<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM 10-K/A
(Amendment No. 2)
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________________.
Commission File Number: 1-9208
NRG GENERATING (U.S.) INC.
(Exact name of registrant as specified in its charter)
Delaware 59-2076187
(State or other jurisdiction of incorporation or organization) (I.R.S.
Employer Identification No.)
1221 Nicollet Mall, Suite 610, Minneapolis, Minnesota 55403 (612) 373-
8834
(Address of principal executive offices) (Zip Code)
(Telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days. X Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. X
As of December 12, 1997, there were outstanding 6,836,769 shares of
Common Stock. Based on the last sales price at which such stock was sold
on that date, the approximate aggregate market value of such shares held by
non-affiliates was $63,720,000.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. X Yes No
<PAGE>
The undersigned Registrant hereby amends the items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K
for the fiscal year ended June 30, 1996 as set forth below.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
3. Exhibits
The "Index to Exhibits" following the Consolidated Financial
Statements of the Company and its subsidiaries in the Company's Annual
Report on Form 10-K, as filed, is amended to substitute therefor the
"Exhibit Index" which follows the signature page hereof, which is
incorporated herein by reference, and to file certain exhibits which are
included herewith.
1
<PAGE>
Signature
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NRG GENERATING (U.S.) INC.
/s/ Timothy P. Hunstad
By: Timothy P. Hunstad
Title: Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Robert T. Sherman President and December 15, 1997
By: Robert T. Sherman, Jr. Chief Executive Officer
/s/ Timothy P. Hunstad Vice President and December 15, 1997
By: Timothy P. Hunstad Chief Financial Officer
/s/ Leonard Bluhm Chairman of the December 15, 1997
By: Leonard A. Bluhm Board of Directors
/s/ Lawrence Littman Director December 15, 1997
By: Lawrence I. Littman
/s/ Craig A. Mataczynski Director December 15, 1997
By: Craig A. Mataczynski
/s/ David H. Peterson Director December 15, 1997
By: David H. Peterson
/s/ Spyros Skouras, Jr. Director December 15, 1997
By: Spyros S. Skouras, Jr.
/s/ Charles Thayer Director December 15, 1997
By: Charles J. Thayer
/s/ Ronald J. Will Director December 15, 1997
By: Ronald J. Will
2
<PAGE>
Index to Exhibits
Exhibit No. Description
2.1** Composite Fourth Amended and Restated Plan of Reorganization for
the Company dated January 31, 1996 and proposed by the Company,
the Official Committee of Equity Security Holders, Wexford
Management Corp. ("Wexford") and NRG Energy, Inc. ("NRG Energy").
2.2** Order confirming Composite Fourth Amended and Restated Plan of
Reorganization for the Company proposed by the Company, the
Official Committee of Equity Security Holders, Wexford and NRG
Energy dated February 13, 1996 and entered on February 22, 1996
and filed as Exhibit 2.1 to the Company's Current Report on Form
8-K dated February 13, 1996 and incorporated herein by this
reference.
2.3** Amended and Restated Stock Purchase and Reorganization Agreement
dated January 31, 1996 between the Company and NRG Energy filed
as Exhibit 10.1 to the Company's Current Report on Form 8-K dated
February 13, 1996 and incorporated herein by this reference.
2.4** Letter Agreement dated April 26, 1996 between the Company and NRG
Energy amending the Stock Purchase and Reorganization Agreement.
3.1** Amended and Restated Certificate of Incorporation of the Company.
3.2** Preferred Stock Certificate of Designation of the Company filed
as Exhibit 3.3 to the Company's Current Report on Form 8-K dated
April 30, 1996 and incorporated herein by this reference.
3.3** Bylaws of the Company filed as Exhibit 3.2 to the Company's
Current Report on Form 8-K dated April 30, 1996 and incorporated
herein by this reference.
10.1** Co-Investment Agreement dated April 30, 1996 between the Company
and NRG Energy.
10.2.1** Chapter 11 Financing Agreement dated August 30, 1995 between the
Company and NRG Energy.
10.2.2** Letter Agreement dated February 20, 1996 between the Company and
NRG Energy amending the Chapter 11 Financing Agreement.
10.2.3** Letter Agreement dated April 30, 1996 between the Company and NRG
Energy further amending the Chapter 11 Financing Agreement.
10.3** Liquidating Asset Management Agreement dated April 30, 1996
between the Company and Wexford.
10.4** Management Services Agreement dated as of January 31, 1996
between the Company and NRG Energy.
10.5.1** Loan Agreement dated April 30, 1996 between the Company and NRG
Energy.
3
<PAGE>
10.5.2** Note dated April 30, 1996 from the Company to NRG Energy in the
principal amount of $45,000,000.
10.6.1** Supplemental Loan Agreement dated April 30, 1996 between NRG
Energy and the Company.
10.6.2** Note dated April 30, 1996 from the Company to NRG Energy in the
principal amount of $15,855,545.25.
10.7.1 NRG Newark Cogen Loan Agreement dated April 30, 1996 between NRG
Energy and the Company.
10.7.2** Note dated April 30, 1996 from the Company to NRG Energy in the
principal amount of $24,000,000.
10.8.1** Credit Agreement dated May 17, 1996 between NRG Generating
(Newark) Cogeneration Inc. ("NRGG Newark"), NRG Generating
(Parlin) Cogeneration Inc. ("NRGG Parlin"), Credit Suisse,
Greenwich Funding Corporation and any Purchasing lender, as
Lenders under the Credit Agreement.
10.8.2** Amendment No. 1 to the Credit Agreement dated June 28, 1996
between NRG Generating (Newark) Inc., NRG Generating (Newark)
Inc. and Credit Suisse, Greenwich Funding Corporation and any
Purchase Lender (as defined therein).
10.8.3** Stock Pledge Agreement dated June 28, 1996 between the Company as
Pledgor and Credit Suisse.
10.8.4** Guaranty dated as of May 17, 1996 by NRG Energy, as Guarantor, to
Credit Suisse, as Agent for the benefit of Credit Suisse,
Greenwich Funding Corporation and any Purchasing lender, as
Lenders under the Credit Agreement.
10.8.5** Guaranty dated as of June 28, 1996 by the Company as Guarantor to
Credit Suisse as Agent for the benefit of Credit Suisse,
Greenwich Funding Corporation and any Purchasing lender, as
Lenders under the Credit Agreement.
10.8.6** Tax Indemnification Agreement dated June 28, 1996 between the
Company, NRGG Newark, NRGG Parlin and Credit Suisse.
10.8.7** Assignment and Security Agreement dated June 28, 1996 between
NRGG Parlin and Credit Suisse
10.8.8 Amended and Restated Leasehold Mortgage, Assignment of Leases and
Rents and Security Agreement dated June 28, 1996 between NRGG
Newark and Credit Suisse
10.8.9 Leasehold Mortgage, Assignment of Leases and Rents and Security
Agreement dated June 28, 1996 between NRGG Parlin and Credit
Suisse.
10.8.10** Interest Rate Swap Agreement dated August 2, 1996 between NRGG
Newark, NRGG Parlin and Credit Suisse.
10.9.1 Loan Agreement dated March 8, 1996 between O'Brien (Schuylkill)
Cogeneration Inc. and NRG Energy in connection with the Grays
Ferry Partnership.
4
<PAGE>
10.9.2 Option Agreement dated May 1, 1996 between O'Brien (Schuylkill)
Cogeneration Inc. and NRG Energy.
10.10.1** Gas Supply Agreement dated June 30, 1992 between the Company and
The Philadelphia Municipal Authority (the "PMA") regarding the NE
Plant (Philadelphia Project) and filed as an exhibit to the
Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1992 and incorporated herein by this reference.
10.10.2** Gas Supply Agreement dated June 30, 1992 between the Company and
the PMA regarding the SW Plant (Philadelphia Project) and filed
as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1992 and incorporated herein by this
reference.
10.10.3** Energy Service Agreement dated June 30, 1992 between the Company
and the PMA regarding the NE Plant (Philadelphia Project) and
filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1992 and incorporated herein
by this reference.
10.10.4** Energy Service Agreement dated June 30, 1992 between the Company
and the PMA regarding the SW Plant (Philadelphia Project) and
filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1992 and incorporated herein
by this reference.
10.10.5** Stock Purchase Agreement dated November 12, 1993 between the
Company, OPC Acquisition, Inc. and BioGas Acquisition, Inc. and
filed as an exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 and incorporated herein
by this reference.
10.10.6 Loan Agreement between the Company and PECO.
10.11.1** Long Term Power Purchase Contract for Cogeneration and Small
Power Production dated March 10, 1986 between the Company and
Jersey Central Power and Light ("JCP&L") and filed as an exhibit
to the Company's Registration Statement (File No. 33-11789) and
incorporated herein by this reference.
10.11.2** Letter Agreement dated June 2, 1986 between the Company and JCP&L
amending the Long Term Power Purchase Contract.
10.11.3** Second Amendment to Power Purchase Agreement dated March 1, 1988
between the Company and JCP&L.
10.11.4** Letter Agreement dated April 30, 1996 between O'Brien (Newark)
Cogeneration, O'Brien (Parlin) Cogeneration and JCP&L.
10.11.5** Third Amendment to Power Purchase Agreement dated April 30, 1996
between O'Brien (Newark) Cogeneration and JCP&L.
10.14 Transmission Service and Interconnection Agreement dated November
17, 1987 between O'Brien Energy Systems, Inc. and Public Service
Electric and Gas Company.
5
<PAGE>
10.15.1 Steam Purchase Agreement dated October 3, 1986 between O'Brien
Cogeneration IV, Inc. and Newark Boxboard Co.
10.15.2** Amendment to Steam Purchase Agreement dated March 15, 1988
between O'Brien Cogeneration IV, Inc. and Newark Boxboard Co.
10.15.3** Amendment to Steam Purchase Agreement dated July 18, 1988 between
O'Brien (Newark) Cogeneration, Inc. and Newark Group Industries,
Inc.
10.16.1 Operating and Maintenance Agreement dated May 1, 1996 between
NRGG Newark and Stewart & Stevenson Operations, Inc.
10.16.2 Letter Agreement dated May 10, 1996 between the Company and
Stewart & Stevenson Operations, Inc.
10.16.3 Letter Agreement dated May 20, 1996 between NRG Generating
(Newark) Cogeneration and Stewart & Stevenson Operations, Inc.
10.17.1** Agreement for Purchase and Sale of Electric Power dated October
20. 1986 between the Company and JCP&L and filed as an exhibit to
the Company's Registration Statement (File No. 33-11789) and
incorporated herein by this reference.
10.17.2 First Amendment to Agreement for Purchase and Sale Electric Power
dated June 11, 1991 between the Company and JCP&L.
10.17.3** Amended and Restated Agreement for Purchase and Sale of Electric
Power dated April 30, 1996 between O'Brien (Parlin) Cogeneration,
Inc. and JCP&L.
10.17.4** Letter Agreement dated April 30, 1996 between O'Brien (Parlin)
Cogeneration, Inc. and JCP&L.
10.20.1** Steam Purchase Contract dated December 8, 1986 between the
Company and E.I. du Pont de Nemours("E.I. du Pont") and Company.
10.20.2** Amendment No. 1 to Steam Purchase Contract dated January 12, 1988
between the Company and E.I. du Pont.
10.20.3** Letter Agreement dated July 25, 1988 between the Company and E.I.
du Pont.
10.20.4** Amendment No. 3 to Steam Purchase Agreement dated December 12,
1988 between the Company and E.I. du Pont.
10.20.5** Amendment No. 4 to Steam Purchase Contract dated July 14, 1989
between the Company and E.I. du Pont.
10.20.6** Amendment No. 5 to Steam Purchase Contract dated February 16,
1993 between the Company and E.I. du Pont.
10.21.1** Electricity Purchase Contract dated January 18, 1988 between the
Company and E.I. du Pont.
10.21.2** Electricity Purchase Contract dated April 30, 1996 between
O'Brien (Parlin) Cogeneration Inc. and NRG Parlin Inc.
6
<PAGE>
10.21.3** Assignment of Electricity Purchase Contract dated April 30, 1996
between O'Brien (Parlin) Cogeneration, Inc., NRG Parlin, Inc. and
E.I. du Pont.
10.22.1 Operating & Maintenance Agreement dated May 1, 1996 between NRG
Generating (Parlin) Cogeneration, Inc. and Stewart Stevenson
Operations, Inc.
10.22.2 Agreement dated May 1, 1996 between the Company, NRGG Newark,
NRGG Parlin and Stewart & Stevenson Operations, Inc.
10.22.3 Letter Agreement dated May 20, 1996 between NRG Generating
(Parlin) Cogeneration, Inc. and Stewart & Stevenson Operations,
Inc.
10.23** Amended and Restated Partnership Agreement of Grays Ferry
Cogeneration Partnership ("Grays Ferry") dated March 1, 1996,
between Adwin (Schuylkill) Cogeneration, Inc. ("Adwin
Schuylkill"), O'Brien (Schuylkill) Cogeneration, Inc. ("O'Brien
Schuylkill") and Trigen-Schuylkill Cogeneration, Inc. ("Trigen-
Schuylkill").
10.24.1** Acquisition Agreement dated March 1, 1996 between Adwin
Schuylkill, O'Brien Schuylkill and Trigen-Schuylkill.
10.24.2** Side Agreement dated March 1, 1996 between Adwin Schuylkill,
O'Brien Schuylkill and Trigen-Schuylkill.
10.25.1** Contingent Capacity Purchase Addendum to the Agreement for
Purchase of Electric Output (Phase I) dated September 17, 1993
between PECO and Grays Ferry.
10.25.2** Contingent Capacity Purchase Addendum to the Agreement for
Purchase of Electric Output (Phase II) dated September 17, 1993
between PECO and Grays Ferry.
