Owner
and the replacement operator, at Owner's expense, in training replacement
personnel for the Facility, including permitting such replacement personnel to
participate in the foregoing training program. In addition, Operator will
surrender to Owner all training material created, acquired or provided pursuant
to this Section 3.11, provided that, subject to the requirements of Article XI,
Operator may retain a copy thereof.
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Section 3.12 - Reports.
Operator shall cooperate with Owner in complying with the reporting requirements
set forth in the Project Agreements and shall, from and after the Commencement
Date furnish or cause to be furnished to Owner the following reports concerning
the Facility operations:
(a) Monthly Reports. Commencing within ten (10) Days after the end
of each calendar month after the Commencement Date, Operator shall submit: (i) a
progress report, in detail acceptable to Owner, covering all operations
conducted during such calendar month with respect to operations and maintenance
(including without limitation information regarding power generation, heat rates
and fuel consumption), procurement, capital improvements, labor relations,
significant interactions with the Power Purchasers, the Interconnecting
Utilities and Governmental Authorities, and other significant matters, which
report shall include (with respect to quantitative items) a comparison of such
items to corresponding values for the then preceding month and year and listing
of any significant operating problems along with remedial actions planned and a
brief summary of major activities planned for the next two reporting periods;
and (ii) a statement setting forth all Reimbursable Costs paid or incurred,
which statement shall itemize in detail acceptable to Owner the computation of
such Reimbursable Costs and shall state whether or not the Facility operations
have conformed to the applicable Annual Operating Plan and Annual Operating
Budget during such reporting period and if not, the extent and reasons for such
deviation and any remedial action, if remediable.
(b) Annual Reports. As soon as available, and in any event within
thirty (30) Days after the end of each Operating Year, Operator shall submit to
Owner an annual report certified by the Plant Manager describing in detail
substantially similar to that contained in the monthly reports referred to in
Section 3.12(a) above, all of the Facility operations for such Operating Year
and presenting a comparison of such Facility operations with the Annual
Operating Plan and Annual Operating Budget for such Operating Year and with
those obtained for the preceding Operating Year, if any (the "Annual Report").
Within thirty (30) Days after the submission of each Annual Report, the Plant
Manager shall meet with Owner to review and discuss the report and to report
upon any other aspects of the operations at the Facility that Owner may request.
(c) Fuel Reports. Notwithstanding Owner's obligation to furnish fuel
as set forth in Section 4.1 hereof, within ten (10) Days after the end of each
calendar month, Operator shall prepare and submit to Owner a fuel report
summarizing on a daily basis the amount of fuel delivered in accordance with the
Fuel Agreements and accepted at the Facility and the amount of such fuel
consumed at each Unit of the Facility during the preceding month.
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(d) Additional Reports. Operator shall periodically provide reports
to Owner advising Owner of any information Operator becomes aware of concerning
changes in Laws and/or Prudent Operating Practices that it believes may be
material to the operation and maintenance of the Facility.
Section 3.13 - Emergency and Outage Procedures.
In the case of an Unscheduled Outage or Emergency, Operator shall, in accordance
with the requirements of the applicable Site Procedures, notify Owner of the
nature of such Unscheduled Outage or Emergency, the proposed remedial measures
and its probable duration. Operator shall take corrective action pursuant to
Owner's direction only; provided that in the case of an Emergency, Operator
shall act immediately as required to prevent or overcome the threat of injury to
persons or damage to property or to minimize the adverse consequences thereof
pending receipt of instructions by Owner.
Section 3.14 - Improvements.
If at any time, Operator believes that certain alterations, additions,
modifications or other changes to the Facility ("Improvements") would improve
the overall operation, output and/or efficiency of the Facility, then Operator
shall advise Owner in writing of such proposed Improvements and, upon the
written approval of Owner, the Operator shall arrange for the procurement and
integration of all such equipment, materials and other resources necessary to
implement such Improvements at the Facility. Except as set forth in the Annual
Operating Plan or Annual Operating Budget, the Operator shall make no
Improvements other than Improvements made in accordance with this Section 3.14.
Section 3.15 - Annual Review.
No later than one hundred twenty (120) Days prior to each Operating Year
commencing with the second Operating Year, the Operator shall participate in an
annual review. The purpose of the annual review shall be to analyze the past
year's operations and propose changes for the improved quality of the Facility's
operation and maintenance and to review the proposed Annual Operating Plan for
the next Operating Year. To this end, the Operator and Owner shall establish a
standing committee comprised of the Plant Manager and one (1) representative
from each of the Operator and the Owner to monitor and review existing and
proposed activities with respect to the operation and maintenance of the
Facility. Such committee shall meet at least once every year and at such other
times as may be reasonably requested by Owner.
Section 3.16 - Not Used.
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Section 3.17 - Administration.
Operator shall administer and be responsible for the cost accounting,
requisitioning, personnel, and payroll functions related to Operator's Personnel
pursuant to this Agreement. Without limiting the foregoing, Operator shall (i)
pay all bills to be paid by Operator in a timely manner, and (ii) forward in a
timely manner to Owner all bills received by Operator that are Owner's
responsibility to pay hereunder, together with Operator's advice as to which are
due, if there are any offsets or credits, and such other matters as reasonably
related thereto.
Section 3.18 - Taxes.
Operator shall pay, subject to Owner's reimbursement in accordance with Section
6.2, all federal, state and local unemployment taxes, Federal Insurance
Contribution Act (FICA) taxes and other taxes which it is obligated to pay with
respect to wages and salaries paid by it to its employees performing the Work
and maintain all appropriate records with respect thereto.
Section 3.19 - Facility Performance.
If any significant deficiency in performance of the Facility occurs, including,
but not limited to, a failure to meet any warranty under the Project Agreements,
or if such a deficiency is projected, then Operator shall notify Owner of such
deficiency or projected deficiency and shall state Operator's opinion as to the
cause of such deficiency or projected deficiency and prepare a report in detail,
as required, together with a plan to remedy the problem. Upon Owner's request,
Operator shall make available such of its Personnel as reasonably necessary to
review and assess the cause of such deficiency with Owner and Contractor and/or
any of their agents.
Section 3.20 - Loan Agreement.
Operator acknowledges that Owner intends to obtain long-term debt and equity
financing for the Facility, and that compliance by Owner with the terms and
conditions applicable thereto may require the cooperation of Operator in matters
not now ascertainable. Accordingly, Operator will reasonably cooperate with
Owner, so as to permit Owner to comply with the various requirements relating to
the operation and maintenance of the Facility that are imposed by such Project
Lenders, including, but not limited to, providing any required or reasonably
requested information or reports on the operation and maintenance of the
Facility.
Section 3.21 - Fuel Supply.
(a) Operator shall not be responsible for contracting for natural
gas. Operator shall be responsible for day to day communication and coordination
with the Power Purchasers and the fuel supply and transportation subcontractors
of the Power Purchasers and/or the Owner's fuel supply and transportation
Subcontractors, as appropriate.
(b) Operator shall monitor the fuel requirements of the Facility and
Operator shall be responsible for keeping Owner informed that the supply of fuel
available is adequate to
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operate the Facility at its optimal level. In the event Operator becomes aware
that natural gas is not available in sufficient quantities or quality to fuel
the Facility to provide the electrical output requested by the Power Purchasers
in an optimal manner, Operator shall immediately notify Owner.
Section 3.22 - Safety.
Operator shall comply with all Site Procedures regarding safety, security and
fire protection to prevent accidents or injuries to persons or damage to
property on or about the Site. Operator shall continuously update the same to
optimize the safe, reliable and efficient operation of the Facility.
Section 3.23 - Books and Records.
(a) Operator shall maintain operating logs, records and reports (in
form and substance as required by the Site Procedures) documenting the operation
of the Facility, including those logs, records and reports required by any
Project Agreement; maintain current revisions of Facility drawings, equipment
manuals, instruction books, and the Operation and Maintenance Manuals; maintain
accurate cost ledgers and accounting records regarding the Work in accordance
with generally accepted accounting principles for review by Owner. Operator
shall also prepare all reports required for Governmental Authorities, or by the
Project Permits, and provide same to Owner for its review and submittal. Upon
termination of this Agreement, the Operator shall turn over a copy of all such
books, logs, ledgers, manuals, reports and records to Owner.
(b) Operator shall establish and maintain an information system
reasonably satisfactory to Owner to provide storage and ready retrieval of
Facility operating data, including such information necessary to verify and
support calculations for preparation of invoices made pursuant to the Power
Purchase Agreements; provided, however, that all hardware necessary in
connection with the information system shall be provided by Owner.
(c) Operator shall prepare and maintain, on a current basis, proper,
accurate, and complete books and records and accounts of all transactions
related to the Facility, including such information necessary to verify
calculations made pursuant to this Agreement.
(d) At all reasonable times Owner shall have access to the records
maintained pursuant to this Section and may audit the record keeping practices
and systems used to generate the data required by this Section 3.23 and shall
have the right to determine whether such practices and systems are in accordance
with generally accepted accounting principles and cause Operator to make such
changes as necessary to conform with such principles.
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(e) Owner's right of access to the records described in this Section
3.23 and Operator's obligation to maintain and preserve the same shall survive
for a five (5) year period following the termination of this Agreement.
Section 3.24 - Scheduling Maintenance.
Operator shall arrange and schedule all maintenance for the Facility in
accordance with the Standards of Performance and Project Agreements. Scheduled
outages shall be approved by Owner, such approval not to be unreasonably
withheld. Operator shall coordinate with Owner in scheduling such maintenance
and notify the Power Purchasers, as necessary, of Facility conditions as
required by the Project Agreements. Generally, scheduled maintenance will be
performed, to the extent practical, during off-peak hours.
Section 3.25 - Cooperation With Others.
Operator shall cooperate fully with (i) any Subcontractor, (ii) any entity
supplying or transporting fuel to the Facility, (iii) the Interconnecting
Utilities, and (iv) the Power Purchasers.
Section 3.26 - Access.
Operator shall allow Owner and such other parties as Owner designates from time
to time, to have full, unrestricted access to the Facility and Site and all
reports, data, information and documents related to the Project in Operator's
possession at the Site at all times, provided, however, such parties must adhere
to all applicable Site Procedures.
Section 3.27 - Operator Licenses; Permits.
Operator shall cause each of the Personnel to procure and maintain their
respective licenses as required to perform the Work and shall assist Owner in
the maintenance of the Project Permits and procurement of any revisions,
waivers, or additional permits necessary or desirable for the operation of the
Facility as contemplated hereunder. Operator shall prepare all operating and
other reports for Owner's review and submittal to maintain the Project Permits.
Section 3.28 - Enforcement of Warranties.
Operator shall notify Owner of any claims which Owner may have under warranties
or guaranties of which Owner is beneficiary regarding the Facility, Materials or
any component thereof of which Operator becomes aware during the performance of
Work. Operator shall manage and operate the Facility consistent with the
conditions applicable to all such warranties and guarantees so as to preserve
the effectiveness thereof and shall take no action which may adversely affect
any claim under any such warranty or guaranty without the express written
consent of the Owner except as provided in Section 3.13.
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Section 3.29 - Compliance with Laws.
Operator shall at all times operate and maintain the Facility such that it
complies in every material respect with all applicable Laws and Project Permits.
Operator shall notify Owner of any deficiencies or compliance requirements of
such Laws and Project Permits and changes in Laws or requirements of any
Governmental Authority relevant to the Project of which Operator is aware.
Section 3.30 - No Liens or Encumbrances.
Operator shall keep and maintain the Facility free and clear of all liens and
encumbrances resulting from acts or omissions of Operator or its subcontractors
or work done at the request of Operator or its subcontractors to the extent
Owner has paid Operator for the Work.
Section 3.31 - No Action.