10.25.3 Amendment Agreement dated January 31, 1994 between PECO and Grays
Ferry.
10.25.4 Agreement for Purchase of Electric Output (Phase I) dated July
28, 1992 between PECO Energy Company ("PECO") and Grays Ferry.
10.25.5 Agreement for Purchase of Electric Output (Phase II) dated July
28, 1992 between PECO and Grays Ferry.
10.26.1** Amended and Restated Steam Purchase Agreement dated September 17,
1993 among Philadelphia Thermal Energy Corporation ("PTEC"),
Adwin Equipment Company ("Adwin"), O'Brien Environmental Energy,
Inc. ("O'Brien") and Grays Ferry.
10.26.2** Amended and Restated Steam Venture Agreement dated September 17,
1993 among PTEC, Philadelphia United Power Corporation ("PUPCO"),
Adwin and O'Brien.
10.27.1 Amended and Restated Project Services and Development Agreement
dated September 17, 1993 by and between PUPCO and Grays Ferry
7
<PAGE>
10.27.2** Consent to Assignment of Agreement dated March 1, 1996 between
PUPCO, Grays Ferry Cogeneration Partnership and The Chase
Manhattan Bank, N.A.
10.28** Amended and Restated Site lease, dated September 17, 1993 between
PTEC and Grays Ferry.
10.29 Newark Lease.
10.30 Parlin Lease.
10.31.1** NRG Generating (U.S.) Inc. 1996 Stock Option Plan dated September
20, 1996 and filed as Appendix A to the Company's Proxy Statement
dated October 28, 1996 and incorporated herein by reference.
10.31.2** Form of an Incentive Stock Option Agreement.
10.31.3** Form of a Nonqualified Stock Option Agreement.
10.31.4** Form of a Nonemployee Director Nonqualified Stock Option
Agreement.
10.32** Employment Agreement dated April 30, 1996 between the Company and
Leonard A. Bluhm.
11** Computation of Earnings
21** List of Subsidiaries of the Registrant.
23.1** Consent of Price Waterhouse LLP.
23.2** Consent of Coopers & Lybrand LLP.
27** Financial Data Schedule.
_____
** Previously filed.
8
<PAGE>
Exhibit 10.7.1
NRG NEWARK COGEN LOAN AGREEMENT
dated as of April 30, 1996
$24,000,000
Between
NRG ENERGY, INC.
and
NRG GENERATING (U.S.) INC.
<PAGE>
NRG NEWARK COGEN LOAN AGREEMENT, dated as of April 30, 1996,
between NRG GENERATING (U.S.) INC., a Delaware corporation (the "Company")
and NRG ENERGY, INC., a Delaware corporation (the "Lender").
WITNESSETH:
WHEREAS, immediately prior to the execution and delivery of this
Agreement, the Company was the debtor and the debtor in possession in
Chapter 11 case number 94-26723 (the "Case") pending before the United
States Bankruptcy Court for the District of New Jersey (the "Bankruptcy
Court");
WHEREAS, pursuant to the Fourth Amended and Restated Plan of
Reorganization for the Company proposed by the Lender, Wexford Management
Corp. and the official Committee of Equity Security Holders dated November
17, 1995 (as amended and confirmed by order of the Bankruptcy Court entered
on February 22, 1996, the "NRG Plan"; capitalized terms used herein without
definition shall have the respective meanings assigned to them in the NRG
Plan), and subject to the terms and conditions of the Amended and Restated
Stock Purchase and Reorganization dated as of January 31, 1996 between the
Lender and the Company, the Lender is acquiring on the date hereof 41.86%
of the outstanding shares of Common Stock of the Company and in that
connection has agreed to make certain loans to the Company;
WHEREAS, the NRG Plan contemplates that a Newark Project
Refinancing may occur on the Effective Date pursuant to which Newark
Refinancing Proceeds of up to $24 million may be generated for purposes of
funding distributions to creditors under the NRG Plan but, to the extent
Newark Refinancing Proceeds of $24 million for any reason are not available
on the Effective Date, the Lender is to make the NRG Newark Cogen Loan in
an amount equal to the amount (if any) by which $24 million exceeds the
Newark Refinancing Proceeds, which amount equals $24,000,000.
WHEREAS, the Lender agrees to make the NRG Newark Cogen Loan to
the Company contemplated by the NRG Plan on the terms and conditions set
forth below.
NOW, THEREFORE, the Company and the Lender agree as follows:
<PAGE>
ARTICLE 1
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
terms defined in the caption hereto shall have the meanings set forth
therein, and the following terms have the following meanings:
"Acquisition" means the acquisition by the Company pursuant to
the Acquisition Agreement of 41.86% of the issued and outstanding capital
stock of the company as reorganized under the NRG Plan and all of the
capital stock of each of certain of the Company's subsidiaries.
"Acquisition Agreement" means the Amended and Restated Stock
Purchase and Reorganization Agreement, dated as of January 31, 1996,
between the Lender and O'Brien Environmental Energy, Inc., a Delaware
corporation, the predecessor in interest to the Company.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) to be used by the Company or a Restricted
Subsidiary in a Related Business; (ii) the Capital Stock of a Person that
becomes a Restricted Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Restricted Subsidiary; or (iii)
Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary; provided, however, that, in the case of
clauses (ii) and (iii), such Restricted Subsidiary is primarily engaged in
a Related Business.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Person or (ii) any Person who
is a director or officer (a) of such Person, (b) of any Subsidiary of such
Person or (c) of any Person described in clause (i) above. For the
purposes of this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of Sections 6.04 and
6.05 only, "Affiliate" shall also mean any beneficial owner of shares
representing 5% or more of the total voting power of the Voting Stock (on a
fully diluted basis) of the Company or of rights or warrants to purchase
such Voting Stock (whether or not currently exercisable) and
2
<PAGE>
any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Affiliate Transaction" shall have the meaning assigned thereto
in Section 6.05(a).
"Agreement" means this Loan Agreement, as amended, supplemented
or modified from time to time.
"Asset Disposition" means any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary (other
than directors' qualifying shares), property or other assets (each referred
to for the purposes of this definition as a "disposition") by the Company
or any of its Restricted Subsidiaries (including any disposition by means
of a merger, consolidation or similar transaction) other than (i) a
disposition by a Restricted Subsidiary to the Company or by the Company or
a Restricted Subsidiary to a Wholly owned Subsidiary, (ii) a disposition of
property or assets in the ordinary course of business, (iii) for purposes
of Section 6.04 only, a disposition subject to Section 6.02 and (iv) a
disposition of Liquidating Assets in accordance with and pursuant to the
terms of the Liquidating Asset Management Agreement.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of the numbers of years from the date
of determination to the dates of each successive scheduled principal
payment of such Indebtedness or redemption or similar payment with respect
to such Preferred Stock multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Bankruptcy Law" shall have the meaning assigned thereto in
Section 8.01.
"Base Rate" means for any day, a rate per annum equal to 9.5%.
"Board of Directors" means the Board of Directors of the Company
or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required
by law to close.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in
3
<PAGE>
(however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Capitalized Lease obligations" means an obligation that is
required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized amount
of such obligation determined in accordance with GAAP; and the Stated
Maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease.
"Closing Date" means the date, which shall be on the Effective
Date, on which the Lender makes the Loan.
"Code" means the Internal Revenue Code of 1986, as amended.
"Co-Investment Agreement" shall mean that certain Co-Investment
Agreement dated the date hereof between the Lender and the Company and as
provided for by the NRG Plan.
"Co-Investment Indebtedness" means Indebtedness incurred by the
Company to finance the Company's investment in a project offered to the
Company pursuant to the terms of the Co-Investment Agreement.
"Commercial L/C11 means a commercial documentary letter of credit
under which the issuer agrees to make payments in Dollars for the account
of the Company, on behalf of the Company or a Subsidiary thereof, in
respect of obligations of the Company or such Subsidiary in connection with
the purchase of goods or services in the ordinary course of business.
"Commonly Controlled Entity" means an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 414(b) or (c) of the Code.
"Company" means the party named as such in this Agreement until a
successor replaces it and, thereafter, means the successor.
"Consolidated Coverage Ratio" as of any date of determination
means the ratio of (i) the aggregate amount of EBITDA for the period of the
most recent four consecutive fiscal quarters ending prior to the date of
such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (1) if the Company or any
Restricted Subsidiary has Incurred any Indebtedness since the
4
<PAGE>
beginning of such period that remains outstanding on such date of
determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such Indebtedness as if such
Indebtedness had been Incurred on the first day of such period and the
discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (2) if since the
beginning of such period the Company or any Restricted Subsidiary shall
have made any Asset Disposition, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly
attributable to the assets which are the subject of such Asset Disposition
for such period or increased by an amount equal to the EBITDA (if negative)
directly attributable thereto for such period and Consolidated Interest
Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of
the Company or any Restricted Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and
its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such period
the Company or any Restricted Subsidiary (by merger or otherwise) shall
have made an Investment in any Restricted Subsidiary (or any Person which
becomes a Restricted Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially
all an operating unit of a business, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such period and (4)
if since the beginning of such period any Person (that subsequently became
a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made
any Asset Disposition or any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (2) or (3) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Asset Disposition, Investment or
acquisition assets occurred on the first day of such period. For purposes
of this
5
<PAGE>
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in
good faith by a responsible financial or accounting officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given
pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been
the applicable rate for the entire period (taking into account any Interest
Rate Protection Agreement applicable to such Indebtedness if such Interest
Rate Protection Agreement has a remaining term as at the date of
determination in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the company and its consolidated Subsidiaries, plus, to
the extent incurred by the Company and its Subsidiaries in such period but
not included in such interest expense, (i) interest expense attributable to
Capitalized Lease obligations, (ii) amortization of debt discount and debt
issuance cost, (iii) capitalized interest, (iv) non-cash interest expense,
(v) commissions, discounts and other fees and charges attributable to
letters of credit and bankers' acceptance financing, (vi) interest actually
paid by the Company or any such Subsidiary under any Guarantee of
Indebtedness or other obligation of any other Person, (vii) net costs
associated with Hedging obligations (including amortization of fees),
(viii) the product of (a) all Preferred Stock dividends in respect of all
Preferred Stock of Subsidiaries of the Company and Redeemable Stock of the
Company held by Persons other than the Company or a Wholly Owned Subsidiary
multiplied by (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state
and local statutory tax rate of the Company, expressed as a decimal, in
each case, determined on a consolidated basis in accordance with GAAP and
(ix) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to
pay interest or fees to any Person (other than the Company) in connection
with Indebtedness Incurred by such plan or trust; provided, however, that
there shall be excluded therefrom any such interest expense of any
Unrestricted Subsidiary to the extent the related Indebtedness is not
Guaranteed or paid by the Company or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income
(loss) of the Company and its consolidated Subsidiaries; provided, however,
that there shall not be included in such Consolidated Net Income:
6
<PAGE>
(i) any net income (loss) of any Person if such Person is not a
Restricted Subsidiary, except that (A) subject to the limitations contained
in clause (iv) below, the Company's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Person during
such period to the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in
clause (iii) below) and (B) the Company's equity in a net loss of any such
Person (other than an Unrestricted Subsidiary) for such period shall be
included in determining such Consolidated Net Income,
(ii) any net income (loss) of any person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition,
(iii) any net income (loss) of any Restricted subsidiary if such
subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject
to the limitations contained in (iv) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Restricted Subsidiary during such
period to the Company or another Restricted Subsidiary as a dividend
(subject, in the case of a dividend that could have been made to another
Restricted Subsidiary, to the limitation contained in this clause) and (B)
the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income,
(iv) any gain (but not loss) realized upon the sale or other
disposition of any asset of the Company or its consolidated Subsidiaries
(including pursuant to any sale/leaseback transaction) which is not sold or
otherwise disposed of in the ordinary course of business and any gain (but
not loss) realized upon the sale or other disposition of any Capital Stock
of any Person,
(v) any extraordinary gain or loss, and
(vi) the cumulative effect of a change in accounting principles.
7
<PAGE>
"Consolidated Net Worth" means the total of the amounts shown on
the balance sheet of the Company and the Restricted Subsidiaries,
determined on a consolidated basis, as of the end of the most recent fiscal
quarter of the Company ending prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated
value of all outstanding Capital stock of the Company plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and
(B) any amounts attributable to Disqualified Stock.
"Contingent obligation" means as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness,
dividends or other obligations ("primary obligations") of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including any obligation of such Person, whether or not contingent (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or
hold harmless the owner of any such primary obligation against loss in
respect thereof; provided, however, that the term Contingent obligation
shall not include endorsements of instruments for deposit or collection in
the ordinary course of business. The amount of any Contingent obligation
shall be deemed to be an amount equal to the stated or determinable amount
(based upon the maximum reasonably anticipated net liability in respect
thereof as determined by the Company in good faith) of the primary
obligation or portion thereof in respect of which such Contingent
obligation is made or, if not stated or determinable, the maximum
reasonably anticipated net liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by the Company in
good faith.
"Contractual Obligation" means as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"Credit Documents" means the collective reference to this
Agreement and the Note.
8
<PAGE>
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
"Custodian" shall have the meaning assigned thereto in Section
8.01.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable or exercisable) or
upon the happening of any event (i) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise, (ii) is convertible or
exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable
at the option of the holder thereof, in whole or in part, in each case on
or prior to the first anniversary of the Stated Maturity of the Notes.
"Dollars" and "$11 means dollars in lawful currency of the United
States of America.
"EBITDA" means, for any period the Consolidated Net Income for
such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated
Interest Expense,
(iii) depreciation expense and (iv) amortization expense, in each case for
such period.
"Effective Date" shall have the meaning assigned thereto in the
NRG Plan, which definition is incorporated herein by this reference.
"Environmental Laws" means any and all Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements of any Governmental Authority or requirements of
law (including court-ordered requirements of common law) regulating or
imposing liability or standards of conduct concerning environmental or
public health protection matters, including Hazardous Materials, as now or
may at any time hereafter be in effect.
"ERISAII means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Event of Default" shall have the meaning assigned thereto in
Section 8.01.
9
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fee Property" shall have the meaning assigned thereto in Section
3.10.
"Final Maturity Date" shall have the meaning assigned thereto in
Section 2.04.
"Fiscal Date" means the Saturday closest to February 1, May 1,
August 1 or November 1, as the case may be, in any calendar year.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keepwell, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in
any other manner the obligee of such Indebtedness or other obligation of
the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part); provided, however, that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hazardous Materials" means any hazardous materials, hazardous
wastes, hazardous pesticides, hazardous or toxic substances, defined,
listed, classified or regulated as such in or under any Environmental Law,
including asbestos, petroleum, any other petroleum products (including
gasoline, crude oil or any fraction thereof) polychlorinated biphenyls and
urea-formaldehyde insulation.
10
<PAGE>
"Hedging obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Highest Lawful Rate" shall have the meaning assigned thereto in
Section 9.10.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
(i) the principal of and premium (if any) in respect of
indebtedness of such Person for borrowed money,
(ii) the principal of and premium (if any) in respect of
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments,
(iii) all obligations of such Person in respect of letters of
credit or other similar instruments (including reimbursement obligations
with respect thereto),
(iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services (except Trade Payables),
which purchase price is due more that six months after the date of placing
such property in service or taking delivery and title thereto or the
completion of such services,
(v) all Capitalized Lease obligations of such Person,
(vi) the amount of all obligations of such Person with respect to
the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of the Company, any Preferred Stock (but
excluding, in each case, any accrued dividends),
(vii) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by
such Person; provided, however, that the amount of Indebtedness of such
Person shall be the lesser of (A) the fair market value of such
11
<PAGE>
asset at such date of determination and (B) the amount of such Indebtedness
of such other Persons,
(viii) all Indebtedness of other Persons to the extent
Guaranteed by such Person, and
(ix) to the extent not otherwise included in this definition,
Hedging obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as
described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at
such date.
"indemnified liabilities" shall have the meaning assigned thereto
in Section 9.05(d).
"Initial Maturity Date" shall have the meaning assigned thereto
in Section 2.04.
"Insolvency" means, with respect to a Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of such term as
used in Section 4245 of ERISA.
"Interest Payment Date" means the last day of each March, June,
September and December, commencing on the first such day to occur after the
Loan is made.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, interest rate hedge
agreement or other similar agreement or arrangement as to which such Person
is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the balance sheet of such
Person) or other extension of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or services
for the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by such
Person. For purposes of the definition of "Unrestricted Subsidiary" and
Section 6.02, (i) "Investment" shall include the portion (proportionate to
the Company's equity interest in such Subsidiary) of the fair market value
of the net assets of any Subsidiary of the Company at the time that such
Subsidiary is
12
<PAGE>
designated an Unrestricted Subsidiary; provided, however, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company
shall be deemed to continue to have a permanent "Investment" in an
Unrestricted Subsidiary in an amount (if positive) equal to (x) the
Company's "Investment" in such Subsidiary at the time of such redesignation
less (y) the portion (proportionate to the Company's equity interest in
such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time of such redesignation; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its
fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Leased Properties" shall have the meaning assigned thereto in
Section 3.10.
"Lender" means the party named in this Agreement until one or
more successors replace it, and thereafter means the successor or
successors.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof).
"Liquidating Assets" shall have the meaning assigned thereto in
the Liquidating Asset Management Agreement which definition shall be
incorporated herein by this reference.
"Liquidating Asset Management Agreement" means that certain
Liquidating Asset Management Agreement dated the date hereof by and between
the Company and Wexford Management Corp., a Delaware corporation and as
provided for by the NRG Plan.
"Loan" shall have the meaning set forth in Section 2.01.
"Multiemployer Plan" means a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Net Available Cash" from an Asset Disposition means cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or
otherwise, but only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring person of
Indebtedness or other obligations relating to the properties or assets that
are the subject of such Asset Disposition or received in any other noncash
form) therefrom, in each case net of (i) all legal, title and recording tax
expenses, commissions and other
13
<PAGE>
fees and expenses incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset
Disposition in accordance with the terms of any Lien upon such assets, or
which must by its terms, or in order to obtain a necessary consent to such
Asset Disposition, or by applicable law be repaid out of the proceeds from
such Asset Disposition, (iii) all distributions and other payments required
to be made to minority interest holders in Subsidiaries or joint ventures
as a result of such Asset Disposition and (iv) appropriate amounts to be
provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset
Disposition and retained by the Company or any Restricted Subsidiary after
such Asset Disposition.
"Net Cash Proceeds" means, with respect to any Newark Loan
Refinancing, the cash proceeds thereof, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and expenses actually
incurred in connection therewith and net of taxes paid or payable as a
result thereof.
"Newark Loan Refinancing" shall mean Indebtedness that is
incurred to enable the Company to repay, retire, or refinance the mortgage
indebtedness of Newark Cogen.
"Note" means the Note substantially in the form attached hereto
as Exhibit A.
"Notice Event" shall have the meaning assigned thereto in Section
5.08.
"NRG Plan" has the meaning set forth in the recitals.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary or Clerk of the Company.
"Officers" Certificate" means a certificate signed by two
officers.
"0pinion of counsel" means a written opinion from legal counsel
who is acceptable to the Lender. The counsel may be an employee of or
counsel to the Company or the Lender.
14
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary, the Company or a
Person which will, upon the making of such Investment, become a Restricted
subsidiary; provided, however, that the primary business of such Restricted
Subsidiary is a Related Business; (ii) another Person if as a result of
such Investment such other Person is merged or consolidated with or into,
or transfers or conveys all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided, however, that such Person's primary
business is a Related Business; (iii) Temporary Cash Investments; (iv)
receivables owing to the Company or any Restricted Subsidiary, if created
or acquired in the ordinary course of business and payable or dischargeable
in accordance with customary trade terms; provided, however, that such
trade terms may include such concessionary trade terms as the Company or
any such Restricted Subsidiary deems reasonable under the circumstances;
(v) payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of business;
(vi) loans or advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted
Subsidiary; (vii) stock, obligations or securities received in settlement
of debts created in the ordinary course of business and owing to the
Company or any Restricted Subsidiary or in satisfaction of judgments; and
(viii) any Investment pursuant to and in accordance with the terms of the
Co-Investment Agreement.
"Permitted Liens" means:
(a) Liens for taxes, assessments or other governmental charges not
yet delinquent or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or such Subsidiary, as the case may
be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics' landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
in respect of obligations which are not yet due or which are bonded or
which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company or such Subsidiary, as the case may be, in accordance with GAAP;
15
<PAGE>
(c) pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, tenders, trade or
government contracts (other than for borrowed money), leases, licenses,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business;
(e) easements (including reciprocal easement agreements), rights-of-
way, building, zoning and similar restrictions, utility agreements,
covenants, reservations, restrictions, encroachments, changes, and other
similar encumbrances or title defects incurred, or leases or subleases
granted to others, in the ordinary course of business, which do not in the
aggregate materially detract from the aggregate value of the properties of
the Company and its Subsidiaries, taken as a whole or in the aggregate
materially interfere with or adversely affect in any material respect the
ordinary conduct of the business of the Company and its Subsidiaries on the
properties subject thereto, taken as a whole;
(f) Bankers' liens arising by operation of law;
(g) Liens on documents of title and the property covered thereby
securing Indebtedness in respect of any Commercial L/Cs;
(h) (i) mortgages, liens, security interests, restrictions or
encumbrances that have been placed by any developer, landlord or other
third party on property over which the Company or any Subsidiary of the
Company has easement rights or on any Leased Property and subordination or
similar agreements relating thereto and (ii) any condemnation or eminent
domain proceedings affecting any real property;
(i) Liens on goods (and Proceeds thereof) held by the Company or any
of its Subsidiaries to be sold on a consignment basis in the ordinary
course of business;
(j) leases or subleases to third parties;
(k) Liens in connection with workmen's compensation obligations and
general liability exposure of the Company and its Subsidiaries; and
16
<PAGE>
(l) Liens securing Indebtedness Incurred under Section 6.01(b)(ii) or
(iii).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or
any other entity.
"Plan" means at any particular time, any employee benefit plan as
defined in Section 3(3) of ERISA and not , excluded by Section 4(b) of
ERISA and in respect of which the Company or a Commonly Controlled Entity
is (or, if such plan were terminated at such time, would under Section 4069
of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Preferred Stock" as applied to the Capital Stock of any
corporation means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such corporation, over shares of Capital Stock of any other
class of such corporation.
"principal" of a Note means the principal of the Note plus the
premium, if any, payable on the Note which is due or overdue or is to
become due at the relevant time.
"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to
any defeasance or discharge mechanism) (collectively, "refinances" and
"refinanced" shall have a correlative meaning) any Indebtedness existing on
the Closing Date or Incurred in compliance with this Agreement (including
Indebtedness of the Company that refinances Indebtedness of any Restricted
Subsidiary (to the extent permitted in this Agreement) and Indebtedness of
any Restricted Subsidiary that refinances Indebtedness of another
Restricted Subsidiary) including Indebtedness that refinances Refinancing
Indebtedness; provided, however, that (i) the Refinancing Indebtedness has
a Stated Maturity no earlier than the Stated Maturity of the Indebtedness
being refinanced, (ii) the Refinancing Indebtedness has an Average Life at
the time such Refinancing Indebtedness is Incurred that is equal to or
greater than the Average Life of the Indebtedness being refinanced and
(iii) such Refinancing Indebtedness is Incurred in an aggregate principal
amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being refinanced; provided further,
however, that Refinancing Indebtedness shall not
17
<PAGE>
include (x) Indebtedness of a Restricted Subsidiary that refinances
Indebtedness of the Company or (y) Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Register" shall have the meaning assigned thereto in Section
2.10(b).
"Regulation U11 means Regulation U of the Board of Governors of
the Federal Reserve System, as from time to time in effect.
"Related Business" means those businesses in which the Company or
any of its Subsidiaries is engaged on the date of this Agreement, or which
are directly related thereto.
"Reorganization" means with respect to a Multiemployer Plan, the
condition that such Plan is in reorganization as such term is used in
Section 4241 of ERISA.
"Reportable Event" means any of the events set forth in Section
4043(b) of ERISA other than those events as to which the thirty day notice
period is waived under Sections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
S 2615.
"Requirement of Law" means, as to any Person, the Articles or
Certificate of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation, order, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property, or to which such Person or any of its
property is subject.
"Responsible Officer" means, with respect to any Person, the
president, chief executive officer, the chief operating officer, the chief
financial officer, treasurer, controller or any vice president of such
Person.
"Restricted Payment" shall have the meaning assigned thereto in
Section 6.02(a).
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Single Employer Plan" means any Plan which is covered by Title
IV of ERISA and which is not a Multiemployer Plan.
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of
principal of such security is due
18
<PAGE>
and payable, including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such security at
the option of the holder thereof upon the happening of any contingency
beyond the control of the issuer unless such contingency has occurred).
"Subordinated obligation" means any Indebtedness of the company
(whether outstanding on the Closing Date or thereafter Incurred) which is
subordinate or junior in right of payment to the Note pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total
voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i)
such Person or (ii) one or more Subsidiaries of such Person.
"Successor Company" shall have the meaning assigned hereto in
Section 7.01(i).
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any
agency thereof or obligations Guaranteed by the United States of America or
any agency thereof, (ii) investments in time deposit accounts, certificates
of deposit and money market deposits maturing within 180 days of the date
of acquisition thereof issued by a bank or trust company which is organized
under the laws of the United States of America, any state thereof or any
foreign country recognized by the United States of America having capital,
surplus and undivided profits aggregating in excess of $300,000,000 (or the
foreign currency equivalent thereof), (iii) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i) or (ii) above entered into with a bank meeting the
qualifications described in clause (ii) above, and (iv) investments in
commercial paper, maturing not more than six months after the date of
acquisition, issued by the Lender or the parent corporation of the Lender,
and commercial paper with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-11" (or higher) according to Standard and Poor's
Ratings Group.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed
19
<PAGE>
by such Person arising in the ordinary course of business in connection
with the acquisition of goods or services.
"Transferee" shall have the meaning set forth in Section 9.06(b).
"Uniform Commercial Code" means the New York Uniform commercial
Code as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the company
that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may
designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary
unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or owns or holds any Lien on any property of, the Company
or any other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; provided, however, that either (A) the
Subsidiary to be so designated has total consolidated assets of $1,000 or
less or (B) if such Subsidiary has consolidated assets greater than $1,000,
then such designation would be permitted under Section 6.02. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that immediately after giving effect to such
designation (x) the Company's Consolidated Coverage Ratio would exceed
1.6:1.00 and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the Lender
by promptly filing with the Lender a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in
the election of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the
Company all the Capital Stock of which (other than directors' qualifying
shares) is owned by the Company or another Wholly owned Subsidiary.