Operator shall not intentionally take any action or intentionally fail to take
any action that would (i) relieve Contractor from any obligation or liability
under the Construction Contract, (ii) give rise to any claim by Contractor
against Owner or Operator or (iii) otherwise cause a default (or a condition
which with passage of time, notice or both, would be a default) under any
Project Agreement or a violation of any applicable Law or Project Permit.
Section 3.32 - Litigation; Permit Lapses.
Upon obtaining notice or knowledge thereof, Operator shall submit prompt written
notice to Owner of: (i) any litigation, or material claim, dispute or action,
threatened in writing or filed, concerning the Facility, the Site, the Project
Agreements, or the Work; (ii) any written refusal or threatened refusal to
grant, renew or extend or any pending or written threatened action that might
affect the granting, renewal or extension of, any license, permit, approval,
authorization or consent concerning the Facility or the Work; and (iii) any
dispute with any Governmental Authority concerning the Facility or the Work, any
Project Permit, or any dispute with respect to any Project Agreement.
ARTICLE IV - Owner Responsibilities
Section 4.1 - Fuel Supply.
Owner shall cause natural gas to be provided for use at the Facility, in such
quantities as contemplated pursuant to the Project Agreements and as reasonably
requested by Operator pursuant to Section 3.21. In the event that natural gas is
purchased by Owner, Owner shall be responsible for (a) contracting for natural
gas and (b) making direct payment on invoices for natural gas to the applicable
suppliers.
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Section 4.2 - Reasonable Access.
Owner shall provide and grant to Operator right of access to the Facility and
the Site throughout the term of this Agreement. As reasonably requested by
Operator, Owner shall provide Operator with reasonable access to any information
in its possession relating to the physical characteristics of the Facility or to
any of the Facility Equipment.
Section 4.3 - Accommodations.
Owner shall provide for and make available to Operator such office space,
storage facilities, unloading areas, rest rooms and office equipment facilities
as Operator may reasonably require and are reasonably practicable at the
Facility, as constructed pursuant to the Construction Contract.
Section 4.4 - Utilities.
Owner shall provide for and make available to Operator sufficient quantities of
electricity and other utilities as Operator may reasonably request for (a) the
operation and maintenance of the Facility and (b) the health and safety of its
employees.
Section 4.5 - Manuals and Drawings.
Owner shall provide Operator with all operation and maintenance manuals and all
drawings, specifications, diagrams, and other information which Owner has or may
obtain with respect to the Facility including any of the same that Contractor is
obligated to provide to Owner pursuant to the Construction Contract. Should any
such information be classified as confidential or proprietary, then Owner shall
use reasonable efforts to obtain all necessary authorizations, releases,
acknowledgments, or other approvals to provide Operator access to and use of
such information. Operator, in turn, shall comply with all resulting
requirements for protecting the confidential or proprietary nature of such
information, including without limitation, any such requirements contained in
any Project Agreement following receipt of such requirements.
Section 4.6 - Taxes.
Owner shall pay (or reimburse Operator) for any present or future duty or tax
(other than income taxes of Operator) which may be assessed against it and/or
Operator, upon reasonable notice from Operator, relative to the operation and
maintenance of the Facility. Operator shall promptly furnish any such bills it
receives to Owner. If Owner is exempt from the payment of any applicable sales
and/or use taxes or has a direct payment permit with respect to such taxes, then
Owner shall provide Operator with a copy of the certificate or permit, duly
executed and issued by the appropriate governmental authority, or an opinion of
counsel regarding such exemption in lieu of such certificate or permit.
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Section 4.7 - Maintenance of Permits.
Owner shall pay for and maintain, with the cooperation of the Operator, any and
all certificates, permits, governmental fees, licenses, and inspections
necessary for the continuous operation of the Facility (except any of the same
required to be obtained and maintained by Operator or the Personnel pursuant to
Section 3.27 of this Agreement), including any required renewals of the Project
Permits.
Section 4.8 - Payment
Owner shall make applicable payments to Operator pursuant to Article VI.
ARTICLE V - Limitations on Authority
Section 5.1 - General Limitations.
Notwithstanding any provision in this Agreement to the contrary, unless
previously expressly approved in (i) the Annual Operating Plan or Annual
Operating Budget regarding Operational Phase Services; or (ii) the
Pre-Commencement Phase Budget with regard to Pre-Commencement Phase Services,
or, (iii) otherwise approved in writing by Owner, Operator or any agent,
representative or contractor of Operator shall not:
(a) Disposition of Assets. Sell, lease, pledge, mortgage, convey, or
make any license, exchange or other transfer or disposition of any property or
any interest therein comprising any part of the Project;
(b) Contract. Make, enter into, execute, amend, terminate, suspend,
modify or supplement or give or accept waivers under any contract or agreement
on behalf of or in the name of Owner;
(c) Expenditures. Make or commit to any expenditure, incur any
obligation or liability or acquire on a Reimbursable Cost basis any Materials,
assets or other items, or consent or agree to do any of the foregoing; provided
that in the event of an Emergency affecting the safety or protection of Persons
or endangering the Facility or property located at the Facility, Operator,
without approval from Owner, shall be authorized to take all reasonable actions
to prevent such threatened damage, injury or loss in accordance with Sections
3.8 and 3.13;
(d) Other Actions. Take or agree to take any other action that
materially varies with the applicable Annual Operating Plan or Annual Operating
Budget or with any Project Agreement or fail to take any action required by the
Annual Operating Plan, Annual Operating Budget or any Project Agreement;
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Batesville O&M Agreement Page 27
(e) Lawsuits and Settlements. Settle, compromise, assign, pledge,
transfer, release or consent to the compromise, assignment, pledge, transfer or
release of, any claim, suit, debt, demand or judgment against or due by, Owner
or Operator, the cost of which, in the case of Operator, would be Reimbursable
Costs hereunder, or submit any such claim, dispute or controversy to arbitration
or judicial process, or stipulate in respect thereof to a judgment, or consent
to do the same or commence any litigation, action, arbitration, or other
proceeding on behalf of Owner; provided, however, that Owner shall not
unreasonably withhold its approval of any settlement, compromise, arbitration or
litigation of any claim, suit, demand, debt or judgment involving a liability or
potential liability only against Operator; or
(f) Project Agreements. Initiate or respond to any complaint or
dispute resolution under or negotiate with any party to any Project Agreement,
except as expressly authorized in writing by Owner.
ARTICLE VI - Payment Amount and Terms
Section 6.1 - Payment.
As the sole and exclusive compensation and reimbursement to Operator for the
performance of the Work hereunder, Owner shall pay Operator, in the manner and
at the times specified in this Article VI, all Reimbursable Costs, the
Pre-Commencement Phase Services Fee and the Management Fee. Operator
acknowledges that the obligation of Owner to pay the Pre-Commencement Phase
Services Fee and the Management Fee is subordinate to the obligation of Owner to
pay Debt Service (as defined in the Loan Agreement to the Project Lenders).
Section 6.2 - Reimbursable Costs.
(a) Covered Expenditures. Subject to the limitations on expenditures
set forth elsewhere in this Agreement, Owner shall reimburse Operator for the
following costs incurred by Operator in performing the Work, each as properly
incurred by Operator pursuant to this Agreement and documented by written
invoice or receipt provided to Owner (the "Reimbursable Costs"): (i) the actual
payroll cost for the Personnel involved in the performance of the Work,
including overtime, plus the actual cost of associated payroll taxes,
unemployment and disability insurance, worker's compensation, vacation,
holidays, fringe benefits and other statutory compensation; (ii) (A) prior to
the Commencement Date, relocation and recruitment costs of salaried and
non-salaried employees as approved in advance by Owner (provided, that such
relocation and recruitment costs shall not exceed $80,000 in the aggregate) and
(B) on and after the Commencement Date, relocation and recruitment costs of
salaried employees and recruitment costs of non-salaried employees as approved
in advance by Owner; (iii) the actual costs of Operator's subcontractors
approved as provided herein; (iv) the actual cost of insurance paid by Operator
to provide the coverages set forth in Section 7.1 (except for payments for
deductibles to
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Batesville O&M Agreement Page 28
be paid by Operator pursuant to Section 7.4); (v) upon Owner's request and
subject to Owner's prior approval, other services provided (other than the Work)
at a mutually agreed upon price, terms and conditions and (vi) any other cost
designated as a Reimbursable Cost pursuant to the terms of this Agreement. Owner
shall pay Reimbursable Costs as follows:
(b) Payments. Owner shall establish the Operating Account and, on or
before the first day of each month, shall deposit into such account the portion
of the Reimbursable Costs budgeted for such month in the applicable Annual
Operating Budget or Pre-Commencement Phase Budget. Any interest accruing on such
account shall be for the benefit of Owner. Operator may withdraw funds from such
account as and when necessary to pay such Reimbursable Costs incurred by
Operator. Operator shall submit a statement to Owner at the end of each month
itemizing the total Reimbursable Costs incurred during such month. Upon the
approval of such statement and subject to Section 6.6, Owner shall make any
additional payment to Operator due for such month within thirty (30) Days from
the date of such invoice statement. Any excess payment by Owner shall be
credited against any amount due Operator for the period following such
statement. No Reimbursable Costs shall be invoiced by Operator unless they were
incurred in accordance with the applicable Annual Operating Budget or
Pre-Commencement Phase Budget, each as amended, supplemented, or otherwise
modified from time to time. If at any time during the performance of the Work
after the Commencement Date, Operator becomes aware that for any monthly period
Reimbursable Costs exceed or could be reasonably anticipated to exceed the
amount provided therefor in the Annual Operating Budget, Operator shall promptly
notify Owner of such budget overrun and shall not, without the written approval
of Owner amending such Annual Operating Budget or authorizing such expenditure,
perform any further Work that will result in or increase such budget overrun,
except in the case of an Emergency as provided in Section 3.13.
(c) Direct Payments.
(i) For each item of Material and rendition of Services, Operator
shall promptly notify Owner in writing that a payment is due to a Subcontractor
pursuant to a purchase order issued by Owner. The written notification shall be
certified by the Operator as pertaining to work that has been duly performed in
accordance with the applicable purchase orders, and shall be accompanied by an
invoice, ▇▇▇▇ of sale or other appropriate documentation evidencing the payment
due. Upon receipt of such written notification, Owner shall cause such payment
to be made in a timely manner directly to said Subcontractor in accordance with
the purchase order.
(ii) All payments due from Owner to Subcontractors (the "Direct
Payments") in a given month shall be separately itemized in the invoice
statements required pursuant to Section 6.2(a), provided, however, that Direct
Payments shall not be included in the amount of the Reimbursable Costs.
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Batesville O&M Agreement Page 29
(iii) In no event shall any separate or additional compensation be
payable by Owner to Operator in connection with Operator's performance under
this Section.
Section 6.3 - Fees.
(a) Pre-Commencement Phase Services Fee. Owner shall pay to Operator
a fixed fee of $390,000 for the Pre-Commencement Phase Services (the
"Pre-Commencement Phase Services Fee"). The Pre-Commencement Phase Services Fee
shall be payable in ten (10) equal monthly installments beginning ten (10)
months before the Scheduled Commencement Date and ending on the Commencement
Date (provided that if the Commencement Date occurs prior to the end of such ten
(10) month period, the balance of the Pre-Commencement Phase Services Fee shall
be payable in the month immediately following the month in which the
Commencement Date occurs). The Pre-Commencement Services Fee shall be payable on
the first Day of the month for which such payment is due. The Pre-Commencement
Phase Services Fee shall constitute full payment for the services listed in
Exhibit D, all Operator overhead and profit for the Work and general and
administrative costs incurred by the Operator.