SECTION 1.02. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) as used herein and in the Note and any certificate or other
document made or delivered pursuant
20
<PAGE>
hereto, accounting terms relating to the Company and its Subsidiaries not
defined in Section 1.01 and accounting terms partly defined in Section 1.01
to the extent not defined shall have the respective meanings given to them
under GAAP. All computations determining compliance with financial
covenants or terms, including definitions used therein, shall be prepared
in accordance with generally accepted accounting principles in effect at
the time of the preparation of, and in conformity with those used to
prepare, the historical financial statements of the Company;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the
plural include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate
or junior to secured Indebtedness merely by virtue of its nature as
unsecured indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP and accretion of principal on such security shall be
deemed to be the Incurrence of Indebtedness;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater;
(9) unless otherwise specified therein, all terms defined in
this Agreement shall have the defined meanings when used in the Note or any
certificate or other document made or delivered pursuant hereto;
(10) the words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement, and section,
Section, schedule and exhibit references are to this Agreement unless
otherwise specified; and
(11) as used in this Agreement, references to a fiscal year of
the Company identified only by a year
21
<PAGE>
refer to the fiscal year of the Company ended on the Fiscal Date at the end
of the fourth fiscal quarter of the company which falls in the immediately
succeeding calendar year. References to the last day of any fiscal year or
fiscal quarter of the Company, or to a fiscal year or quarter ended on a
certain date, shall be deemed to refer to the Fiscal Date at the end of
such fiscal year or quarter.
ARTICLE 2
Loan
SECTION 2.01. Loan. Subject to the terms and conditions hereof,
the Lender agrees to make a loan in Dollars (the "Loan") to the Company on
the Closing Date, in an aggregate principal amount of [twenty-four million
dollars ($24,000,000)].
SECTION 2.02. Use of Proceeds. The proceeds of the Loan shall be
used for the purposes set forth in the NRG Plan and shall be applied in
accordance with the NRG Plan.
SECTION 2.03. Borrowing. The Company shall borrow the entire
amount of the Loan on the Closing Date.
SECTION 2.04. Maturity: Refinancing.
(a) The Loan will mature on the date that is twelve (12) years
following the Closing Date (the "Maturity Date").
(b) The Company hereby covenants and agrees to use its
reasonable best efforts to obtain Newark Loan Refinancing the Net Cash
Proceeds of which will enable and permit the Company to repay the Loan in
its entirety, including principal and interest thereon.
SECTION 2.05. Optional and Mandatory Prepayments; Principal
Amortization.
(a) The Company may at any time and from time to time prepay the
Loan, in whole or in part, without premium or penalty, upon at least five
days irrevocable notice to the Lender. If such notice is given, the
Company shall make such prepayment, and the payment amount specified in
such notice shall be due and payable, on the date specified therein.
Partial prepayments of the Loan shall be in an aggregate principal amount
equal to the lesser of (A) $2,000,000, or a whole multiple of $1,000,000 in
excess thereof and (B) the aggregate unpaid principal amount of the Loan.
22
<PAGE>
(b) (i) If, subsequent to the Closing Date, there shall be
obtained a Newark Loan Refinancing, 100% of the Net Cash Proceeds thereof,
after paying in full the mortgage debt of Newark Cogen being refinanced,
shall be promptly applied toward the payment of the Loan.
(ii) The Company shall give the Lender at least one Business
Day's notice of each prepayment or mandatory reduction pursuant to this
Section 2.05(b) setting forth the date and amount thereof.
(c) Accrued interest on the amount of any prepayments shall be
paid on the date of such prepayment.
(d) The principal amount of the loan shall be repaid in semi-
annual installments of [$800,000] on every other Interest Payment Date,
commencing with the second Interest Payment Date after the Closing Date.
SECTION 2.06. Interest Rate and Payment Dates.
(a) The Loan shall bear interest for the period from and
including the date the Loan is made to, but excluding, the maturity date
thereof an the unpaid principal thereof at a rate per annum equal to the
Base Rate.
(b) If all or a portion of (i) the principal amount of the Loan
or (ii) any interest payable thereon shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise) the Loan, and any such
overdue amount shall, without limiting the rights of the Lender under
Section 8, bear interest at a rate per annum which is 2.00% above the Base
Rate from the date of such non-payment until paid in full (as well after as
before judgment).
(c) Interest shall be payable in arrears on each Interest Payment
Date.
SECTION 2.07. Computation of Interest.
Interest in respect of the Loan, shall be calculated on the basis
of a 365 (or 366 as the case may be) day year for the actual days elapsed.
SECTION 2.08. Treatment of Payments.
(a) Whenever any payment received by the Lender under this
Agreement or the Note is insufficient to pay in full all amounts then due
and payable to the Lender under this Agreement or the Note such payment
shall be applied by the Lender in the following order: First, to the
payment of fees and expenses, if any, due and payable to the Lender under
and
23
<PAGE>
in connection with this Agreement and the Note including the payment of all
expenses due and payable under Section 9.05; Second, to the payment of
interest then due and payable on the Loan; and Third, to the payment of the
principal amount of the Loan which is then due and payable; or
(b) All payments (including prepayments) to be made by the
Company on account of principal, interest and fees shall be made without
set-off or counterclaim and shall be made to the Lender, for the account of
the Lender at the office of the Lender located at 1221 Nicollet Mall, Suite
700, Minneapolis, MN 55403 in lawful money of the United States of America
and in immediately available funds. If any payment hereunder would become
due and payable on a day other than a Business Day, such payment shall
become due and payable on the next succeeding Business Day and, with
respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.
SECTION 2.9. Indemnity. The Company agrees to indemnify the
Lender and to hold the Lender harmless from any loss or expense (but
without duplication of any amounts payable as default interest) which the
Lender may sustain or incur as a consequence of default by the Company in
making any prepayment after the Company has given a notice in accordance
with Section 2.05. This covenant shall survive termination of this
Agreement and repayment of the Loan.
SECTION 2.10. Repayment of the Loan: Evidence of Debt.
(a) The Company hereby unconditionally promises to pay to the
Lender the then unpaid principal amount of the Loan in accordance with the
terms hereof and the Note. The Company hereby further agrees to pay
interest on the unpaid principal amount of the Loan from time to time
outstanding from the date hereof until payment in full thereof at the rates
per annum, and on the dates, set forth in Section 2.06.
(b) The Lender shall maintain a Register (the "Register") in
which shall be recorded (i) the amount of the Loan made hereunder, (ii) the
amount of any principal or interest due and payable or to become due and
payable from the Company to the Lender hereunder and (iii) the amount of
any sum received by the Lender hereunder from the Company.
(c) The entries made in the Register to the extent permitted by
applicable law, shall be prima facie evidence of the existence and amounts
of the obligations of the Company therein recorded; provided, however, that
the failure of the Lender to maintain the Register, or any error therein,
shall not in any manner affect the obligation of the Company to
24
<PAGE>
repay (with applicable interest) the Loan made to the Company by the Lender
in accordance with the terms of this Agreement.
(d) The Company agrees that, upon the request of the Lender, the
Company will execute and deliver to the Lender the Note evidencing the
Loan, with appropriate insertions as to date and principal amount.
ARTICLE 3
Representations and Warranties
In order to induce the Lender to enter into this Agreement and to
make the Loan, the Company hereby represents and warrants to the Lender, as
follows (all representations and warranties are made with respect to the
Closing Date and with respect to the entire period following the Closing
Date during which any amounts are due and owing from the Company to the
Lender hereunder, as if made at any time during such period):
SECTION 3.01. No Change. There has been no change, and no
development or event involving a prospective change, which has had or could
reasonably be expected to have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of, the
Company and its Subsidiaries taken as a whole.
SECTION 3.02. Corporate Existence; Compliance with Law. Except
for those exceptions to the following which the Lender has actual knowledge
of on the Closing Date, each of the Company and its Subsidiaries (a) is a
corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation, (b) has full corporate power and
authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to use its corporate
name and to own, lease or otherwise hold its properties and assets and to
carry on its business as presently conducted other than such franchises,
licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, would not have a material adverse effect
on the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries, taken as a whole, (c) is
duly qualified and in good standing to do business in each jurisdiction in
which the nature of its business or the ownership, leasing or holding of
its properties makes such qualification necessary, except such
jurisdictions where the failure so to qualify would not have a material
adverse effect on the business, assets, condition (financial or otherwise)
or results of operations of the Company and its Subsidiaries,
25
<PAGE>
taken as a whole, and (d) is in compliance with all applicable statutes,
laws, ordinances, rules, orders, permits and regulations of any
Governmental Authority (including those related to Hazardous Materials and
substances), except where noncompliance would not have a material adverse
effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a
whole. Neither the Company nor any of its Subsidiaries has received any
written communication from a Governmental Authority that alleges that the
Company or any of its Subsidiaries is not in compliance, in all material
respects, with all material federal, state, local or foreign laws,
ordinances, rules and regulations.
SECTION 3.03. Corporate Power; Authorization. Each of the
Company and its Subsidiaries has the corporate power and authority to make,
deliver and perform each of the Credit Documents to which it is a party,
and the Company has the corporate power and authority and legal right to
borrow hereunder. Each of the Company and its Subsidiaries has taken all
necessary corporate action to authorize the execution, delivery and
performance of each of the Credit Documents to which it is or will be a
party and the Company has taken all necessary corporate action to authorize
the borrowings hereunder. No consent or authorization of, or filing with,
any Person (including any Governmental Authority) is required in connection
with the execution, delivery or performance by the Company or any of the
Company's Subsidiaries, or for the validity or enforceability against the
Company or any of the Company's Subsidiaries, of any Credit Document except
for consents, authorizations and filings (a) which have been obtained or
made and are in full force and effect, and except such consents,
authorizations and filings, the failure to obtain or perform (i) which
would not have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole and (ii) which would not adversely affect the
validity or enforceability of any of the Credit Documents or the rights or
remedies of the Lender thereunder.
SECTION 3.04. Enforceable Obligations. This Agreement, and each
of the other Credit Documents has been, duly executed and delivered on
behalf of the Company. This Agreement and each of the other Credit
Documents constitutes the legal, valid and binding obligation of the
Company, and is enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors' rights
generally and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
26
<PAGE>
SECTION 3.05. No Legal Bar. The execution, delivery and
performance of each Credit Document and the incurrence or issuance of and
use of the proceeds of the Loan do not violate any Requirement of Law or
any Contractual obligation applicable to or binding upon the Company or any
Subsidiary of the Company or any of their respective properties or assets,
in any manner which, individually or in the aggregate, (i) would have a
material adverse effect on the ability of the Company or any such
Subsidiary to perform its obligations under the Credit Documents to which
it is a party, (ii) would give rise to any liability on the part of the
Lender, or (iii) would have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries taken as a whole, and do not result in the
creation or imposition of any Lien on any of its properties or assets
pursuant to any Requirement of Law applicable to it, as the case may be, or
any of its Contractual Obligations, except for Permitted Liens.
SECTION 3.06. No Material Litigation. No litigation by,
investigation known to the company by, or proceeding of, any Governmental
Authority is pending against the Company or any of its Subsidiaries with
respect to the validity, binding effect or enforceability of any Credit
Document, the Loan made hereunder or the use of proceeds thereof. No
lawsuits, claims, proceedings or investigations pending or, to the best
knowledge of the Company, threatened against or affecting the Company or a
subsidiary of the Company or any of their respective properties, assets,
operations or businesses, in which there is a probability of an adverse
determination that is reasonably likely, if adversely decided, to have a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries,
taken as a whole.
SECTION 3.07. Investment Company Act. Neither the company nor
any Subsidiary of the Company is an "investment company" or a company
"controlled" by an "investment company" (as each of the quoted terms is
defined or used in the Investment Company Act of 1940, as amended).
SECTION 3.08. Federal Regulation. No part of the proceeds of the
Loan are being or are to be used for any purpose which violates the
provisions of Regulation G, T, U or X of the Board of Governors of the
Federal Reserve System. Neither the Company nor any of its Subsidiaries is
engaged or will engage, principally or as one of its important activities,
in the business of extending credit for the purpose of "purchasing" or
"carrying" any "margin stock"
27
<PAGE>
within the respective meanings of each of the quoted terms under said
Regulation U.
SECTION 3.09. No Default. The Company and each of its
Subsidiaries have performed all material obligations required to be
performed by them under their respective Contractual obligations on and
after the Closing Date and they are not (with or without the lapse of time
or the giving of notice, or both) in breach or default in any respect
thereunder, except to the extent that such breach or default would not have
a material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries
taken as a whole. Neither the Company nor any of its Subsidiaries is in
default under any material judgment, order or decree of any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, applicable to it or any of its
respective properties, assets, operations or business, except to the extent
that any such defaults would not, in the aggregate, have a material adverse
effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a
whole.
SECTION 3.10. Ownership of Property: Liens. Each of the Company
and its Subsidiaries has good and valid title to all of its material
tangible and intangible personal property, in each case free and clear of
all mortgages, liens, security interests or encumbrances of any nature
whatsoever except Permitted Liens. With respect to real property or
interests in real property, as of the Closing Date, each of the Company and
its Subsidiaries has (i) fee title to all of the real property listed on
Schedule 3.10 (each, a "Fee Property"), and (ii) good and valid title to
the leasehold estates in all of the real property leased by it and listed
on Schedule 3.10 under the heading "Leased Properties" (each, a "Leased
Property"), in each case free and clear of all mortgages, liens, security
interests, easements, covenants, rights-of-way and other similar
restrictions of any nature whatsoever, except (A) Permitted Liens, (B) any
conditions that may be shown by a current, accurate survey or physical
inspection of any Fee Property or Leased Property, (C) as to Leased
Property, the terms and provisions of the respective lease therefor and any
matters affecting the fee title and any estate superior to the leasehold
estate related thereto, and (D) title defects, or leases or subleases
granted to others, which are not material to the Fee Properties or the
Leased Properties, as the case may be, taken as a whole. The Fee
Properties and the Leased Properties (collectively the "Real Properties")
constitute, as of the Closing Date, all of the real property owned in fee
or leased by the Company and its subsidiaries.
28
<PAGE>
SECTION 3.11. ERISA. None of the Company, any Subsidiary of the
Company or any Commonly Controlled Entity would be liable for any amount
pursuant to Section 4062, 4063, 4064 or 4069 of ERISA, if any Single
Employer Plan were to terminate. Neither the Company nor any Commonly
Controlled Entity has been involved in any transaction that would cause the
Company to be subject to liability with respect to a Plan to which the
Company or any Commonly Controlled Entity contributed or was obligated to
contribute during the six-year period ending on the date this
representation is made or deemed made under Section 4062, 4069 or 4212(c)
of ERISA. Neither the Company nor any Commonly Controlled Entity has
incurred any material liability under Title IV of ERISA which could become
or remain a liability of the Company after the Closing Date. None of the
Company, any Subsidiary of the Company, or any director, officer or
employee thereof, or any of the Plans (to the best knowledge of the Company
with respect to any Multiemployer Plan), or any trust created thereunder,
or any fiduciary thereof, has engaged in a transaction or taken any other
action or omitted to take any action involving any Plan which could
constitute a prohibited transaction within the meaning of Section 406 of
ERISA which is not otherwise exempted, or would cause it to be subject to
either a material liability or civil penalty assessed pursuant to Section
409 or 502 of ERISA or a material tax imposed pursuant to Section 4975 or
4976 of the Code. Each of the Plans (to the best knowledge of the Company
with respect to any Multiemployer Plan) has been operated and administered
in all material respects in accordance with applicable laws, including but
not limited to ERISA and the Code. There are no material pending or, to
the best knowledge of the Company, threatened claims by or on behalf of any
of the Plans or any fiduciary, by any employee or beneficiary covered under
any such Plan, or otherwise involving any such Plan or fiduciary (other
than routine claims for benefits). No condition exists and no event has
occurred with respect to any Multiemployer Plan which presents a material
risk of a complete or partial withdrawal under Subtitle E of Title IV of
ERISA, nor has the Company or any Commonly Controlled Entity been notified
that any such Multiemployer Plan is insolvent or in reorganization within
the meaning of Section 4241 of ERISA. Neither the Company nor any Commonly
Controlled Entity nor any Subsidiary has been a party to any transaction or
agreement to which the provisions of Section 4204 of ERISA were applicable.
Neither the Company nor any Commonly Controlled Entity nor any subsidiary
is obligated to contribute to a Multiemployer Plan, on behalf of any
current or former employee of the Company, any Commonly Controlled Entity
or any Subsidiary. None of the Plans or any trust established thereunder
has incurred any "accumulated funding deficiency" (as defined in Section
302 of ERISA and Section 412 of the Code), whether or not waived, as of the
last day of the most recent fiscal year of each of the
29
<PAGE>
Plans. No contribution failure has occurred with respect to any Plan
sufficient to give rise to a lien under Section 302(f) of ERISA.
SECTION 3.12. Copyrights, Patents, Trademarks and Licenses. The
Company or a Subsidiary of the Company owns or has the right to use,
without payment to any other party, all material patents, patent
applications, trademarks (registered or unregistered), trade names, service
marks and copyrights owned, used or filed by or licensed to the Company and
its Subsidiaries. To the best knowledge of the Company, no claims are
pending by any Person with respect to the ownership, validity,
enforceability or the Company's or any Subsidiary's use of any such
patents, patent applications, trademarks (registered or unregistered),
trade names, service marks, copyrights challenging or questioning the
validity or effectiveness of any of the foregoing, in any jurisdiction,
domestic or foreign.
SECTION 3.13. Environmental Matters.
(a) To the best knowledge of the Company, the Real Properties do
not contain in, on or under including the soil and groundwater thereunder,
any Hazardous Materials in amounts or concentrations that constitute or
constituted a material violation of, or could reasonably give rise to
material liability under, Environmental Laws.
(b) To the best knowledge of the Company, the Real Properties
and all operations and facilities at the Real Properties are in material
compliance with all Environmental Laws, and there is no contamination or
violation of any Environmental Law which could materially interfere with
the continued operation of, or materially impair the fair salable value of,
the Real Properties.
(c) To the best knowledge of the Company, neither the Company
nor any of its Subsidiaries has received or is aware of any complaint,
notice of violation, alleged violation, or notice of investigation or of
potential liability under Environmental Laws with regard to the Real
Properties or the operations of the Company or its subsidiaries, nor does
the Company or any of its Subsidiaries have knowledge that any such action
is being contemplated, considered or threatened.
(d) To the best knowledge of the Company, Hazardous Materials
have not been generated, treated, stored, disposed of, at, on or under the
Real Properties, nor have any Hazardous Materials been transported from the
Real Properties, in material violation of or in a manner that could
reasonably give rise to liability under any Environmental Laws.
30
<PAGE>
(e) There are no governmental administrative actions or judicial
proceedings pending or, to the knowledge of the Company and its
Subsidiaries, threatened, under any Environmental Law to which the Company
or any of its Subsidiaries is a party with respect to the Real Properties,
nor are there any consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative or judicial
requirements, other than permits authorizing operations at facilities at
the Real Properties, outstanding under any Environmental Law with respect
to the Real Properties.
ARTICLE 4
Conditions Precedent
SECTION 4.01. Conditions to Loans. The obligation of the Lender
to make the Loan on the Closing Date is subject to the satisfaction, or
waiver by the Lender, immediately prior to or concurrently with the making
of the Loan, of the following conditions:
(a) Note. The Lender shall have received the Note conforming to
the requirements hereof and executed by a duly authorized officer of the
Company.
(b) Consummation of Acquisition and NRG Plan. The Acquisition
shall have been consummated at the Closing (as defined in the Acquisition
Agreement) and concurrently therewith the KRG Plan shall have been
consisted on the Effective Date (as defined in the NRG Plan).
ARTICLE 5
Affirmative Covenants
The Company hereby agrees that, so long as the Loan remains
outstanding and unpaid, or any other amount is owing to the Lender
hereunder or under any of the other Credit Documents, it shall, and, in the
case of the agreements contained in Sections 5.04 through 5.07 and 5.09,
the Company shall cause each of its Subsidiaries to:
SECTION 5.01. Financial Statements. Furnish to the Lender:
(a) as soon as available after the end of each fiscal year of
the Company, but in any event within 10 days of filing them with the
Securities and Exchange commission, a copy of the consolidated balance
sheet of the Company and its consolidated Subsidiaries as at the end of
such fiscal year and the related consolidated
31
<PAGE>
statements of stockholders, equity and cash flows and the consolidated
statements of income of the Company and its Subsidiaries for such fiscal
year, setting forth in each case (other than for the financial statements
delivered with respect to the first fiscal year of the Company ended
following the Closing Date) in comparative form the figures for the
previous year, reported on by independent certified public accountants of
nationally recognized standing; and
(b) as soon as available after the end of each of the first
three quarterly periods of each fiscal year of the Company, but in any
event within 10 days of filing them with the Securities and Exchange
Commission, the unaudited consolidated balance sheet of the Company and its
Subsidiaries as at the end of each such quarter and the related unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such quarterly period and the portion of the fiscal year
of the Company through such date, setting forth in each case (other than
for the financial statements delivered with respect to fiscal quarters
occurring during the first fiscal year of the Company ended following the
Closing Date) in comparative form the figures for the corresponding quarter
in, and year to date portion of, the previous year; together with a
comparison showing the figures for such periods in the budget prepared by
the Company and furnished to the Lender, certified by the chief financial
officer, controller or treasurer of the Company as being fairly stated in
all material respects.
SECTION 5.02. Certificates; Other Information. Furnish to the
Lender:
(a) concurrently with the delivery of the consolidated financial
statements referred to in Section 5.01(a), so long as not contrary to the
then current recommendations of the American Institute of Certified
Accountants, a letter from the independent certified public accountants
reporting on such financial statements stating that in making the
examination necessary to express their opinion on such financial
statements, nothing has come to their attention which would lead them to
believe that there exists any Default or Event of Default under Sections
6.01 and 6.02, except as specified in such letter;
(b) within 15 days of the delivery of the financial statements
referred to in Sections 5.01(a) and (b) (except that the certificate
referred to in clause (i) below shall be delivered concurrently with such
financial statements), a certificate of the chief
32
<PAGE>
financial officer of the Company (i) stating that, to the best of such
officer's knowledge, each of the Company and its respective Subsidiaries
has observed or performed all of its covenants and other agreements, and
satisfied every material condition, contained in this Agreement and the
other Credit Documents to be observed, performed or satisfied by it, and
that such officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate, (ii) showing in detail as
of the end of the related fiscal period the figures and calculations
supporting such statement in respect of Sections 6.02 and 6.05 and (iii) if
not specified in the financial statements delivered pursuant to Section
5.01, specifying the aggregate amount of interest paid or accrued by the
Company and its Subsidiaries, and the aggregate amount of depreciation,
depletion and amortization charged on the books of the Company and its
Subsidiaries, during such accounting period; and
(c) promptly, such additional financial and other information as
the Lender may from time to time reasonably request.
SECTION 5.03. SEC Reports. The Company shall furnish to the
Lender, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available to
the public generally by the Company or any of its Subsidiaries, if any, and
all regular and periodic reports and all final registration statements and
final prospectuses, if any, filed by the Company or any of its Subsidiaries
with any securities exchange or with the Securities and Exchange Commission
or any Governmental Authority succeeding to any of its functions.
SECTION 5.04. Payment of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or before they become delinquent,
as the case may be, all its obligations and liabilities of whatever nature,
except (a) when the amount or validity thereof is currently being contested
in good faith by appropriate proceedings and reserves in conformity with
GAAP with respect thereto have been provided on the books of the Company or
any of its Subsidiaries, as the case may be, (b) for delinquent obligations
which do not have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the Company
and its Subsidiaries taken as a whole and (c) for trade and other accounts
payable in the ordinary course of business which are not overdue for a
period of more than 90 days or, if overdue for more than 90 days, as to
which a dispute exists and adequate reserves in conformity with GAAP have
been established on the books of the Company or any of its Subsidiaries, as
the case may be.
33
<PAGE>
SECTION 5.05. Conduct of Business and Maintenance of Existence.
Except as otherwise contemplated or permitted by the Co-Investment
Agreement or the Liquidating Asset Management Agreement, continue to engage
in business of the same general type as now conducted by it, and preserve,
renew and keep in full force and effect its corporate existence and take
all reasonable action to maintain all material rights, material privileges,
franchises, patents, patent applications, copyrights, trademarks and trade
names, necessary or desirable in the normal conduct of its business except
for rights, privileges, franchises, patents, patent applications,
copyrights, trademarks and tradenames the loss of which would not in the
aggregate have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole, and comply with all applicable Requirements
of Law except to the extent that the failure to comply therewith would not,
in the aggregate, have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the Company
and its Subsidiaries taken as a whole.
SECTION 5.06. Maintenance of Property; Insurance.
(a) Keep all property useful and necessary in its business in
good working order and condition (ordinary wear and tear excepted); and
(b) Maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and with
only such deductibles as are usually maintained by, and against at least
such risks (but including, in any event, public liability insurance) as are
usually insured against in the same general area, by companies engaged in
the same or a similar business and furnish to the Lender, upon written
request of the Lender, full information as to the insurance carried;
Provided that the Company may implement programs of self-insurance in the
ordinary course of business and in accordance with industry standards for a
company of similar size so long as reserves are maintained in accordance
with GAAP for the liabilities associated therewith.
SECTION 5.07. Inspection of Property: Books and Records;
Discussions. Keep proper books of record and account in which full, true
and correct entries are made of all dealings and transactions in relation
to its business and activities which permit financial statements to be
prepared in conformity with GAAP and all Requirements of Law; and permit
representatives of the Lender upon reasonable notice (but no more
frequently than monthly), to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any
reasonable time and as often as may
34
<PAGE>
reasonably be requested upon reasonable notice, and to discuss the
business, operations, assets and financial and other condition of the
Company and its Subsidiaries with officers and employees thereof and with
their independent certified public accountants.
SECTION 5.08. Notices. Subject to the last sentence of this
section promptly give notice to the Lender of any of the following (a
"Notice Event"):
(a) of the occurrence of any Default or Event of Default;
(b) of any (i) default or event of default under any instrument
or other agreement, guarantee or collateral document of the Company or any
of its Subsidiaries which default or event of default has not been waived
and would have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole, or (ii) litigation, investigation or
proceeding which may exist at any time between the Company or any of its
Subsidiaries and any Governmental Authority, or receipt of any notice of
any environmental claim or assessment against the company or any of its
Subsidiaries by any Governmental Authority which in any such case would
have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole;
(c) of any litigation or proceeding against the company or any
of its Subsidiaries (i) in which more than $500,000 of the amount claimed
is not covered by insurance or (ii) in which injunctive or similar relief
is sought which if obtained would have a material adverse effect on the
business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole;
(d) of the following events, as soon as practicable after, and
in any event within 30 days after, the Company knows or has reason to know
thereof: (i) the occurrence of any Reportable Event with respect to any
Plan which Reportable Event could reasonably result in material liability
to the Company and its Subsidiaries taken as a whole, or (ii) the
institution of proceedings or the taking of any other action by PBGC, the
Company or any Commonly Controlled Entity to terminate, withdraw or
partially withdraw from any Plan and, with respect to a Multiemployer Plan,
the Reorganization or Insolvency of the Plan, in each of the foregoing
cases which could
35
<PAGE>
reasonably result in material liability to the Company and its Subsidiaries
taken as a whole, and in addition to such notice, deliver to the Lender
whichever of the following may be applicable: (A) a certificate of a
Responsible officer of the Company setting forth details as to such
Reportable Event and the action that the Company or such Commonly
Controlled Entity proposes to take with respect thereto, together with a
copy of any notice of such Reportable Event that may be required to be
filed with PBGC, or (B) any notice delivered by PBGC evidencing its intent
to institute such proceedings or any notice to PBGC that such Plan is to be
terminated, as the case may be; and
(e) of a material adverse change known to the Company or its
Subsidiaries in the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries taken as a whole.