(b) Management Fee. Owner shall pay to Operator an annual Management
Fee of $500,000 for each Operating Year, adjusted as set forth in Section 6.11,
commencing on the Commencement Date and continuing for each Operating Year
thereafter. Each annual Management Fee shall be earned in monthly increments of
one-twelfth (1/12) of such Fee, each of which shall be payable monthly on the
first day of the month in which Work is to be performed (partial month fees will
be pro-rated accordingly). The Management Fee shall constitute full payment for
the services listed in Exhibit D, all Operator overhead and profit for the Work
and general and administrative costs incurred by the Operator.
Section 6.4 - Not Used.
Section 6.5 - Not Used.
Section 6.6 - Disputes.
Should Owner in good faith contest the validity, reasonableness or accuracy of
any statement submitted to it for payment, it shall notify Operator in writing
within fifteen (15) Days of its receipt of such statement, explaining in detail
the reasons for its refusal to honor Operator's request for payment. If Owner
disputes only part of a statement submitted to it for payment, then it shall pay
to Operator the undisputed portion of such statement in accordance with Section
6.2 and notify Operator in writing of the amount disputed in accordance with
this Section 6.6. All such disputes shall be resolved pursuant to Article VIII
of this Agreement.
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Section 6.7 - Exclusion.
Except as may otherwise expressly be provided for in this Agreement, Owner shall
not be liable for any additional costs incurred by Operator, or fees related
thereto, to the extent such costs are incurred by Operator either (i) for Work
performed not consistent with the Standards of Performance; (ii) for Work
performed to remedy a fault or deficiency which was created or aggravated by
Operator's failure to follow the Standards of Performance, or Operator's
negligent acts or omissions or willful misconduct, or (iii) in violation of
Section 5.1.
Section 6.8 - Audit Rights.
Notwithstanding the payment of any amount pursuant to the foregoing provisions,
Owner shall remain entitled to conduct an audit and review of all payments made
to Operator hereunder on a time and material or cost reimbursable basis,
together with any supporting documentation in accordance with the provisions of
Section 6.2 for a period of five (5) years from and after the close of the
calendar year (in the case of payments for Pre-Commencement Phase Services) or
Operating Year (in the case of payments for Work performed after the
Commencement Date). Such audit and review may be conducted by Owner or by an
independent certified public accountant and the party conducting such audit and
review shall be entitled to inspect, copy and audit any of Operator's financial
books, records, accounts, and ledgers relating to the Facility or the Work.
Operator shall cooperate with the auditors and promptly respond to any questions
relating to such audits. Operator shall retain all such information described
above for a period of five (5) years. If, pursuant to such audit and review, it
is determined that any amount previously paid by Operator did not constitute a
due and payable item hereunder, including without limitation, a properly payable
Reimbursable Cost, Owner, at its option, may recover such amount immediately
upon demand, with interest determined in accordance with Section 6.10, from
Operator or deduct or cause to be deducted such amount from any payment that
thereafter may become due to Operator hereunder.
Section 6.9 - Payment of Fines and Penalties.
Payment at any time of any fine or penalties (or settlements in lieu of fines or
penalties) payable to any Governmental Authority, to the extent caused by the
negligent acts or omissions or willful misconduct of Operator, or Operator's
failure to comply with any provision of this Agreement, shall be the
responsibility of Operator and such fines or penalties shall not be considered
Reimbursable Costs or otherwise result in any increase of the costs to be borne
by Owner. Owner shall be responsible for the payment of any other fines or
penalties (or settlements in lieu of fines or penalties) payable to any
Governmental Authority as a result of the failure of the Facility to comply with
applicable Laws or Facility Permits.
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If either Party receives notice or has knowledge of any violation of any laws or
regulations by the other Party with respect to the matters covered by this
Agreement which could result in such fines or penalties from a Governmental
Authority, then such knowledgeable Party shall give prompt notice thereof to the
other Party.
Section 6.10 - Interest.
Any amount owed to either Party hereunder by the other Party shall accrue
interest each Day from the date that such amount is due until the date paid at
the Reference Rate per annum, computed and compounded daily.
Section 6.11 - Payment Adjustment.
The Management Fee shall be adjusted annually, effective as of January 1st of
any given Operating Year. On such date each Management Fee shall be adjusted in
accordance with the following equation:
Adjusted Management Fee = original Management Fee multiplied by the
ratio of
GDP-IP August Previous Year
---------------------------
GDP-IP August 1998
Where:
"GDP-IP August Previous Year" equals the published index value in
August of the Operating Year immediately preceding the Operating Year for which
the adjustment is due.
"GDP-IP August 1998" equals the published index value for August
1998.
"GDP-IP" means the final published Implicit Price Deflator for Gross
Domestic Product as determined quarterly and reported monthly by the Bureau of
Economic Analysis of the U.S. Department of Commerce in the publication "Survey
of Current Business." In the event this index is discontinued or its basis is
substantially modified, the Parties shall agree on a substitute index.
ARTICLE VII - Insurance
Section 7.1 - General Requirements
7.1.1 All insurance carried and maintained pursuant to this Agreement shall be
with insurance companies which are authorized to transact insurance business and
cover risks in the State of Mississippi and which are rated "Excellent" or
better by Best's Insurance Guide and Key Ratings or other insurance companies of
recognized responsibility and satisfactory to the Owner, Lender
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and (with respect only to the insurance companies proposed to provide the
insurance required by Section 7.3.1, paragraphs i and ii) Operator, except that
Operator may self-insure the coverages it is required to provide hereunder.
7.1.2 On or before the Notice to Proceed Date and annually thereafter, the
Parties shall arrange to furnish each other with an approved certification of
all required insurance and copies of policies, if requested. Such certification
shall be executed by each insurer or by an authorized representative of each
insurer. Such certification or notice, as the case may be, shall identify
insurers, the type of insurance the insurance limits, the policy term and shall
specifically list the special provisions enumerated for such insurance required
by this Article VII.
Section 7.2 - Operator Provided Insurance
7.2.1 Coverages - Operator shall at all times throughout the term of this
Agreement and any renewal thereof carry and maintain or cause to be maintained,
at its own expense, insurance with coverage as follows:
i. Workers' Compensation and Employer's Liability Coverage - Operator
shall maintain or cause to be maintained Workers' Compensation
insurance written in accordance with statutory limits and Employer's
Liability in the amount not less than $10,000,000 per occurrence and
in the annual aggregate. The Employer's Liability coverage shall not
contain an occupational disease exclusion. Such policy or policies
shall contain an all states endorsement or stop gap endorsement and
alternate employer coverage.
ii. Comprehensive Automobile Liability Coverage - Operator shall
maintain or cause to be maintained Comprehensive Automobile
Liability insurance covering all owned, non-owned and hired vehicles
used by Operator or its permissive users in connection with Work.
Such coverage shall be written in an amount not less than $1,000,000
per occurrence.
iii. Excess (or Umbrella) Liability Coverage - Operator shall maintain
excess (or Umbrella) Liability insurance written on an occurrence
basis providing coverage for a limit of $9,000,000 per occurrence
and annual aggregate in excess of the insurance required in Section
7.2.1, paragraph ii.
iv Subcontractor Insurance - Operator shall require all of Operator's
subcontractors to obtain, maintain and keep in force during the time
in which they are engaged in performing services hereunder
reasonably adequate coverage in accordance with Operator's normal
practice (but not less than Worker's Compensation insurance written
in accordance with statutory limits and Employer's Liability,
Comprehensive Automobile Liability and Comprehensive
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General Liability each with limits of $1,000,000 per occurrence and
in the aggregate) and furnish Owner with acceptable evidence of such
insurance upon its request.
7.2.2 Deductibles - All deductibles or self-insured retentions for the coverages
specified in Section 7.2.1 shall be the sole responsibility of Operator.
7.2.3 Endorsements - Any insurance provided in accordance with Section 7.2.1
shall be endorsed to provide that if such insurance is canceled for any reason
whatsoever, including nonpayment of premium, or any substantial change is made
in the coverage that affects the interest of Owner, Independent Engineer,
Lender, Power Purchasers or Interconnecting Utilities, such cancellation or
change shall not be effective as to Owner until forty-five (45) days after
receipt by Owner of written notice sent by registered mail from such insurer of
such cancellation or change; provided, however, that such forty-five (45) day
period shall be reduced to 10 days in the case where cancellation results from
the nonpayment of premiums. In addition, any insurance provided in accordance
with Section 7.2.1 paragraphs ii, iii and iv shall be endorsed to provide that:
i. Owner, Independent Engineer, Power Purchasers, Interconnecting
Utilities and Lender shall be an additional insured, in each case
with the understanding that any obligation imposed upon Operator
(including the liability to pay premiums) shall be the sole
obligation of Operator and not that of Owner, Independent Engineer,
Utilities, Transmission Providers or Lender.
ii. The insurer thereunder waives all rights of subrogation against
Owner, Independent Engineer, Power Purchasers, Interconnecting
Utilities and Lender and any other right to deduction due to
outstanding premiums, whether by attachment or otherwise.
iii. Such insurance shall be primary without right of contribution of any
other insurance carried by or on behalf of Owner, Independent
Engineer, Power Purchasers, Interconnecting Utilities or Lender with
respect to its interest as such in the Facility.
iv. Inasmuch as such policies are written to cover more than one
insured, all terms, conditions, insuring agreements and endorsements
(other than the limits of liability) shall operate in the same
manner as if there were a separate policy covering each insured.
Any insurance provided in accordance with Section 7.2.1 paragraph i shall be
endorsed to provide that the insurer thereunder waives all rights of subrogation
against Owner, Independent
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Engineer, Power Purchasers, Interconnecting Utilities and Lender and any other
right to deduction due to outstanding premiums, whether by attachment or
otherwise.
Section 7.3 - Owner Provided Insurance
7.3.1 Coverages - Owner shall commencing on or before (x) the Notice to Proceed
Date in the case of insurance provided in accordance with paragraphs i and ii
below and (y) the Commencement Date in the case of insurance provided in
accordance with paragraph iii below, and continuing throughout the term of this
Agreement and any renewal thereof carry and maintain or cause to be maintained,
at its own expense, insurance with coverage as follows:
i. Commercial or Comprehensive General Liability Coverage. - Owner
shall maintain or cause to be maintained Commercial or Comprehensive
General Liability insurance with a combined single limit of not less
than $1,000,000 per occurrence and in the annual aggregate. Such
coverage shall also include premises/operations, explosion, collapse
and underground hazard, broad form contractual, products/completed
operations, independent contractors, broad form property damage and
personal injury.
ii. Excess (or Umbrella) Liability Coverage - Owner shall maintain
excess (or Umbrella) Liability insurance providing coverage for a
limit of $9,000,000 per occurrence and in the annual aggregate in
excess of the insurance required in paragraph i above.
iii. Property and Boiler and Machinery Coverage - Owner shall maintain at
all times Property and Boiler and Machinery insurance on an "all
risk" replacement cost basis with extended coverages, providing
coverage for the Facility, which insurance shall include coverage
for removal of debris and shall insure the buildings, structures,
boiler and machinery, equipment, facilities, fixtures and other
properties constituting a part of the Facility in an amount
satisfactory to Owner with a deductible of not greater than
$1,000,000.
iv. Subcontractor Insurance - Owner shall require all of its
Subcontractors to obtain, maintain and keep in force during the time
in which they are engaged in performing services hereunder
reasonably adequate coverage in accordance with Owner's normal
practice and furnish Owner with acceptable evidence of such
insurance upon its request.
7.3.2 Deductibles - All deductibles for the coverages specified in this Section
7.3.1, paragraphs i, ii and iii shall be the sole responsibility of Owner,
except that Operator shall be responsible for such deductible to the extent the
claim arises out the negligence or willful misconduct of Operator in the
performance of the Work, not to exceed $100,000 per occurrence pursuant to
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Section 7.3.1 paragraphs i and ii or $200,000 per occurrence pursuant to Section
7.3.1, paragraph iii. Any such deductible or self-insured retention paid by
Operator shall not be deemed to be a Reimbursable Cost hereunder.