Each notice pursuant to this Section 5.08 shall be accompanied by a
statement of a Responsible officer setting forth details of the occurrence
referred to therein and (in the cases of clauses (a) through (d)) stating
what action the Company proposes to take with respect thereto. The company
shall not be deemed in breach or default of its obligations under this
Section 5.08 due to the failure to notify the Lender of any Notice Event of
which the Lender shall have had actual knowledge as of the date notice of
such Notice Event was to have been provided.
SECTION 5.09. Environmental Laws.
(a) Comply with, and use all reasonable efforts to insure
compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply with and maintain, and require
that all tenants and subtenants obtain and comply with and maintain, any
and all licenses, approvals, registrations or permits required by
Environmental Laws, except to the extent that failure to do so would not
have any reasonable likelihood of having a material adverse effect on the
business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole or on the
validity or enforceability of any of the Credit Documents or the rights and
remedies of the Lender thereunder;
(b) conduct and complete all investigations, studies, sampling
and testing, and all remedial, removal and other actions, required under
applicable Environmental Laws, and promptly comply with all lawful orders
and directives of all Governmental Authorities respecting Environmental
Laws,
36
<PAGE>
except to the extent that the same are being contested in good faith by
appropriate proceedings; and
(c) In regard to this Agreement or in any way relating to the
Company or its Subsidiaries or their current or former operations, defend,
indemnify and hold harmless the Lender, and its respective employees,
agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or otherwise, arising
out of, or in any way relating to Hazardous Material or Environmental Laws,
including any orders, requirements or demands of Governmental Authorities
related thereto, including reasonable attorney's and consultant's fees,
investigation and laboratory fees, remediation costs, court costs and
litigation expenses, except to the extent that any of the foregoing arise
out of the gross negligence or willful misconduct of the party seeking
indemnification therefor. The agreements in this Section 5.09(c) shall
survive repayment of the Loan and all other amounts payable hereunder.
SECTION 5.10. Further Instruments and Acts. Upon request of the
Lender, the Company will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Agreement.
SECTION 5.11 Taxes. Each of the Company and its Subsidiaries will
file or cause to be filed all material tax returns which, to the knowledge
of the Company, are required to be filed and will pay all taxes shown to be
due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on
it or any of its property by any Governmental Authority (other than any
amount of which is currently being contested in good faith by appropriate
proceeds and with respect to which reserves (or other sufficient
provisions) in conformity with GAAP have been provided on the books of the
Company or its Subsidiaries, as the case may be).
ARTICLE 6
Negative Covenants
So long as the Loan remains outstanding and unpaid, or any other
amount is owing to the Lender hereunder or under any other Credit Document
(it being understood that each of the permitted exceptions to each of the
covenants in this Article 6 is in addition to, and not overlapping with,
any other of such permitted exceptions except to the extent expressly
provided):
37
<PAGE>
SECTION 6.01. Limitation on Indebtedness.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, Incur any Indebtedness; provided, however, that on or after
the first anniversary of the Closing Date the Company may Incur
Indebtedness if on the date thereof the Consolidated Coverage Ratio would
be greater than 1.6:1.0.
(b) Notwithstanding Section 6.01(a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness (A) of the Company to any Subsidiary, and (B)
of any Subsidiary to the Company or any other Subsidiary;
(ii) Indebtedness represented by (w) the Loan, (x) any
Indebtedness outstanding or to be issued or incurring pursuant to the NRG
Plan, (y) any Co-Investment Indebtedness and (z) any Refinancing
Indebtedness Incurred in respect of any Indebtedness described in this
clause (ii) or Section 6.01(a);
(iii) Indebtedness of the Company or any of its
Subsidiariestn an aggregate principal amount at any one time outstanding
(excluding any Indebtedness permitted to be incurred under clause (ii) or
(iii) of this Section 6.01(b)) not in excess of $5,000,000;
(iv) Indebtedness in connection with workmen's compensation
obligations and related general liability exposure of the Company and its
Subsidiaries; and
(v) Capitalized Lease Obligations in respect of (A)
sale/leaseback transactions of property owned by the Company on the Closing
Date, and (B) fixtures and equipment and other personal property acquired
after the Closing Date.
(c) The Company shall not Incur any Indebtedness pursuant to
Section 6.01(b) if the proceeds thereof are used, directly or indirectly,
to repay, prepay, redeem, defease, retire, refund or refinance any
Subordinated Obligations unless such Indebtedness shall be subordinated to
the Loan to at least the same extent as such Subordinated obligations.
SECTION 6.02. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to (i) declare or pay any dividend or
make any distribution on or in respect of its Capital Stock (including any
payment in connection with
38
<PAGE>
any merger or consolidation involving the Company) except dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and except dividends or distributions payable to the Company or
another Restricted Subsidiary (and, if such Restricted Subsidiary is not
wholly owned, to its other shareholders on a pro rata basis), (ii)
purchase, redeem, retire or otherwise acquire for value any Capital Stock
of the Company or any Restricted Subsidiary held by Persons other than the
Company or another Restricted Subsidiary, (iii) purchase, repurchase,
redeem, defease or otherwise acquire or retire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund payment,
any Subordinated Obligations (other than the purchase, repurchase or other
acquisition of Subordinated obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final
maturity, or (iv) make any Investment (other than a Permitted Investment)
in any Person (any such dividend, distribution, purchase, redemption,
repurchase, defeasance, other acquisition, retirement or Investment being
herein referred to as a "Restricted Payment") if at the time the Company or
such Restricted Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (Or would
result therefrom);
(2) the Consolidated Coverage Ratio of the Company would be less
than 1.6:1.0; or
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if other than in cash,
to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a resolution of the
Board of Directors) declared or made subsequent to the Closing Date would
exceed the sum of:
(A) 25% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the beginning of the fourth
fiscal quarter in 1995, to the end of the most recent fiscal quarter ending
at least 45 days prior to the date of such Restricted Payment (or, in case
such Consolidated Net Income shall be a deficit, minus 100% of such
deficit); and
(B) the aggregate Net Cash Proceeds received by the Company
from the issue or sale of its Capital Stock (other than Disqualified Stock)
subsequent to the Closing Date (other than an issuance or sale to a
subsidiary of the Company or an employee stock
39
<PAGE>
ownership plan or other trust established by the Company or any
of its Subsidiaries).
(b) The provisions of Section 6.02(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock of the Company
or Subordinated Obligations made by exchange for, or out of the proceeds of
the substantially concurrent sale of, Capital Stock of the Company (other
than Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary or an employee stock ownership plan or other trust established
by the Company or any of its Subsidiaries); provided, however, that (A)
such purchase or redemption shall be excluded in the calculation of the
amount of Restricted Payments and (B) the Net Cash Proceeds from such sale
shall be excluded from clause (3)(B) of Section 6.02(a);
(ii) any purchase or redemption of Subordinated obligations made
by exchange for, or out of the proceeds of the substantially concurrent
sale of, Indebtedness of the Company which is permitted to be Incurred
pursuant to Section 6.01; provided, however, that such purchase or
redemption shall be excluded in the calculation of the amount of Restricted
Payments;
(iii) any purchase or redemption of Subordinated Obligations
from Net Available Cash to the extent permitted by Section 6.04; provided,
however, that such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 6.02(a); provided, however, that such dividend shall be
included in the calculation of the amount of Restricted Payments; or
(v) so long as the entire principal and accrued interest on the
Loan shall not have been accelerated and become due and payable pursuant to
Section 8.02 or so long as such acceleration shall have been rescinded, the
payment of dividends upon or the redemption of the Company's Class A
Preferred Stock in accordance with the terms of such stock.
SECTION 6.03. Limitation on Restrictions on Distributions from
Subsidiaries. The company shall not, and shall not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become
effective any
40
<PAGE>
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its
Capital Stock or pay any Indebtedness or other obligations owed to the
Company, (ii) make any Loan or advances to the Company or (iii) transfer
any of its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in
effect at or entered into on the closing Date;
(2) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an agreement
referred to in clause (1) of this Section or this clause (2) or contained
in any amendment to an agreement referred to in clause (1) of this Section
or this clause (2); provided, however, that the encumbrances and
restrictions contained in any such refinancing agreement or amendment are
no less favorable to the Lender than encumbrances and restrictions
contained in such agreements;
(3) in the case of clause (iii), any encumbrance or restriction
(A) that restricts in a customary manner the subletting, assignment or
transfer of any property or asset that is subject to a lease, license or
similar contract or (B) contained in security agreements securing
Indebtedness of a Restricted Subsidiary to the extent such encumbrance or
restrictions restrict the transfer of the property subject to such security
agreements; and
(4) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or disposition
of all or substantially all the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition.
SECTION 6.04. Limitation on Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration (including by way of relief
from, or by any other Person assuming sole responsibility for, any
liabilities, contingent or otherwise) at the time of such Asset Disposition
at least equal to the fair market value of the shares and assets subject to
such Asset Disposition, (ii) at least 80% of the consideration thereof
received by the Company or such Restricted Subsidiary is in the form of
cash and (iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such
41
<PAGE>
Restricted Subsidiary, as the case may be) (A) first, to the extent the
Company elects (or is required by the terms of any Senior Indebtedness or
Indebtedness of a Wholly owned Subsidiary), to prepay, repay or purchase
such Indebtedness of a Wholly Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within 6
months after the later of the date of such Asset Disposition or the receipt
of such Net Available Cash; (B) second, to the extent of the balance of Net
Available Cash after application in accordance with clause (A), to the
extent the Company or such Restricted Subsidiary elects, to reinvest in
Additional Assets (including by means of an Investment in Additional Assets
by a Restricted Subsidiary with Net Available Cash received by the Company
or another Restricted Subsidiary) within 6 months from the later of such
Asset Disposition or the receipt of such Net Available Cash; and (C) third,
to the extent of the balance of such Net Available Cash after application
in accordance with clauses (A) and (B), to repay the Loan, provided,
however, that in connection with any prepayment, repayment or purchase of
Indebtedness pursuant to clause (A) or (C) above, the Company or such
Restricted Subsidiary shall retire such Indebtedness and shall cause the
related loan commitment (if any) to be permanently reduced in an amount
equal to the principal amount so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this Section, the Company and
the Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this Section except to the extent that
the aggregate Net Available Cash from all Asset Dispositions which are not
applied in accordance with this Section exceed $500,000.
For the purposes of this Section, the following are deemed to be
cash: (x) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the
release of the Company or such Restricted Subsidiary from all liability on
such Indebtedness in connection with such Asset Disposition and (y)
securities received by the Company or any Restricted Subsidiary from the
transferee that are promptly converted by the Company or such Restricted
Subsidiary into cash.
SECTION 6.05. Limitation on Transactions with Affiliates.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into or conduct any
transaction (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company
(an "Affiliate Transaction") on terms (i) that are less favorable to the
Company or such Restricted Subsidiary, as the case may be, than those that
could be obtained at the time of such
42
<PAGE>
transaction in arm's-length dealings with a Person who is not such an
Affiliate and (ii) that, in the event such Affiliate Transaction involves
an aggregate amount in excess of $500,000, are not in writing and have not
been approved by a majority of the members of the Board of Directors having
no personal stake in such Affiliate Transaction.
(b) The provisions of Section 6.05(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to Section 6.02, (ii) the
performance of the Company's or Subsidiary's obligations under any
employment contract, collective bargaining agreement, employee benefit
plan, related trust agreement or any other similar arrangement heretofore
or hereafter entered into in the ordinary course of business, (iii) payment
of compensation to employees, officers, directors or consultants in the
ordinary course of business, (iv) maintenance in the ordinary course of
business of benefit programs or arrangements for employees, officers or
directors, including vacation plans, health and life insurance plans,
deferred compensation plans, and retirement or savings plans and similar
plans or (v) any transaction between the Company and a Wholly Owned
Subsidiary or between Wholly Owned Subsidiaries (v) any transaction between
the Lender and the Company and (vi) any transaction pursuant to and in
accordance with the Liquidating Asset Management Agreement.
SECTION 6.06. Limitation on Liens. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly,
create or permit to exist any Lien an any of its property or assets
(including Capital Stock), whether owned on the date of this Agreement or
thereafter acquired, securing any obligation other than Permitted Liens.
SECTION 6.07. Limitation on Lines of Business. The Company shall
not, and shall not permit any Restricted Subsidiary to, engage in any
business, other than (i) those businesses in which the Company or such
Restricted subsidiary is engaged on the date of this Agreement (or which
are directly related thereto or (ii) those businesses in which the Company
or any of its Subsidiaries may engage in connection with any Investment
made pursuant to and in accordance with the terms of the Co-Investment
Agreement.
SECTION 6.08. When the Company May Merge or Transfer Assets. The
Company shall not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person,
unless:
(i) the resulting, surviving or transferee Person (the
"Successor Company") shall be a corporation organized and existing under
the laws of the United States of America, any State thereof or the District
of
43
<PAGE>
Columbia and the Successor Company (if not the Company) shall expressly
assume, by an agreement supplemental hereto, executed and delivered to the
Lender, in form satisfactory to the Lender, all the obligations of the
Company under the Note and this Agreement;
(ii) immediately after giving affect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor
Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Successor Company or such Restricted Subsidiary
at the time of such transaction), no Default shall have occurred and be
continuing;
(iii)immediately after giving effect to such transaction, the
Consolidated Coverage Ratio of the Successor Company would be greater than
1.6:1.0;
(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
(v) the Company shall have delivered to the Lender an Officers'
Certificate and an opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Agreement.
The Successor Company shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this
Agreement, but the predecessor Company in the case of a lease of all or
substantially all its assets shall not be released from the obligation to
pay the principal of and interest on the Note.
Notwithstanding, the foregoing clauses (ii), (iii) and (iv), (1)
any Restricted Subsidiary may consolidate with, merge into or transfer all
or part of its properties and assets to the Company and (2) the Company may
merge with an Affiliate incorporated for the purpose of reincorporating the
Company in another jurisdiction to realize tax or other benefits.
ARTICLE 7
Security Interest
SECTION 7.01. Assignment and Grant of Security. To secure the
prompt and unconditional payment, performance and discharge, when due, of
all of the Company's obligations under
44
<PAGE>
this Agreement and the Note (collectively, the "Secured Obligations"), the
Company hereby assigns, pledges, conveys, sets over, delivers and transfers
to the Lender and grants a security interest to the Lender in and to all of
the Company's right, title and interest in and to each and all of the
following:
(a) any and all payments received or receivable by the company
from Newark Cogen, including without limitation any and all such payments
made pursuant to any management agreement between O'Brien and Newark Cogen
and all dividends or other distributions, but excluding any dividends or
distributions that are subject to any prior security interest granted to
any holder of Indebtedness secured by a mortgage on the Newark Project (the
"Designated Payments"); and
(b) all Proceeds of any Designated Payments (the Designated
Payments, together with the Proceeds thereof, are referred to as the
"Collateral"). As used herein, the terms "Proceeds" shall refer to and
include (i) whatever is now or hereafter received by the Company upon the
sale, exchange, collection or other disposition of any of the Collateral,
whether such Proceeds constitute accounts, accounts receivable, general
intangibles, instruments, securities, credits, documents', deposit
accounts, money, or contract rights; (ii) personal property of any type or
nature whatsoever which is now or hereafter acquired by the Company with
any Proceeds of the Collateral; and (iii) any insurance now or hereafter
payable by reason of any loss, damage or destruction to or of any or all of
the Collateral.
SECTION 7.02 Covenants In Respect Of Collateral.
(a) The Company shall not voluntarily, involuntarily or by
operation of law, sell, assign, hypothecate, pledge, encumber, grant any
other security interest or lien in, dispose of or otherwise transfer the
Collateral, or any portion thereof or any interest therein, or permit any
of the foregoing to occur and shall not otherwise do, suffer or permit
anything to be done or occur that may impair the Collateral as security
hereunder or the liens and security interests therein created hereunder in
favor of the Lender.
(b) The Company shall do all such other acts and things as may be
necessary or appropriate or which the Lender may from time to
time reasonably request as necessary in the opinion of the Lender
to establish and maintain a first priority perfected security
interest in the Collateral, including, without limitation, the
Proceeds, subject to no other liens, security interests or
encumbrances; and the Company shall pay the cost of all filings
or recordings of
45
<PAGE>
this Agreement or any other document or instrument in all public offices
whenever it is reasonably deemed by the Lender to be necessary or
desirable. The Company hereby irrevocably constitutes and appoints the
Lender the attorney-in-fact of the Company to execute, deliver and, if
appropriate, to file with the appropriate filing officer or office such
security agreements, financing statements, continuation statements, notices
to the institutions or other entities with which the Collateral or any
portion thereof is maintained or such other documents or instruments as the
Lender may request or require in order to confirm, impose, perfect or
continue the perfection of the liens and security interests created hereby.
The foregoing power-of-attorney is coupled with an interest and shall
survive any dissolution, bankruptcy, or insolvency of the Company as an
entity.
(c) The Company shall provide to the Lender any information
which the Lender may at any time and from time to time hereafter require,
in its sole and absolute discretion, pertaining to the Collateral. The
Company shall promptly notify the Lender of any change of the Company's
place of business, chief executive office or mailing address.
(d) The Company shall not make any assignment, conveyance,
transfer or agreement in conflict herewith or constituting an assignment,
conveyance, transfer or encumbrance on any Designated Payment.
ARTICLE 8
1. Defaults and Remedies
SECTION 8.01. Events of Default. An "Event of Default" occurs
if:
(1) the Company defaults in any payment of interest or any other
amount (other than those specified in (2) below) with respect to the Loan
when the same becomes due and payable and such default continues for a
period of 10 (or, from and after the Initial Maturity Date, 30) days;
(2) the Company (i) defaults in the payment of the principal of
the Loan when the same becomes due and payable at its Stated Maturity, upon
redemption, upon declaration or otherwise or (ii) fails to redeem or
purchase the Note when required pursuant to this Agreement or the Note;
(3) at any time during which the Lender shall own less than 26%
of the outstanding common stock of the Company, or, persons designated by
the Lender or which
46
<PAGE>
the Lender shall have the right to appoint shall constitute less than a one-
half of the Board of Directors: (i) any representation or warranty made or
deemed made by the company in any Credit Document shall prove to have been
incorrect in any material respect on or as of the date, or at any time
during the period, that such representation or warranty is made or deemed
made; (ii) the facts or circumstances giving rise to such incorrect
representation or warranty would have a material adverse effect on the
Company's ability to pay the amounts outstanding under the Loan (including
principal and interest) as they become due and payable; and (iii) both of
the conditions in preceding subclauses (i) and (ii) continue for 30 days
after the notice specified below;
(4) the Company fails to comply with Section 6.08 at any time
during which the Lender shall own less than 26% of the outstanding common
stock of the Company, or persons designated by the Lender or, which the
Lender shall have the right to appoint, shall constitute less than a one-
half of the Board of Directors;
(5) the Company shall default in the observance or performance
of any agreement contained in Section 5.08(a) or Article 6 of this
Agreement;
(6) the Company fails to comply with any of its agreements in
the Credit Documents (other than those referred to in (1) through (5)
above) and such failure continues for 30 days after the notice specified
below; provided that, in the case of Sections 5.04, 5.05 and 5.11, the
Lender shall then own less than 26% of the outstanding common stock of the
Company, or persons designated by the Lender or which the Lender shall have
the right to appoint shall constitute less than a one-half of the Board of
Directors;
(7) Indebtedness of the Company or any subsidiary is not paid
within any applicable grace period after final maturity or is accelerated
by the holders thereof because of a default and the total amount of such
Indebtedness unpaid or accelerated exceeds $2,000,000 or its foreign
currency equivalent at the time;
(8) the company or any Subsidiary pursuant to or within the
meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
47
<PAGE>
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(9) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary in an
involuntary case;
(B) appoints a Custodian of the Company or any subsidiary or for
any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(10) any judgment or decree for the payment of money in excess of
$2,000,000 or its foreign currency equivalent at the time is entered
against the Company or any Subsidiary and is not discharged and either (A)
an enforcement proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 days following the entry
of such judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed;
(11) (i) any Person shall engage in any "prohibited transaction"
(as defined in Section 4.06 of ERISA or Section 4975 of the Code) involving
any Plan which is not otherwise exempted, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not waived,
shall exist with respect to any Plan, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to terminate, any Plan,
which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Lender, likely to result in
the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v)
the
48
<PAGE>
Company or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Lender is likely to, incur any liability in connection with
a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan; and in each case in clauses (i) through (v) above, such event or
condition, together with all other such events or conditions relating to a
Plan, if any, would be reasonably likely to subject the Company or any of
its Subsidiaries to any tax, penalty or other liabilities in the aggregate
material in relation to the business, assets, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries
taken as a whole; or
(12) any Credit Document shall cease, for any reason, to be in
full force and effect or the Company or any of its subsidiaries shall so
assert in writing.
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or
involuntary or is effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or
any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clauses (3) and (6) is not an Event of Default
until the Lender notifies the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such
notice. Such notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default".
SECTION 8.02. Acceleration. If an Event of Default (other than
an Event of Default specified in Section 8.01(8) or (9) with respect to the
Company) occurs and is continuing, the Lender by notice to the Company may
declare the principal of and accrued interest on the Loan to be due and
payable. upon such a declaration, such principal and interest shall be due
and payable immediately. If an Event of Default specified in Section
8.01(8) or (9) with respect to the Company (but not any Subsidiary) occurs,
the principal of and interest on the Loan Note shall ipso facto become and
be immediately due and payable without any declaration or other act on the
part of the Lender. The Lender by notice to the Company may rescind an
acceleration and its consequences. No such rescission
49
<PAGE>
shall affect any subsequent Default or impair any right consequent thereto.
SECTION 8.03. Default and Remedies.
(a) If an Event of Default occurs and is continuing, the Lender
shall have all of the remedies of a secured party under the Uniform
Commercial Code, including, without limitation, the right, to notify the
account debtors from which the Designated Payments are owing to pay
directly to the Lender the amount owing from such account debtors to the
Company in respect of the respective Designated Receivable. In addition to
and not in derogation of any or all of the rights and remedies granted
hereunder to the Lender or otherwise available to the Lender under
applicable law, following such an Event of Default, the Lender shall have
the further right and power, at its sole option, to sell, or otherwise
dispose of, the Collateral (other than Collateral consisting of cash), or
any part thereof, at any one or more public or private sales as permitted
by applicable law, and for that purpose the Lender may take immediate and
exclusive possession of such Collateral, or any part thereof, to the extent
capable of possession.
(b) To the fullest extent permitted by law, the Company
irrevocably and expressly waives any right to receive any notice of sale or
notice of any other disposition of all or any part of the Collateral that
does not consist of cash, except that to the extent the Company may be
entitled by applicable law to any notice of sale or other disposition of
such Collateral, the Company agrees that if such notice is mailed, postage
prepaid, to the Company at the Company's address hereinafter specified not
less than five (5) days before the time of the sale or other disposition
contemplated therein, such notice shall conclusively be deemed commercially
reasonable and shall fully satisfy any requirement for giving of said
notice. The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn any
public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
(c) The proceeds realized upon any such disposition, after
deduction for the expenses of retaking, holding, preparing for sale,
selling or the like and reasonable attorneys' fees, legal expenses and
costs incurred by the Lender, shall be applied in accordance with Section
5.06.
(d) The remedies of the Lender hereunder are cumulative and the
exercise of any one or more of the remedies
50
<PAGE>
provided for herein, or under the Uniform Commercial Code, shall not be
construed as a waiver of any other rights or remedies of the Lender so long
as any part of the Secured obligations remains unsatisfied or unperformed.
The making of this Agreement shall not waive or impair any other security
the Lender may have or hereafter acquire for the payment or performance of
the Secured Obligations, nor shall the making of any such additional
security waive or impair this Agreement; but the Lender may resort to any
security it may have in the order it may deem proper.
SECTION 8.04. Other Remedies. If an Event of Default occurs and
is continuing, the Lender may pursue any available remedy to collect the
payment of principal of or interest on the Note or to enforce the
performance of any provision of the Note or this Agreement.
The Lender may maintain a proceeding even if it does not possess
the Note or does not produce it in the proceeding. A delay or omission by
the Lender in exercising any right or remedy accruing upon an Event of
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
SECTION 8.05. Waiver of Past Defaults. The Lender by notice to
the Company may waive an existing Default and its consequences. When a
Default is waived, it is deemed cured, but no such waiver shall extend to
any subsequent or other Default or impair any consequent right.
SECTION 8.06. Priorities. If the Lender collects any money or
property pursuant to this Article 8, it shall pay out the money or property
in the following order:
FIRST: to itself in accordance with the priority set forth in
Section 2.08; and
SECOND: to the extent of any excess, to the Company.
SECTION 8.07. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Agreement a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys' fees, against
any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant.
51
<PAGE>
SECTION 8.08. Waiver of Stay or Extension Laws. The company (to
the extent it may lawfully do so) shall not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of
this Agreement; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and shall
not hinder, delay or impede the execution of any power herein granted to
the Lender, but shall suffer and permit the execution of every such power
as though no such law had been enacted.
ARTICLE 9
Miscellaneous
SECTION 9.01. Amendments and Waivers. Except as otherwise
expressly set forth in this Agreement, no Credit Document nor any terms
thereof may be amended, supplemented, waived or modified except in
accordance with the provisions of this Section 9.01.
SECTION 9.02. Notices. All notices, requests and demands to or
upon-the respective parties hereto to be effective shall be in writing
(including by telecopy or telex, if one is listed), and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made
when delivered by hand, or three Business Days after being deposited in the
mail, postage prepaid, or, in the case of telecopy notice, when sent,
confirmation of receipt received, or, in the case of telex notice, when
sent, answerback received, addressed as follows, or to such other address
as may be hereafter notified by the respective parties hereto and any
future holders of the Note:
The Company: NRG GENERATING (U.S.) INC.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403
Attention: President and Chief
Executive Officer
Telephone: (612) 373-5300
Telecopier: (612) 373-5430
With a copy to: Troutman Sanders
NationsBank Plaza, Suite 5200
Attention: Hazen Dempster
Telephone: (404) 885-3000
Telecopier: (404) 885-3900
52
<PAGE>
if to Lender NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403
Attention: Vice
President, Business Development
Telephone: (612) 373-5300
Telecopier: (612) 373-5430
with copies to:NRG Energy Inc.
Legal Department
1221 Nicollet Mall, Suite 700
Minneapolis, MN 55403
Attention: Vice President and General Counsel
Telephone: (612) 373-5300
Telecopier (612) 373-5392
provided that any notice, request or demand to or upon the Lender pursuant
to Section 2.05 shall not be effective until received.
SECTION 9.03. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Lender, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
SECTION 9.04. Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Note.