7.3.3 Endorsements - Any insurance provided in accordance with Section 7.3.1
shall be endorsed to provide that:
i. Operator shall be an insured for losses occurring at the Site in the
case of insurance provided in accordance with Section 7.3.1
paragraphs i and ii and an additional insured in the case of
insurance provided in accordance with Section 7.3.1 paragraphs iii
and iv, in each case with the understanding that, except as
expressly provided in Section 7.3.2, any obligation imposed upon
Owner (including the liability to pay premiums) shall be the sole
obligation of Owner and not that of Operator.
ii. The insurer thereunder waives all rights of subrogation against
Operator and Owner and any other right to deduction due to
outstanding premiums, whether by attachment or otherwise.
iii. Such insurance shall be primary without right of contribution of any
other insurance carried by or on behalf of Operator with respect to
its interest as such in the Facility.
iv. If such insurance is canceled for any reason whatsoever, including
nonpayment of premium, or any substantial change is made in the
coverage that affects the interest of Operator and Lender, such
cancellation or change shall not be effective as to Operator until
forty-five (45) days after receipt by Operator of written notice
sent by registered mail from such insurer of such cancellation or
change; provided, however, that such forty-five (45) day period
shall be reduced to ten (10) days in the case where cancellation
results from the nonpayment of premiums.
v. Inasmuch as such policies are written to cover more than one
insured, all terms, conditions, insuring agreements and endorsements
(other than the limits of liability) shall operate in the same
manner as if there were a separate policy covering each insured.
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iv. If Owner purchases insurance on a claims made basis, such policies
must contain a discovery period that expires five (5) years after
the expiration of the policy or, with Operator's prior written
consent which shall not be unreasonably withheld, Owner will provide
an equivalent arrangement to address claims which occurred during
the claims made policy period but are not reported for a period of
five (5) years.
Section 7.4 - Optional Insurance Responsibilities
If requested by Owner in writing, Operator shall assist Owner in obtaining for
its own account the insurance Owner is required to maintain pursuant to Section
7.3.1 paragraphs i and ii above, subject to Owner reimbursing Operator for its
reasonable costs incurred in providing such assistance.
ARTICLE VIII - Dispute Resolution
Section 8.1 - Procedure.
In the event a dispute arises between or among Owner and Operator regarding the
application or interpretation of any provision of this Agreement other than
matters which may not be settled without the consent of an insurance company or
a third party to a Project Agreement, the aggrieved Party shall notify the other
Party to this Agreement of the dispute. If the Parties shall have failed to
resolve the dispute within ten (10) Days after delivery of such notice, each
Party shall, within two (2) Days thereafter, nominate a senior member of its
management to meet at the Facility, 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 twenty (20) Days of such nomination, each Party
shall have the right to submit the dispute to arbitration in accordance with
Sections 8.2 through 8.5.
Section 8.2 - Arbitration Procedure.
(a) The Parties agree to settle all controversies and disputes
between them arising out of or relating to this Agreement (including, without
limitation, the breach, termination or validity thereof) by arbitration in
accordance with the Arbitration Rules of the American Arbitration Association
("AAA"), or successor organization, in effect at the time of the arbitration
("Rules"), except as such Rules may be modified by this Agreement.
(b) A Party desiring to submit a dispute to arbitration hereunder
shall file a Demand for Arbitration with the AAA at its office in New York, New
York. A copy of such Demand shall be sent to the other Party at the same time.
The arbitration proceeding shall be conducted by an arbitrator or a panel of
three arbitrators, as provided below. Within ten (10) Days after a Demand for
Arbitration has been made by either Party, the Parties shall either agree on the
appointment of a single arbitrator or each Party shall appoint one arbitrator.
Within
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twenty (20) Days after the Demand for Arbitration has been made, the two
arbitrators shall choose a third arbitrator who shall act as chairperson of the
arbitral proceedings. If the two arbitrators chosen by the Parties do not agree
upon a third arbitrator within twenty (20) Days after the filing of the Demand
for Arbitration, then upon the application of either Party, the third arbitrator
shall be appointed by the AAA. Should either Party refuse or neglect to
participate in the appointment of the arbitrators within the time provided, the
arbitrator selected by the other Party shall be the sole arbitrator of the
dispute.
(c) Following the appointment of the arbitrators, each Party shall
have the right to mail to the other Party (with a copy to the arbitrators) a
written request for the production of certain identified documents or of all
documents in possession of the other Party relevant to any claims or
counterclaims in said arbitration. Within ten (10) Days of receipt of any such
request, the receiving Party may make written objection to the requesting Party
(with a copy to the arbitrators) to all or part of said request, on the ground
that it is unduly burdensome, that the documents requested are irrelevant or
privileged, or that such documents are equally available to the requesting
Party. The arbitrators shall rule on the validity of any such objection and the
Parties shall produce documents in accordance with such order. The documents
requested shall be delivered within thirty (30) Days of receipt of such request,
unless the arbitrators otherwise direct.
(d) THE SITE OF THE ARBITRATION SHALL NEW YORK, NEW YORK, UNLESS
OTHERWISE AGREED TO BY THE PARTIES. The Parties shall diligently and
expeditiously proceed with arbitration. The arbitrators shall be instructed to
render a written decision within forty-five (45) Days after the conclusion of
the hearing or the filing of such briefs as may be authorized by the
arbitrators, subject to any reasonable delay due to unforeseen circumstances.
(e) Except to the extent the Parties' remedies may be limited by the
terms of this Agreement, the arbitrators shall be empowered to award any remedy
available under the laws of the State of New York including, but not limited to,
monetary damages and specific performance. The arbitrators shall not have the
power to amend or add to this Agreement. The award of the arbitrators shall be
in writing with reasons for such award and signed by the arbitrators. The
Parties agree that any award rendered shall be final and binding; provided,
however, the Parties do not hereby waive their rights to modify or vacate an
award pursuant to Sections 10 and 11 of the United States Arbitration Act, 9
U.S.C. ▇▇.▇▇. 10, 11. Judgment rendered by the arbitrators may be entered in any
court having jurisdiction thereof.
Section 8.3 - Qualifications of Arbitrators; Expenses.
(a) The arbitrators in the arbitration proceeding provided for
in Section 8.2 shall be individuals experienced in the power plant operation and
maintenance industry and competent to pass on the matter presented for
arbitration, but said arbitrators shall have no interest in or
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prior connection with Owner, Operator, or any of their respective Affiliates,
and shall be impartial toward each Party at the time of their selection.
(b) Owner and Operator shall share equally the compensation and
expenses of the arbitrators as well as all fees imposed by the AAA including,
but not limited to, transcripts, hearing room rentals, filing fees, and
administrative costs. Owner and Operator shall each be responsible for its own
costs and legal fees, if any. Notwithstanding the foregoing, the arbitrators
shall be empowered to award a Party its costs, expenses and legal fees if the
arbitration proceeding is initiated by the other Party in bad faith.
Section 8.4 - Independent Arbitration Agreement.
This Article VIII constitutes an independent contract to arbitrate all disputes
between the Parties, including, without limitation, disputes regarding contract
formation and whether either Party is entitled to quasi-contractual or quantum
meruit recovery from the other Party.
Section 8.5 - Continuation of Work.
Pending final resolution of any dispute, the Parties shall continue to fulfill
their respective obligations hereunder, including but not limited to payment
obligations. Subject to Sections 2.3 and 3.5(b), the interpretation or decision
of the non-aggrieved Party shall take precedence until such time as the dispute
is resolved pursuant to Section 8.1 or 8.2; provided that, nothing in this
Section shall relieve the non-aggrieved Party from any liability hereunder
resulting from such action to the extent such interpretation or decision is
ultimately determined to be wrong by the Arbitrators.
ARTICLE IX - Commencement and Termination
Section 9.1 - Commencement of Work.
The Pre-Commencement Phase Services shall commence on the Notice to Proceed
Date. The Operational Phase Services shall commence on the Commencement Date.
Section 9.2 - Term.
Except as may otherwise be noted herein, this Agreement shall be effective as of
the Effective Date and shall remain in full force and effect for an initial term
of twenty-seven (27) years from the Commencement Date.
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Section 9.3 - Renewals.
Owner shall have the option to extend the term of this Agreement for succeeding
two (2) year periods, provided that Owner gives written notice to Operator of
such intent no later than one hundred and eighty (180) Days prior to the
expiration of the current term.
Section 9.4 - Early Termination.
(a) This Agreement may not be terminated before its expiration
except (i) by mutual written agreement of the Parties or (iii) by Owner pursuant
to Sections 9.4(b) or 18.2 or (iv) pursuant to the default provisions expressed
in Article XII.
(b) Owner may, at its option, terminate this Agreement by giving the
Operator thirty (30) Days prior notice in the case of clauses (i), (ii) and
(iii) below and immediately in the case of clause (iv) below. Owner may
terminate this Agreement
(i) if Operator shall fail to perform hereunder in accordance
with Prudent Operating Practice and, as a result thereof,
there is a failure to maintain for a fifteen (15) consecutive
month period at least a ninety-two percent (92%) Availability
Adjustment Factor (as defined pursuant to the Power Purchase
Agreements) calculated on a rolling average basis, and, during
such period, cash distributions are prohibited from being made
by Owner to its partners pursuant to the Loan Agreement for
two (2) consecutive quarters; or
(ii) if there is a failure to maintain for a fifteen (15)
consecutive month period at least a ninety percent (90%)
Availability Adjustment Factor (as defined pursuant to the
Power Purchase Agreements) calculated on a rolling average
basis, and, during such period, the Senior Debt Service
Coverage Ratio under and as defined in the Loan Agreement for
two (2) consecutive quarters is less than 1.10/1.00; or
(iii) upon damage to, or destruction of, a substantial portion
of the Facility, which damage or destruction cannot reasonably
be expected to be repaired or rebuilt within one (1) calendar
year; or
(iv) a work stoppage by Operator's on-site personnel and
failure by Operator to provide a complement of workers within
ten (10) Days as necessary to operate the Facility and perform
the Work in all material respects as required by this
Agreement.
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Section 9.5 - Termination Procedure.
Upon the effective date of termination of this Agreement authorized under
Section 9.4, the Operator shall (a) discontinue the Work, (b) place no further
orders or subcontracts for Materials, Services, or labor, except as authorized
in advance by Owner or required of Operator to avoid giving rise to a default
under this Agreement, (c) make every reasonable effort to obtain cancellation of
affected subcontracts or, at Owner's request, cause the assignment of any such
contracts to Owner or its replacement operator upon terms satisfactory to Owner,
and (d) take such other action as may be reasonably requested by Owner for the
orderly closeout and transition of Operator's operation and maintenance
activities. After deduction of any amounts owed by Operator to Owner, upon
termination pursuant to this Article, Owner shall pay, or cause to be paid, to
Operator (A) the amount, if any, due and payable to Operator pursuant to this
Agreement up to and including the date of termination, and (B) except in the
case of a termination of Operator pursuant to Article XII, all reasonable
documented costs incurred by Operator for its own efforts to implement
termination and the resulting reasonable costs actually incurred for turnover
and demobilization, excluding any loss of anticipated profit. Such payments to
Operator shall not duplicate any other payments hereunder made to Operator.
Operator shall use reasonable efforts to minimize all termination costs. Other
than as set forth in this Section 9.5, Owner shall have no liability to Operator
for costs, expenses or losses of any kind or nature incurred by Operator as a
result of such termination. In no event shall the aggregate payments of Owner
hereunder exceed the amount due for the then-current Operating Year, pro-rated
for any partial Operating Year. Within sixty (60) Days following the termination
date, Operator shall submit to Owner its final invoice statement which Owner
shall review and make payments on in accordance with the provisions expressed in
Article VI. Upon Operator's receipt of final payment in full from Owner, this
Agreement shall terminate and neither Party shall have any further obligation to
the other Party except with respect to those certain provisions of this
Agreement which by their nature survive.
Section 9.6 - Suspension of Performance.
At any time and from time to time Owner may direct Operator to suspend and
subsequently to resume performance of the Work. Any such direction shall be
promptly confirmed in writing. During any such suspension, Operator and Owner
shall proceed in accordance with the provisions of Section 9.5, revised as
applicable to account for the differences between termination and suspension.
Notwithstanding any other provision of this Agreement to the contrary, in the
event of a suspension pursuant to this Section 9.6, Operator shall reduce the
number of Personnel at Owner's request and Owner and Operator shall negotiate in
good faith an equitable reduction in the compensation of Operator for the
applicable period of suspension. Owner shall be responsible for all of the costs
and expenses associated with the remobilization after the suspension.
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ARTICLE X - Representations
Section 10.1 - Representations and Warranties.
(a) Each Party represents and warrants to the other Party that: (i)
such Party has the full power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby; (ii) the
execution and delivery of this Agreement by such Party and the carrying out by
such Party of the transactions contemplated hereby have been duly authorized by
all requisite corporate (or, if applicable, partnership) action, and this
Agreement has been duly executed and delivered by such Party and constitutes the
legal, valid and binding obligation of such Party, enforceable against it in
accordance with the terms hereof, subject as to enforceability of remedies to
limitations imposed by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the enforcement of creditors rights
generally and general principles of equity; (iii) no authorization, consent,
approval or order, or notice to or registration, qualification, declaration or
filing with any Governmental Authority is required for the execution, delivery
and performance by such Party of this Agreement or the carrying out by such
Party of the transactions contemplated hereby, other than regulatory and similar
approvals needed with respect to the operation and maintenance of the Facility;
and (iv) none of the execution, delivery and performance by such Party of this
Agreement, the compliance with the terms and provisions hereof, and the carrying
out of the transaction contemplated hereby, conflicts or will conflict with or
result in a breach or violation of any of the terms, conditions, or provisions
of any law, governmental rule or regulation or the charter document (or
partnership agreement, if applicable), as amended, supplemented, or otherwise
modified, or bylaws, as amended, supplemented, or otherwise modified, of such
Party or any applicable order, writ, injunction, judgment or decree of any court
or Governmental Authority against such Party or by which it or any of its
properties is bound, or any loan agreement, indenture, mortgage, bond, note,
resolution, contract or other agreement or instrument to which such Party is a
Party or by which it or any of its properties is bound, or constitutes or will
constitute a default thereunder or will result in the imposition of any lien
upon any of its properties.
(b) Operator further represents and warrants to Owner that:
(i) it has experience in the operation and maintenance of combustion turbine,
combined cycle power generation facilities and is fully qualified to operate and
maintain the Facility in accordance with the terms hereof, (ii) it shall not
intentionally take any action that would cause a default under any Project
Agreement, and (iii) there are no legal or arbitral proceedings or any
proceedings by or before any Governmental Authority, now pending or (to the
knowledge of Operator) threatened against Operator or any of its subsidiaries
that if adversely determined, could reasonably be expected to have a material
adverse effect on Operator's ability to perform its obligations under this
Agreement.
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ARTICLE XI - Confidentiality
Section 11.1 - General.
Each Party agrees to hold in confidence for a period of five (5) years from the
date of disclosure, but in any event for the term of the Loan Agreement, any
confidential information supplied by the other Party or its contractors and
designated in writing as confidential by the supplier thereof, including this
Agreement ("Confidential Information"). Accordingly, it shall not be disclosed
in whole or in part to third parties without the prior written permission of the
other Party, except that Operator agrees that Owner may disclose any
Confidential Information to Lender, potential Lenders, and their representatives
as required for the financing of the Facility and to the Owner's partners and
prospective partners, subject to appropriate confidentiality agreement. Operator
further agrees, to the extent requested by the supplier of such information, to
require its subcontractors, vendors, suppliers and employees to enter into
appropriate nondisclosure agreements relative to such Confidential Information,
prior to the receipt thereof.
Section 11.2 - Exceptions.
The provisions of this Article shall not apply to information within any one of
the following categories or any combination thereof:
(a) Information that was in the public domain prior to the receiving
Party's receipt or that subsequently becomes part of public domain by
publication or otherwise, except by the receiving Party's wrongful act; or
(b) Information that the receiving Party can show was in its
possession prior to receipt thereof from the disclosing Party; or
(c) Information received by a Party from a third party who such
Party reasonably determines is under no limitation or restriction regarding
disclosure.
Section 11.3 - Required Disclosure.
Any Party required by law, rule, regulation or order, or in the course of
administrative or judicial proceedings, to disclose information that is
otherwise required to be maintained in confidence pursuant to this Article XI
(collectively, a "Legally Compelled Disclosure"), may make disclosure
notwithstanding the provisions of this Article XI; provided, however, that the
Party required to make the disclosure shall immediately notify the other Party
of the requirement and the terms thereof and shall cooperate to the maximum
extent practicable to preserve the confidential nature of the information and,
in the case of Legally Compelled Disclosure, minimize the disclosure. The Party
disclosing such information shall use all reasonable efforts to obtain
proprietary or confidential treatment of such information by the third party to
whom the information is disclosed, and in the case of a Legally Compelled
Disclosure, to the extent such
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remedies are available, shall seek protective orders, limiting the dissemination
and use of the information. Moreover, in the case of a Legally Compelled
Disclosure, this Agreement does not alter the rights of either Party to object
to the rule, regulation, order or proceedings requiring the disclosure.
Section 11.4 - Return of Confidential Information
Confidential Information furnished to Operator by Owner hereunder shall be
returned to Owner or its destruction certified before final payment is made to
Operator hereunder; provided that, subject to any restrictions imposed by
Article XI, Operator may retain a copy thereof.
ARTICLE XII - Default
Section 12.1 - Events of Default.
The following occurrences or events, or any of them, by or against either
Operator or Owner, shall constitute a default under this Agreement:
(a) A material breach of any of the terms, conditions, warranties,
covenants or representations expressed in this Agreement (other than a breach
described in Sections 12.1(b) through (f) below); or
(b) the filing of a petition commencing a voluntary case under the
Federal Bankruptcy Code or for liquidation, reorganization or any similar
arrangement under federal or state law relating to bankruptcy, insolvency,
winding up or adjustment of debts; or
(c) the admission in writing of its insolvency or inability to pay
its debts generally as they become due or the acquiescence in or consent to any
involuntary case commenced pursuant to Section 12.1(d) or the declaration of
such Party as bankrupt or insolvent under the Federal Bankruptcy Code or any
other federal or state law relating to bankruptcy, insolvency, winding up or
adjustment of debts; or
(d) the filing of a petition against it commencing an involuntary
case under the Federal Bankruptcy Code or proposing the adjudication of such
Party as a debtor or bankrupt or proposing its liquidation or reorganization
pursuant to any federal or state law relating to bankruptcy, insolvency, winding
up or adjustment of debts; or
(e) the dissolution of any Party or failure to maintain such Party's
good standing or qualification to do business in the State of Mississippi and
state of organization; or
(f) an assignment for the benefit of creditors.
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Section 12.2 - Rights Upon Default.
(a) In the event that (1) either Party is in default of this
Agreement pursuant to Section 12.1(a) in the case of a non-monetary default or
12.1(d) (for filing of an involuntary petition in bankruptcy) and such default
is not cured, or the defaulting Party is not diligently pursuing a cure, within
thirty (30) Days following receipt of notice that a default under this Agreement
has occurred, or, in the case of a non-monetary default if diligently pursuing a
cure, has not cured such default within ninety (90) Days of such notice;
provided that to the extent that the Operator is in default pursuant to Section
12.1(a) on more than two occasions related to the same default during any twelve
(12) month period, it shall not be entitled to either the 30 or 90 day cure
period provided for herein, or (2) either Party is in default pursuant to
Sections 12.1(b) (for filing a voluntary petition in bankruptcy), 12.1(c),
12.1(e) or 12.1(f), then the non-defaulting Party may take any one or more of
the following actions: (i) terminate this Agreement immediately without
obligation to or recourse by the defaulting Party and in accordance with the
procedures described in Section 9.5, (ii) exercise any other right it may have
under this Agreement, and/or (iii) pursue any other right or remedy available to
it under Law or equity in accordance with the procedures of Article VIII subject
to the limits set forth in this Agreement.
(b) In the event that Owner so elects to terminate this Agreement as
a result of Operator's default hereunder, and without limiting any other right
or remedy of Owner arising therefrom, Owner may employ any other person, firm or
corporation to perform the Work by whatever method Owner may deem expedient.
Furthermore, Operator shall, at Owner's expense, perform the following services
relative to the Work so affected by its default, regardless of whether or not
Owner elects to terminate this Agreement as a result of such default:
(i) assist Owner in preparing an inventory of all Materials in
use or in storage at the Facility; and
(ii) assign to Owner such subcontracts and other contractual
agreements relating to Operator's performance of the Work as
may be designated by Owner. Furthermore, Operator shall
execute all documents reasonably requested by Owner and take
such other steps as are reasonably requested by Owner that may
be required to assign and vest in Owner or its designee all
rights, benefits, interests and title in connection with such
contracts or obligations; and
(iii) assist Owner in training Operator's successor.
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ARTICLE XIII - Indemnity
Section 13.1 - Operator's Indemnity.
13.1.1 Indemnity. Operator shall indemnify, hold harmless and defend Owner, the
Project Lender, the Independent Engineer, and their Affiliates and their
respective officers, directors, partners, and employees (collectively, the
"Owner's Indemnitees") from and against any and all claims, demands, suits,
legal proceedings, liabilities, judgments, awards, losses, damages, costs or
expenses (including, without limitation, reasonable legal fees and expenses),
for bodily injury to or death of persons or damage to or destruction of third
party tangible property, to the extent caused by or arising out of any negligent
act or omission (whether active or passive), willful misconduct or strict
liability of Operator or of anyone acting under its direction or control or on
its behalf in connection with or incident to the performance of the Work (other
than Owner's Indemnitees).
13.1.2 Nonpayment. Operator agrees to fully indemnify, save harmless and defend
the Owner's Indemnitees from claims, liabilities, expenses (including reasonable
legal fees), penalties, interest, demands and causes of action for nonpayment of
amounts due Operator's subcontractors, or others as a result of furnishing Work
which amounts are payable by Operator, provided that Operator has been paid in
accordance with the provisions of the Agreement, including any right of Owner to
withhold payment under the Agreement.
13.1.3 No Limitation of Indemnity. With respect to any and all claims arising,
directly or indirectly, from the performance of the Operator pursuant to this
Agreement brought against any Owner's Indemnitee, whether brought by any
employee of Operator, any subcontractor of Operator, anyone directly or
indirectly employed by any of them or by anyone for whose acts any of them may
be liable or otherwise, or in the event of any other claim against an Owner's
Indemnitee subject to Section 13.1.1, the indemnification obligation under such
Section shall not be limited in any way by the amount or type of damages,
compensation or benefits payable by or for Operator or any subcontractor of
Operator or any other Person under worker's compensation acts, disability
benefit acts, nor by the provision of any insurance, whether required to be
provided under the Agreement, or of other employee benefit acts.
Section 13.2 - Owner's Indemnity.
13.2.1 Indemnity. Owner shall indemnify, defend and hold Operator and its
officers, directors, and their Affiliates and their respective officers,
directors, partners, and employees (collectively "Operator's Indemnitees")
harmless from and against any and all claims, demands, suits, legal proceedings,
liabilities, judgments, awards, losses, damages, costs or expenses (including,
without limitation, reasonable legal fees and expenses) for bodily injury to or
death of persons or damage to or destruction of third party tangible property,
to the extent caused by or arising out of any negligent act or omission (whether
active or passive) willful misconduct or strict liability of Owner or its
Subcontractors or anyone acting on Owner's behalf, including, without
limitation,
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Affiliates of the foregoing (other than Operator's Indemnitees) in connection
with or incident to activities or services on or about the Site.
13.2.2 No Limitation of Indemnity. With respect to any and all claims in
connection with this Project brought against any Operator's Indemnitee, whether
brought by any employee of Owner, any Subcontractor of Owner, anyone directly or
indirectly employed by any of them or by anyone for whose acts any of them may
be liable or otherwise, or in the event of any other claim against an Operator's
Indemnitee subject to Section 13.2.1, the indemnification obligation under such
Section shall not be limited in any way by the amount or type of damages,
compensation or benefits payable by or for Owner or any Subcontractor or any
other Person under worker's compensation acts, disability benefit acts, nor by
the provision of any insurance, whether required to be provided under the
Agreement, or of other employee benefit acts.
Section 13.3 - Survival of Indemnity.
This Article XIII and any other indemnity provided under this Agreement shall
survive the termination or suspension of this Agreement and shall remain in full
force and effect until the later of (i) the time during which a claim or cause
of action may be brought is barred by the applicable statute of limitations and
(ii) the satisfaction or payment of such claim or liability and of all expenses
and charges incurred by Operator or Owner, as the case may be, relating to the
enforcement of this Article XIII, but with respect to Section 13.1 in no event
later than the date of expiration of the insurance required to be provided by
Owner pursuant to Article 7.
Section 13.4 - Litigation.
If any party indemnified pursuant to this Article 13 (each an "Indemnified
Party" collectively "Indemnified Parties") receives notice or has knowledge of
any claim that may reasonably result in a claim for indemnification by such
Indemnified Party against a Party (the "Indemnifying Party") pursuant to this
Article XIII or Article XVII, such Indemnified Party shall, as promptly as
possible, give the Indemnifying Party notice of such claim, including a
reasonably detailed description of the facts and circumstances relating to such
claim, and a complete copy of all notices, pleading and other papers related
thereto, and the basis for its potential claim for indemnification with respect
thereto in reasonable detail and cooperate with the Indemnifying Party in
response thereto.
Subject to the limitations on the Indemnifying Party's indemnity obligations
hereunder, the Indemnifying Party shall assume on behalf of the Indemnified
Party, and conduct with due diligence and good faith the defense of, any suit
against one or more of the Indemnified Parties, whether or not the Indemnifying
Party is joined therein; provided, however, that, without relieving the
Indemnifying Party of its obligations hereunder and subject to the Indemnifying
Party's control over the defense and settlement of such suit, the Indemnified
Party may elect to participate in the defense of any such suit, at its own
expense. The Indemnifying Party's
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indemnity hereunder is for the exclusive benefit of the Indemnified Parties and
their assignees and in no event shall inure to the benefit of a third party.
ARTICLE XIV - Liability of the Parties
Section 14.1 - Limitation of Liability.
14.1.1 In no event whether as a result of breach of contract, warranty,
indemnity, tort (including negligence), strict liability or otherwise, shall
either Party, including with respect to the Operator its suppliers or
subcontractors of any tier, be liable hereunder for any consequential or
indirect loss or damages, including without limitation, loss of energy, revenue,
costs of capital, loss of other anticipated revenues and profits, loss of good
will, damage to or loss of property or equipment in excess of the obligation
assumed by Operator in Sections 7.2 and 13.1, loss of use of equipment or power
system; increased operating costs or any special or incidental damages.
14.1.2 Excluding any liability of Operator for the payment of amounts pursuant
to Sections 13.1.1, 13.1.2, and 7.3.2 as it relates to the payment of
deductibles by Operator for the coverage provided in Section 7.3.1 (i) and (ii),
and excluding any third party liabilities regarding Operator's indemnity as set
forth in Section 7.4, the total aggregate liability of Operator and its
suppliers and subcontractors of any tier with respect to any and all claims
arising out of the performance or non-performance of its obligations under this
Agreement, whether based on contract, warranty, tort (including negligence and
strict liability), or otherwise shall not exceed, exclusive of proceeds of
insurance received by Owner (i) with respect to claims arising or accruing in
the Pre-Commencement Phase, the Pre-Commencement Phase Services Fee (the
"Pre-Commencement Phase Liability Limit") and (ii) with respect to claims
arising or accruing in any Operating Year, the annual Management Fee for such
Operating Year, provided that if such Operating Year consists of less than three
hundred sixty-five days, such amount will be prorated accordingly (the
"Operating Year Liability Limit").
14.1.3 Excluding any liability of Owner for the payment of amounts pursuant to
Section 6.2(a), Sections 13.2.1 and 13.2.2 and amounts to which Operator is
entitled to receive under this Agreement or by law (but subject to Section
14.1.1) in the event of a wrongful termination of this Agreement, the total
aggregate liability of Owner with respect to any and all claims arising out of
the performance or non-performance of its obligations under this Agreement,
whether based on contract, warranty, tort (including negligence and strict
liability), or otherwise shall not exceed, (i) with respect to claims arising or
accruing in the Pre-Commencement Phase, the Pre-Commencement Phase Liability
Limit and (ii) with respect to claims arising or accruing in any Operating Year,
the Operating Year Liability Limit.
Section 14.2 - Survival
The Parties further agree that the waivers and disclaimers of liability,
indemnities, releases from
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liability, and limitations on liability expressed in this Agreement shall
survive termination or expiration of this Agreement, and shall apply at all
times (unless otherwise expressly indicated), whether in contract, equity, tort
or otherwise, regardless of the fault, negligence, strict liability, or breach
of warranty of the Operator's Indemnitees or Owner's Indemnitees, as applicable.
Section 14.3 - No Warranties or Guarantees.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES ANY
WARRANTIES OR GUARANTEES TO THE OTHER, EITHER EXPRESS OR IMPLIED, WITH RESPECT
TO THE SUBJECT MATTER OF THIS AGREEMENT, AND BOTH PARTIES DISCLAIM AND WAIVE ANY
IMPLIED WARRANTIES OR WARRANTIES IMPOSED BY LAW INCLUDING BUT NOT LIMITED TO THE
IMPLIED WARRANTIES OF MECHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Section 14.4 - No Personal Liability.
Each Party acknowledges and agrees that in no event shall any partner,
shareholder, member, owner, manager, officer, director, or employee of either
Party be personally liable to the other Party for any payments, obligations, or
performance due under this Agreement, or any breach or failure of either Party
and the sole recourse for payment or performance of the obligations hereunder
shall be against Owner or Operator and each of their respective assets and not
against any other person, except for such liability as expressly assumed by an
assignee pursuant to an assignment of this Agreement in accordance with the
terms hereof.
ARTICLE XV - Force Majeure
Section 15.1 - Force Majeure; Events Limitation.
Neither Operator nor Owner shall be liable to the other for any failure to
perform pursuant to the terms and conditions of this Agreement to the extent
such performance was prevented by an event of Force Majeure. Force Majeure as
used in this Agreement means any event beyond the reasonable control of the
Party affected and which, with the exercise of due care, such Party could not
reasonably have been expected to avoid, including but not limited to acts of
God, explosions or fires, floods, hurricanes, tornadoes, lightning, earthquakes,
drought, epidemics, blight, famine, quarantine, blockade, acts or inactions of
Governmental Authorities, war, insurrection or civil strife, rebellion,
sabotage, strike or labor difficulty (except any such strikes or labor
difficulties involving Operator's Personnel or other employees or any
subcontractor of Operator or their employees), unavailability of equipment which
could not have been reasonably avoided by Operator's compliance with Prudent
Operating Practices; provided that commercial impracticability shall not
constitute an event of Force Majeure; provided further that a Party shall not be
excused from its performance pursuant to this Article 15.1 (i) unless such Party
gives notice and full particulars of the same to the other Party as soon as
practicable after the
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Batesville O&M Agreement Page 49
occurrence relied on, (ii) to the extent such failure was caused by its
negligence, (iii) to the extent the event relied upon could have been prevented
by reasonable diligence or was within the reasonable control of such Party, (iv)
to the extent of its failure to use due diligence to remedy the situation and
remove the cause of the event of Force Majeure in an adequate manner and with
all reasonable dispatch, (v) for its obligations to make payments due under this
Agreement. The Party affected by the event of Force Majeure shall, to the extent
practicable, take such action as such Party may lawfully and reasonably initiate
to diligently cure the event of Force Majeure and to mitigate the direct and
indirect effects of the event of Force Majeure. The Parties expressly understand
and agree that (a) in the event that any Operator subcontractor is entitled
under the terms of any contract or agreement to force majeure relief for events
or circumstances of a nature or type similar to those specifically enumerated
above on terms broader than those provided above, such broader force majeure
relief shall not constitute force majeure for the Operator hereunder unless such
events or circumstances would themselves constitute a Force Majeure event
hereunder if Operator were directly affected thereby; and (b) the compliance of
Operator's subcontractors with the terms of its applicable subcontract or
purchase order shall be within Operator's control. The burden of proof shall be
on the Party seeking to show excuse from performance due to a Force Majeure
event.
ARTICLE XVI - Title, Documents and Data
Section 16.1 - Materials and Equipment.
Title to all Materials (including equipment) and other items purchased or
obtained by Operator on a Reimbursable Cost basis hereunder shall pass
immediately to and vest in Owner upon the passage of title from the vendor or
supplier thereof; provided, however, that such transfer of title shall in no way
affect Operator's obligations as set forth in the other provisions of this
Agreement.
Section 16.2 - Review by Owner.
All materials and documents required to be submitted for the approval of Owner
shall be prepared and processed in accordance with the requirements and
specifications set forth in the Site Procedures and Annual Operating Plan, as
applicable; provided, however, that Owner's review or approval of materials and
documents submitted by Operator shall not relieve Operator of its responsibility
for the corrections thereof or of its obligations to meet all of the
requirements of this Agreement.
ARTICLE XVII - Hazardous Materials
Section 17.1 - Owner's Indemnity.
Operator makes no representation or warranty concerning the existence or
nonexistence of Hazardous Materials at the Site when the Work commences and
disclaims all responsibility and
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Batesville O&M Agreement Page 50
liability for the excavation, transportation, storage, handling, removal,
treatment or disposal of pre-existing Hazardous Materials discovered or
encountered at the Site. Owner shall indemnify, defend and hold Operator and its
Subcontractors harmless from and against any claim, suit, loss, cost, liability,
fine, or damage (including reasonable attorneys' fees), including, but not
limited to, liability or cost incurred or assessed against Operator pursuant to
42 USC 9601 et seq., "Comprehensive Environmental Response, Compensation and
Liability Act of 1980" and amendments thereto, 15 USC 2602, et seq., "The Toxic
Substances Control Act" and amendments thereto, 42 USC 6901 et seq., "The
Resource Conservation and Recovery Act of 1976" and amendments thereto, or other
applicable Law made or asserted by any Person, including governmental entities,
based on or related to complaints or allegations, whether or not supported by
fact, that soils, leachate, effluent, or other residue located on, emanating
from, or arising from the soils, subsurface or physical conditions at the Site
contain preexisting toxic substances or preexisting Hazardous Materials.
Operator shall provide prompt notice to Owner of any suspected Hazardous
Materials which it finds during performance of Work. Owner shall be responsible
for the prompt determination of the nature of such Hazardous Materials and shall
proceed with due diligence.
Section 17.2 - Collection and Removal.
Operator shall arrange for the proper collection, removal and disposal of any
Hazardous Materials furnished, used, applied, generated or stored at the Site or
emanating from the Site as a result of Work including, but not limited to, used
oils, greases, and solvents from flushing and cleaning processes performed under
this Agreement. All activities in connection with the foregoing shall be
performed in accordance with the Site Procedures. All costs associated with the
transporting and disposing of Hazardous Materials to or from the Site by
Operator in connection with its performance of the Work pursuant to the terms of
this Agreement shall be paid by Owner pursuant to the provisions of Section 6.2.
Section 17.3 - Material Safety Data Sheets.
As required under all applicable Laws, Operator shall provide Material Safety
Data Sheets covering all Hazardous Materials furnished under or otherwise
associated with the Work. Operator shall provide Owner with copies of the
applicable Material Safety Data Sheets or copies of a document certifying that
no Material Safety Data Sheets are required under any applicable Laws and shall
determine whether any substance or material furnished, used, applied, or stored
in connection with the Work is within the provisions of any Laws concerning
Hazardous Materials.
Section 17.4 - Operator's Indemnity.
Operator covenants and agrees that Operator will not introduce Hazardous
Materials on the Site or in the Work in violation of any Laws or handle
Hazardous Materials negligently or in violation of Law. Operator shall
indemnify, defend and hold Owner and its partners, officers, directors,
employees, assigns, successors in interest, agents, the Power Purchasers and the
Interconnecting Utilities from and against any claim, suit, loss, cost,
liability, fine, or damage (including reasonable attorneys' fees), including,
but not limited to, liability or cost incurred or
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Batesville O&M Agreement Page 51
assessed against Owner pursuant to 42 USC 9601 et seq., "Comprehensive
Environmental Response, Compensation and Liability Act of 1980" and amendments
thereto, 15 USC 2601, et seq., "The Toxic Substances Control Act" and amendments
thereto, 42 USC 6901 et seq., "The Resource Conservation and Recovery Act of
1976" and amendments thereto, or other Laws, arising out of Operator's breach of
the preceding covenant and agreement. Owner shall provide prompt notice to
Operator of any such indemnification sought from Operator.
ARTICLE XVIII - Miscellaneous Provisions
Section 18.1 - Entire Agreement.
This Agreement (including all exhibits and schedules thereto) contains the
entire understanding of the Parties with respect to the subject matter hereof
and supersedes any and all prior negotiations, agreements, commitments, and
writings with respect thereto. There are no oral understandings, terms or
conditions and neither Party has relied upon any representation, express or
implied, not contained in this Agreement.
Section 18.2 - Changes to Project Agreements.
Notwithstanding anything to the contrary contained in this Agreement, in the
event (i) any Project Agreement is amended, modified, or supplemented or entered
into subsequent to the Effective Date of this Agreement, and (ii) such Project
Agreement as amended, modified, or supplemented or such new Project Agreement
contains terms that impose upon Operator obligations materially more burdensome
than the obligations imposed upon the Operator absent such amendment,
modification or supplement or new Project Agreement and (iii) the Operator's
obligations under such amendment, modification, supplement or new Project
Agreement cannot be fully compensated as a Reimbursable Cost hereunder, then
Owner and Operator shall negotiate in good faith to provide for the equitable
compensation of Operator on terms reasonably satisfactory to each of Owner and
Operator. If despite good faith negotiations the Parties are unable to reach
agreement with respect to such matter, then Owner shall have the right to
terminate this Agreement.
Section 18.3 - Amendments.
No change, amendment or modification of this Agreement shall be valid or binding
upon the Parties hereto unless such change, amendment or modification shall be
in writing and duly executed by both Parties.
Section 18.4 - Joint Effort.
Preparation of this Agreement has been a joint effort of the Parties and the
resulting document shall not be construed more severely against one of the
Parties than against the other.
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Batesville O&M Agreement Page 52
Section 18.5 - Captions.
The captions contained in this Agreement are for convenience and reference only
and in no way define, describe, extend, or limit the scope or intent of this
Agreement or the intents of any provision contained herein.
Section 18.6 - Notice.
Any notice, demand, offer, 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 deemed given when delivered to the Party to whom
notice is to be given by personal delivery, first class registered or certified
mail, nationally recognized courier, or telex at the most recent address
specified by such Party pursuant to this Section 18.6:
(a) To Owner: LSP Energy Limited Partnership
▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Batesville Project Manager
Tel: (▇▇▇) ▇▇▇.▇▇▇▇
Fax: (▇▇▇) ▇▇▇.▇▇▇▇
With a copy to: LS Power, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
(b) To Operator: Cogentrix Batesville Operations, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Either Party shall have the right to change the place to which such
notice shall be sent or delivered by similar notice sent in like manner to the
other Party.
Section 18.7 - Effective Date of Notice.
The effective date of any notice issued pursuant to this Agreement shall be the
date of the addressee's receipt of such notice or date of refusal to accept
delivery.
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Batesville O&M Agreement Page 53
Section 18.8 - Partial Invalidity.
The invalidity of one or more of the phrases, sentences, clauses, Sections or
Articles contained in this Agreement shall not affect the validity of the
remaining portion of this Agreement so long as the material purposes of this
Agreement can be determined and effectuated.
Section 18.9 - Assignment.
(a) Neither this Agreement nor any right granted hereunder may be
assigned or otherwise disposed of by Operator and neither shall inure to the
benefit of any trustee in bankruptcy, liquidator, receiver, successor, or
Affiliate of Operator, whether by operation of law or otherwise, without the
express written consent of Owner and, furthermore, any assignment or transfer
without such express written consent shall be null and void and shall constitute
a material breach of this Agreement; provided, however, that Operator may assign
this Agreement without the consent of Owner (i) to the successor entity in
connection with a merger, consolidation or other corporate reorganization of
Operator, (ii) to the purchaser, in connection with the sale of all or
substantially all of the business or assets of the Operator, provided that such
purchaser is at least as experienced in the operation and maintenance of natural
gas fired, combustion turbine, combined cycle power generation facilities as
Operator is as of the date hereof, or (iii) to an Affiliate of Operator,
provided such transfer shall not in any manner release the Operator from its
obligations hereunder; and provided further that Operator shall provide a
guarantee of the performance of such affiliate satisfactory in form and
substance to Owner.
(b) This Agreement shall not be assigned by Owner without the prior
written consent of Operator, which consent shall not be unreasonably withheld,
except that this Agreement may be assigned by Owner without such consent (i) to
the Project Lender as security for Lender's financing of the Facility provided
that such transfer shall not in any manner release Owner from its obligations
hereunder; (ii) to the successor of Owner, or to a Person acquiring all or a
controlling interest in the business assets of Owner or to an Affiliate of
Owner; and (iii) in connection with a sale or transfer of Facility. Operator
hereby agrees to execute and deliver a reasonably acceptable form of a consent
to assignment if required in connection with an assignment by Owner.
Section 18.10 - No Waiver.
Any failure of either Party to enforce any of the provisions of this Agreement
or to require at any time performance by the other Party of any of the
provisions hereof during the pendency of this Agreement shall in no way affect
the validity of this Agreement, or any part hereof, and shall not be deemed a
waiver of the right of either Party thereafter to enforce any and each such
provision.
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Batesville O&M Agreement Page 54
Section 18.11 - Counterparts.
This Agreement may be executed by the Parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 18.12 - Publicity.
Each Party shall obtain the other Party's prior written approval regarding the
text of any announcement, publication, photograph or other type of communication
concerning the Work prior to the dissemination or release of same by either
Party, which approval shall not be unreasonably withheld.
Section 18.13 - Applicable Law.
This Agreement shall be governed by, construed and enforced in accordance with
the laws of the State of New York, without regard for its principles governing
conflicts of law.
Section 18.14 - Successors and Assigns.
This Agreement shall be binding upon the Parties hereto, their successors and
assigns from the Effective Date until such time as all obligations described
herein have been completed in full.
Section 18.15 - Exhibits and Schedules.
All Exhibits and Schedules referenced in this Agreement shall be incorporated
into this Agreement by such reference and shall be deemed to be an integral part
of this Agreement.
Section 18.16 - Third Party Beneficiaries.
This Agreement and each and every provision hereof is for the exclusive benefit
of the Parties hereto and is not for the benefit of any third party.
Section 18.17 - Operator Liens and Encumbrances.
Operator represents and warrants that it shall not encumber the Facility,
Facility Site, or any part thereof as security for any payments owed to it by
Owner hereunder unless Operator has provided Owner and Lender with the lesser of
(i) thirty (30) Days, or (ii) a period equal to one half (1/2) the statutory
period under Mississippi law for the filing of mechanic's or materialmen's liens
prior written notice of its intent to do so and neither Owner nor Lender shall
have made payment or provided a bond or other reasonably acceptable provision to
secure such payment within said period.
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Batesville O&M Agreement Page 55
Section 18.18 - Effect of Approval Rights.
Operator acknowledges and agrees that any right of Owner to review or approve
any matter under this Agreement, including, without limitation, any such right
provided in Article III is for the exclusive benefit of the Party entitled to
exercise such right and no exercise of or failure to exercise any such right
shall in any way relieve or limit any of Operator's obligations or liabilities
under this Agreement.
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Batesville O&M Agreement Page 56
IN WITNESS WHEREOF, the Parties hereto have set their hands on the day and
year first above written.
LSP Energy Limited Partnership
By LSP Energy, Inc.
its general partner
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------
Its: Senior Vice President and Secretary
------------------------------------
Cogentrix Batesville Operations, LLC
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------
Its: Senior Vice President - Finance and Treasurer
----------------------------------------------
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Batesville O&M Agreement Page 57
Exhibit A
Description of Facility and Site
--------------------------------------------------------------------------------
Batesville O&M Agreement Page ▇-▇
▇▇▇▇▇▇▇▇▇▇ ▇-▇
The Site
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Batesville O&M Agreement Page A-1
Exhibit B
Typical List of Site Procedures
1.0 Organization/Management Procedures (including organization chart, staffing
plan, role descriptions, Personnel anticipated education and experience).
1.1 Standard Facility Organization
1.2 Standards of Conduct
1.3 Training/Qualifications Program
1.4 Hiring/Promotion/Compensation
1.5 Personnel Procedures (including health and drug screening)
1.6 Annual Budgeting/Planning
1.7 Project Commitments Database
1.8 Management Reports
1.9 Government Interface Practices
1.10 Legal/Insurance Program
1.11 Document Control/Records Management and Procedures
2.0 Procurement/Accounting
2.1 Requisitions/Purchasing Procedures
2.2 Accounts Administration
2.3 Financial Practices/Cash Management
3.0 Operations
3.1 Operator Training/Qualifications/Licensing
3.2 Operating Reports (Logs and Records)
3.3 Performance Testing
3.4 Environmental Compliance (Permits)
3.5 Chemistry Program (Process, Description, Testing, Corrective Action)
3.6 Integrated Startup and Shutdown Procedures (provided by Contractor)
3.7 Interface procedures with Facility Contract Parties
3.8 Performance Tests
4.0 Maintenance
4.1 Computerized Preventive Maintenance Management Program
4.2 Planning and Execution of Outages
4.3 Stores/Spare Parts Inventory Control
4.4 Maintenance Training/Qualifications
4.5 Tool Control and Issue
4.6 Predictive Maintenance Program
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Batesville O&M Agreement Page B - 1
4.7 Preventative Maintenance Procedures
4.8 Configuration Management and Control Procedures
4.9 Spare Parts Forecasting
5.0 Safety and Security Program and Systems; Compliance Plan
5.1 Switching and Tagging
5.2 Crane Qualifications
5.3 Personnel Protective Equipment Requirements
5.4 Evacuation Plan
5.5 Fire Protection and Prevention Systems/Inspections
5.6 Cutting and Welding Permits
5.7 Emergency Response: Safety and Health Action Plan
5.8 Occupational Injury/Illness Reporting
5.9 Testing and Inspection of Tools and Protective Devices
5.10 Hazardous Material and Waste Handling
5.11 Police/Fire/Emergency Coordinator Interface Procedures
5.12 Site Physical Security Procedures
5.13 Employee Safety Program
5.14 Safety Coordination and Action Plan
5.15 Facility Site Access Procedure
5.16 Subcontractor Safety and Quality Assurance Program
6.0 Quality
6.1 Inspection and Acceptance of Contractor Services
6.2 Equipment Failure Investigation
6.3 Accident Investigation and Reporting
6.4 High Energy Equipment Inspection and Testing
a. Hydrostatic Test Procedures
b. Motor/Cable Megger Testing Procedures
c. Calibration Procedures
6.5 Guidelines for the Optimization of Facility Output and
Efficiency/Results Engineering
7.0 Notification Procedures
7.1 Accidents/Reporting and Recordkeeping
7.2 Public Relations
7.3 Pickets/Union Incidents
7.4 Hazardous Materials
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Batesville O&M Agreement Page B - 2
Exhibit C
Typical Pre-Commencement and Annual Operating Phase Budgets
EXPENSES ($) EACH MONTH
-------- --------------
Salaries and Wages
Employee Benefits
Office and Administration
Balance of Plant Maintenance
Equipment and Materials
Water Treatment Chemicals
SCR Chemicals
Supply/Waste Water
Major Maintenance
Back-up Power
Transmission System Maintenance
Pipeline Maintenance
PRODUCTION
----------
Capacity Factor, %
Starts (No.)
Scheduled Maintenance, KWH
Heat Rate, BTU/KWH
Standard Capacity, KW
Supplemental Capacity, KW
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Batesville O&M Agreement Page C-1
Exhibit D
Services Included with Pre-Commencement and Management Fees
A. Pre-Commencement Phase Fee Includes:
o Local salary survey
o Local advertisement for Personnel
o Human Resource support, Personnel interviews and personnel selection
o Payroll and benefits administration
o Cost accounting set-up
o Develop Materials recommendations
o Procure Materials using Owner's procurement procedures
o Review plant designs for operability
o Predictive maintenance program - setup and training (travel included)
o Communication costs from the Charlotte, North Carolina office of Cogentrix
to Site
o Operation and maintenance management support and oversight (travel
included)
o Comprehensive Automobile Liability Insurance
o Preparation of Site Procedures
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Batesville O&M Agreement Page D-1
B. Management Fee Includes:
o Cost accounting support
o Human Resource support and oversight
o Procurement support and parts coordination
o Environmental oversight
o Payroll and Benefits administration
o Maintenance Control Program support
o Predictive maintenance analysis, review and reporting
o Communication costs from the Charlotte, North Carolina office of Cogentrix
to Site
o Brief engineering answers to plant technical inquiries (less than 1 hr)
o Operation and maintenance support organization for technical operational
support on an as required basis
o Outage planning support
o Operability recommendations
o Health and safety oversight
o Operation and maintenance management support and oversight (travel
included)
o Comprehensive Automobile Liability Insurance
o Labor bonuses
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Batesville O&M Agreement Page D-2
Exhibit E
Project Agreements and Project Permits Delivered to Operator
1. Power Purchase Agreement dated as of May 18, 1998, as amended by the First
Amendment to Power Purchase Agreement dated as of July 22, 1998 and the Second
Amendment to Power Purchase Agreement dated as of August ___, 1998, between
Virginia Electric Power Company and Owner.
2. VEPCO Acknowledgment of Dedicated Unit
3. Power Purchase Agreement dated May 21, 1998, as amended July 16, 1998 between
Aquila Power Corporation and Utilicorp United, Inc. and Owner.
4. Aquila Acknowledgment if Dedicated Unit
5. Interconnection and Operating Agreement dated May 18, 1998, as amended by the
Letter of Amendment dated August 18, 1998 between Owner and the Entergy
Mississippi, Inc.
6. Interconnection Agreement dated July 22, 1998 between Owner and the Tennessee
Valley Authority.
7. Water Supply Storage Agreement dated as of June 8, 1998 between Owner and the
United States of America.
8. Infrastructure Use Agreement to be entered into among the State of
Mississippi, Panola Country, Mississippi, City of Batesville, Mississippi,
Industrial Development Authority of the Second Judicial District of Panola
County, Mississippi and Owner.
9. Facilities Agreement, dated June 23, 1998, between Owner and Tennessee Gas
Pipeline Company.
10. Interconnection Agreement, dated July 29, 1998, between Owner and ANR
Pipeline Company.
11. Inducement Agreement to be entered into among the Mississippi Department of
Economic and Community Development, the Mississippi Business Finance
Corporation, the Mississippi Major Impact Authority, Panola County, Mississippi,
the City of Batesville, Mississippi, the Panola Partnership, Inc., and the
Industrial Development Authority of the Second Judicial District of Panola
County, Mississippi.
12. Turnkey Engineering, Procurement and Construction Agreement dated as of July
22, 1998 between Owner and BVZ Power Partners - Batesville.
13. Common Agreement, dated August ___, 1998, among Owner, LSP Batesville
Funding Corporation, LSP Batesville Holding, LLC, Credit Suisse First Boston, as
Tranche A Facility Agent, IBJ Shroder Bank & Trust Company as the Tranche B
Facility Trustee, IBJ Shroder Bank & Trust Company, as the Tranche C Facility
Trustee, Credit Suisse First Boston as the L/C Facility Agent and IBJ Shroder
Bank & Trust Company as Administrative Agent, Collateral Agent, Intercreditor
Agent and Securities Intermediary
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Batesville O&M Agreemrent Page E-1
Permit/Approval
1. CERTIFICATION OF EXEMPT WHOLESALE GENERATOR STATUS issued by the Federal
Energy Regulatory Commission to LSP Energy Limited Partnership
on April 28, 1998.
2. SELF-CERTIFICATION OF COAL OR ALTERNATE FUEL CAPABILITY filed before the
Department of LSP Energy Limited Partnership on March 19, 1998.
3. ACKNOWLEDGMENT OF NOTICE OF PROPOSED CONSTRUCTION AND ALTERATION issued by
the Federal Aviation Administration to LSP Energy Limited Partnership on
June 23, 1998 indicating that proposed construction would not be an
airspace obstruction or hazard.
4. NATIONWIDE PERMIT 7, 12, 14, 25, 26 and Authorization 144 under General
Permit 22 issued by the Army Corps of Engineers to LSP Energy Limited
Partnership on December 4, 1997.
5. APPROVAL TO CHARGE MARKET BASED RATES issued by Federal Energy Regulatory
Commission to LSP Energy Limited Partnership on May 14, 1998.
6. CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY issued by the Mississippi
Department of Environmental Quality to LSP Energy Limited
Partnership on November 25, 1997.
7. PERMIT TO WITHDRAW WATER FOR BENEFICIAL USE - FROM ▇▇▇▇ ▇▇▇▇ issued by
Mississippi Department of Environmental Quality to LSP Energy Limited
Partnership on November 25, 1997.
8. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM WASTEWATER DISPOSAL AND
STORM WATER PERMIT AND SECTION 316(B) issued by Mississippi Department of
Environmental Quality to LSP Energy Limited Partnership on December 10,
1997, with requirements of Section 316(b) of the Clean Water Act met as of
February 16, 1998.
9. CONFIRMATION OF APPROPRIATE ZONING issued by City of Batesville to LSP
Energy Limited Partnership on April 24, 1997.
10. HIGHWAY CROSSING PERMIT for water pipeline construction issued by
Mississippi Department of Transportation to LSP Energy Limited
Partnership on July 28, 1998.
11. HIGHWAY CROSSING PERMIT for wastewater pipeline construction issued by
Mississippi Department of Transportation to LSP Energy Limited
Partnership on July 31, 1998.
12. ROAD CROSSING PERMITS FOR WATER PIPELINE CONSTRUCTION issued by Panola
County to LSP Energy Limited Partnership on July 14, 1998.
13. FLOODPLAIN DEVELOPMENT PERMIT for the water pipeline issued by ▇▇▇▇
▇▇▇▇▇▇▇▇, Panola County Engineer, to LSP Energy Limited Partnership on
September 8, 1997.
14. FLOODPLAIN DEVELOPMENT PERMIT for the wastewater pipeline issued by ▇▇▇▇
▇▇▇▇▇▇▇▇, Panola County Engineer, to LSP Energy Limited
Partnership on September 8, 1997.
15. NATIONWIDE PERMIT 12 for the construction of the gas pipeline issued by
the Army Corps of Engineers to ANR Pipeline Company on August 15, 1997 and
transferred to LSP Energy Limited
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Batesville O&M Agreemrent Page E-1
Partnership on July 23, 1998.
16. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM GENERAL STORM WATER PERMIT
for the construction of the gas pipeline issued by Mississippi Department
of Environmental Quality to ANR Pipeline Company on August 20, 1997 and
transferred to LSP Energy Limited Partnership on July 30, 1998.
17. FLOODPLAIN DEVELOPMENT PERMIT for the gas pipeline issued by ▇▇▇▇
▇▇▇▇▇▇▇▇, Panola County Engineer, to ANR Pipeline Company on July 21, 1997
and transferred to LSP Energy Limited Partnership on July 27, 1998.
18. HIGHWAY CROSSING PERMIT for gas pipeline construction issued by
Mississippi Department of Transportation to LSP Energy Limited Partnership
on July 27, 1998 and August 13, 1998.
19. ROAD CROSSING PERMIT FOR GAS PIPELINE CONSTRUCTION issued by Panola County
to LSP Energy Limited Partnership on August 5, 1998.
20. AIR POLLUTION CONTROL/PREVENTION OF SIGNIFICANT DETERIORATION CONSTRUCTION
PERMIT issued by Mississippi Department of Environmental Quality to LSP
Energy Limited Partnership on November 25, 1997. The permit was modified
on July 14, 1998 and is subject to a 30-day appeal period commencing July
28, 1998.
21. AIR POLLUTION CONTROL OPERATION PERMIT issued by Mississippi Department of
Environmental Quality to LSP Energy Limited Partnership on November 25,
1997. The permit was modified on July 14, 1998 and is subject to a 30-day
appeal period commencing July 28, 1998.
22. OPERATING PERMIT pursuant to Title V of the Clean Air Act Amendments of
1990 to be obtained from Mississippi Department of Environmental Quality
by LSP Energy Limited Partnership.
23. ACID RAIN PERMIT to be obtained from Mississippi Department of
Environmental Quality by LSP Energy Limited Partnership. The application
was submitted on June 2, 1998.
24. SPILL PREVENTION CONTROL AND COUNTERMEASURE PLAN to be submitted to the
Environmental Protection Agency by LSP Energy Limited Partnership.
25. HAZARDOUS WASTE PREVENTION NUMBER to be obtained from the Environmental
Protection Agency by LSP Energy Limited Partnership if required.
26. SOLID WASTE NOTIFICATION FOR OPERATION to be obtained from Mississippi
Department of Environmental Quality by LSP Energy Limited Partnership.
27. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM GENERAL STORM WATER PERMIT
for the construction of the Project on the site and construction of
off-site infrastructure components to be obtained from Mississippi
Department of Environmental Quality by BVZ Power Partners-Batesville.
28. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM HYDROSTATIC TEST WATER
DISCHARGE PERMIT for the gas pipeline to be obtained from Mississippi
Department of Environmental Quality by LSP Energy Limited Partnership.
29. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM HYDROSTATIC TEST
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Batesville O&M Agreemrent Page E-1
WATER DISCHARGE PERMIT for the water pipeline to be obtained from
Mississippi Department of Environmental Quality by LSP Energy Limited
Partnership.
30. NATIONAL POLLUTION DISCHARGE ELIMINATION SYSTEM HYDROSTATIC TEST WATER
DISCHARGE PERMIT for the wastewater pipeline to be obtained from
Mississippi Department of Environmental Quality by LSP Energy Limited
Partnership.
31. CERTIFICATE OF OCCUPANCY to be obtained from the City of Batesville by LSP
Energy Limited Partnership.
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Batesville O&M Agreemrent Page E-1