SECTION 9.05. Payment of Expenses and Taxes. The Company agrees
(a) to pay or reimburse the Lender for all its costs and expenses incurred
in connection with, and to pay, indemnify, and hold the Lender harmless
from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever arising out of or in
connection with, the enforcement or preservation of any rights under any
Credit Document and any such other documents, including reasonable fees and
disbursements of counsel to the Lender incurred in connection with the
foregoing (b) to pay,
53
<PAGE>
indemnify, and to hold the Lender harmless from any and all recording and
filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other similar taxes (other than
withholding taxes), if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation
of any of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, any
Credit Document and any such other documents, and (c) to pay, indemnify,
and hold the Lender and its respective Affiliates, officers and directors
harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever (including reasonable fees
and disbursements of counsel) which may be incurred by or asserted against
the Lender or such Affiliates, officers or directors arising out of or in
connection with any investigation, litigation or proceeding related to this
Agreement, the other Credit Documents, the proceeds of the Loan and the
transactions contemplated by or in respect of such use of proceeds, or any
of the other transactions contemplated hereby, whether or not the Lender or
such Affiliates, officers or directors is a party thereto, including any of
the foregoing relating to the violation of, noncompliance with-or liability
under, any Environmental Law applicable to the operations of the Company,
any of its Subsidiaries or any of the facilities and properties owned,
leased or operated by the Company or any of its Subsidiaries (all the
foregoing, collectively, the "indemnified liabilities"); provided that the
Company shall have no obligation hereunder with respect to indemnified
liabilities of the Lender or any of its respective Affiliates, officers and
directors arising from (i) the gross negligence or willful misconduct of
the Lender or its respective directors or officers; (ii) legal proceedings
commenced against the Lender by any security holder or creditor thereof
arising out of and based upon rights afforded any such security holder or
creditor solely in its capacity as such; (iii) legal proceedings commenced
against the Lender by any Transferee; or (iv) actions taken by the Company
either at the direction of the Board of Directors of the Company or
pursuant to the Management Agreement at such time as persons designated by
the Lender or which the Lender shall have the right to appoint, shall
constitute at least one-half of the Board. The agreements in this Section
9.05 shall survive repayment of the Note and all other amounts payable
hereunder.
SECTION 9.06. Successors and Assigns; Participations and
Assignments.
(a) This Agreement shall be binding upon and inure to the benefit
of the Company, the Lender all future holders
54
<PAGE>
of the Note and the Loan, and their respective successors and assigns,
except that the Company may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Lender.
(b) The company hereby agrees that the Lender may, in accordance
with applicable law, at any time and from time to time assign all or any
part of its rights and obligations under this Agreement and the Note to any
Person (a "Transferee"); provided, however, that any rights the Lender may
have pursuant to Article 3 and Section 8.01(3) shall not survive or be
effective as to any Transferee.
(c) The Company authorizes the Lender to disclose to any
prospective Transferee any and all financial information in the Lender's
possession concerning the Company and its Subsidiaries and Affiliates which
has been delivered to the Lender by or on behalf of the Company, subject to
receipt of a confidentiality agreement from such prospective Transferee in
form and substance reasonably satisfactory to the Company.
SECTION 9.07. Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
SECTION 9.08. Governing Law; No Third Party Rights. This
Agreement and the Note and the rights and obligations of the parties under
this Agreement and the Note shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York and
applicable laws of the United States of America. This Agreement is solely
for the benefit of the parties hereto and their respective successors and
assigns, and, except as set forth in Section 9.06, no other Persons shall
have any right, benefit, priority or interest under, or because of the
existence of, this Agreement.
SECTION 9.09. Submission to Jurisdiction; Waivers.
(a) Each party to this Agreement hereby irrevocably and
unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any of the other Credit Documents,
or for recognition and enforcement of any judgment in respect thereof, to
the non-exclusive general jurisdiction of the courts of the State of New
York, the courts of the United States of
55
<PAGE>
America for the Southern District of New York, and appellate courts
from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such party at its address set forth in Section 9.02; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(b) Each party hereto unconditionally waives trial by jury in
any legal action or proceeding referred to in paragraph (a) above and any
counterclaim therein.
SECTION 9.10. Interest. Each provision in this Agreement and
each other Credit Document is expressly limited so that in no event
whatsoever shall the amount paid, or otherwise agreed to be paid, by the
Company for the use, forbearance or detention of the money to be loaned
under this Agreement or any other Credit Document or otherwise (including
any sums paid as required by any covenant or obligation contained herein or
in any other Credit Document which is for the use, forbearance or detention
of such money) , exceed that amount of money which would cause the
effective rate of interest to exceed the highest lawful rate permitted by
applicable law (the "Highest Lawful Rate"), and all amounts owed under this
Agreement and each other Credit Document shall be held to be subject to
reduction to the effect that such amounts so paid or agreed to be paid
which are for the use, forbearance or detention of money under this
Agreement or such Credit Document shall in no event exceed that amount of
money which would cause the effective rate of interest to exceed the
Highest Lawful Rate. Notwithstanding any provision in this Agreement or
any other Credit Document to the contrary, if the maturity of the Loan or
the obligations in respect of the other Credit Documents are accelerated
for any reason, or in the event of any prepayment of all or any portion of
the Loan or the obligations in respect of the other Credit Documents by the
Company or in any other event, earned interest on the Loan and such other
obligations of the Company may never exceed the Highest Lawful Rate, and
any unearned interest otherwise
56
<PAGE>
payable on the Loan or the obligations in respect of the other Credit
Documents that is in excess of the Highest Lawful Rate shall be canceled
automatically as of the date of such acceleration or prepayment or other
such event and (if theretofore paid) shall, at the option of the holder of
the Loan or such other obligations, be either refunded to the Company or
credited on the principal of the Loan. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the
Highest Lawful Rate, the Company and the Lender shall, to the maximum
extent permitted by applicable law, amortize, prorate, allocate and spread,
in equal parts during the period of the actual term of this Agreement, all
interest at any time contracted for, charged, received or reserved in
connection with this Agreement.
57
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered in New York, New York by their proper and
duly authorized officers as of the day and year first above written.
NRG GENERATING (U.S.) INC.
by
/s/ Leonard Bluhm
Name: Leonard A. Bluhm
Title: President and Chief
Executive Officer
NRG ENERGY, INC.
by
/s/ Craig A. Mataczynski
Name: Craig A. Mataczynski
Title: Vice President, Domestic
Business Development
58
<PAGE>
EXHIBIT A
New York, New York
April 30, 1996
NOTE
FOR VALUE RECEIVED, the undersigned, NRG GENERATING (U.S.) INC., a Delaware
corporation (the "Company"), hereby promises to pay to the order of NRG
ENERGY, INC., a Delaware corporation, or registered assigns (the "Lender"),
at the office of the Lender at 1221 Nicollet Mall, Suite 700, Minneapolis,
MN 55403, in lawful money of the United States of America and in
immediately available funds, the principal amount of TWENTY FOUR MILLION
DOLLARS ($24,000,000), or, if less, the aggregate unpaid principal amount
of the loan made by the lender pursuant to Section 2.01 of the Loan
Agreement referred to below (in either case, to be paid together with any
accrued interest not required to be paid currently in cash), which sum
shall be due and payable in such amounts and on such dates as are set forth
in the NRG Newark Cogen Loan Agreement, dated as of April 30, 1996 between
the Company and the Lender (the "Loan Agreement"; terms defined therein
being used herein as so defined). The undersigned further agrees to pay
interest at said office, in like money, from the date hereof on the unpaid
principally amount hereof from time to time outstanding at the rates and on
the dates specified in Section 2.06 of the Loan Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
diligence, presentment, demand, protest and notice of any kind whatsoever.
The nonexercise by the holder of this Note of any of its rights hereunder
in any particular instance shall not constitute a waiver thereof in that or
any subsequent instance.
This Note is the Note referred to in the Loan Agreement, which Loan
Agreement, among other things, contains provisions for the acceleration of
the maturity hereof upon the happening of certain events, for optional and
mandatory prepayment of the principal hereof prior to the maturity hereof
and for the amendment or waiver of certain provisions of the Loan
Agreement, all upon the terms and conditions therein specified.
<PAGE>
This Note shall be construed in accordance with and governed by the laws of
the State of New York and any applicable laws of the United States of
America.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH TERMS OF THE
LOAN AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE REGISTER
MAINTAINED BY THE LENDER PURSUANT TO THE TERMS OF THE LOAN AGREEMENT.
NRG GENERATING (U.S.) INC.,
by
Name: Leonard A. Bluhm
Title: President and Chief
Executive Officer
2
<PAGE>
EXHIBIT B
A. NOTICE OF BORROWING
TO: NRG Energy, Inc.
1221 Nicollet Mall, Suite 700
Minneapolis, Minnesota 55403
Attention:
Pursuant to Section 2.07 of that certain Supplemental Loan
Agreement dated as of , 1996 (the "Loan Agreement") between NRG
Energy, Inc. (the "Lender and NRG Generating (U.S.) Inc. (the "Company'),
this notice represents the Company's request as follows:
The Lender advance to the Company the sum of $ as a
Deferred Administrative Shortfall Loan under Section 2.01 of the Loan
Agreement.
The effective date of the Borrowing requested hereunder shall be
19 ,
The undersigned officer of the Company certifies that:
(i) The Unresolved Administrative and Priority Claim of .. (the
"Claimant") has become Allowed in the amount of $ by
Final Order entered by the Bankruptcy Court on 199
[or, if applicable, has become due and payable in accordance
with its terms]; and
(ii) The amount of funds held in the Administrative and Priority
Claim Reserve that is available to satisfy the Unresolved
Administrative and Priority Claim of the Claimant to the
extent that it has become Allowed, is $ .
Each capitalized term used but not definedin this notice has the
meaning ascribed thereto in the Loan Agreement.
DATED: 199
NRG GENERATING (U.S.) INC.,
a Delaware corporation
By:
Title:
<PAGE>
Exhibit 10.8.8
NRG GENERATING (NEWARK) COGENERATION INC.,
as Mortgagor
to
CREDIT SUISSE, AS AGENT FOR THE SECURED PARTIES,
as Mortgagee
AMENDED AND RESTATED LEASEHOLD MORTGAGE,
ASSIGNMENT OF LEASES AND
RENTS AND SECURITY AGREEMENT
(Leasehold and Easements)
Dated: As of June 28, 1996
Location: Portion of
Lots 75 and 58 in Block 2412,
Newark Municipal Tax Map,
County of Essex
State of New Jersey
RECORD AND RETURN TO:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Richard Sonkin, Esq.
ESSEX COUNTY, NEW JERSEY
This instrument prepared by:
/s/ Christopher C. Beers
Name: Christopher C. Beers
<PAGE>
AMENDED AND RESTATED LEASEHOLD MORTGAGE,
ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LEASEHOLD MORTGAGE, ASSIGNMENT OF
LEASES AND RENTS AND SECURITY AGREEMENT (this "Mortgage") made as of the
28th day of June, 1996 by NRG GENERATING (NEWARK) COGENERATION INC., a
Delaware corporation having an address at c/o NRG Energy, Inc., 1221
Nicollet Mall, Suite 700, Minneapolis, Minnesota 55403 ("Mortgagor") and
CREDIT SUISSE having an address at Tower 49, 12 East 49th Street, New York,
New York 10017, as agent (in such capacity, "Agent") on behalf of and for
the benefit of the Secured Parties under the Credit Agreement (defined
below) (the Agent, acting on its own behalf and on behalf of the Secured
Parties pursuant to the Credit Agreement being hereinafter referred to as
"Mortgagee"),
W I T N E S S E T H :
WHEREAS, Mortgagor is the owner and holder of a leasehold estate
in the premises described in Exhibit A attached hereto (hereinafter
referred to as the "Leasehold Premises") pursuant to a certain Ground Lease
dated as of July 18, 1988 between Newark Group Industries, Inc. and O'Brien
(Newark) Cogeneration, Inc., a memorandum of which was recorded in the
Essex County Clerk's office on July 21, 1988, in Deed Book 5036, page 617,
as amended pursuant to Agreement dated July 20, 1988, Amendment dated
November 14, 1990, and in connection with which Amendment, a Memorandum of
Lease Amendment was recorded in said Essex County Clerk's Office on April
23, 1991, in Mortgage Book 5925, page 834 and as further amended pursuant
to a Stipulation of Settlement (among Newark Group Industries, Inc.,
Calpine Corporation and NRG Energy, Inc.) dated January 23, 1996
(hereinafter collectively referred to as the "Ground Lease");
WHEREAS, Mortgagor is also the holder of the rights to use the
easements described in Exhibit B attached hereto (collectively, the
"Easements"), which Easements pertain to the premises, or to portions
thereof, described in Exhibit C attached hereto (collectively, the
"Easement Premises" and together with the Leasehold Premises being
hereinafter collectively referred to as the "Premises");
WHEREAS, Mortgagor proposes to operate on the Leasehold Premises
an existing 52 MW power plant, including the related electric power
transmission, fuel supply and fuel transportation facilities, fuel storage
facilities and other facilities and goods that are ancillary, incidental,
necessary or reasonably related to the marketing,
<PAGE>
management, servicing, ownership or operation of the foregoing (the "Newark
Plant");
WHEREAS, portions of the Newark Plant are located on the Easement
Premises;
WHEREAS, Mortgagee has heretofor extended to Mortgagor a certain
loan in the principal amount of SIXTY MILLION and No/100 DOLLARS
($60,000,000) (the "Initial Loan") which Initial Loan was advanced pursuant
to the terms and conditions of a certain Credit Agreement dated as of May
17, 1996 (as the same may be amended, modified or supplemented from time to
time, the "Credit Agreement") among Mortgagee, NRG Generating (Parlin)
Cogeneration Inc. ("NRG (Parlin)"; Mortgagor and NRG (Parlin) being
hereinafter collectively referred to as "Borrowers"), Mortgagor, Credit
Suisse, Greenwich Funding Corporation and any other Purchasing Lender and
is evidenced by the Initial Loan Notes (as defined in the Credit Agreement)
and which Initial Loan is secured, in part, by a certain Leasehold
Mortgage, Assignment of Leases and Rents and Security Agreement executed
and delivered by Mortgagor to Mortgagee dated as of May 17, 1996 and
securing the principal amount of SIXTY MILLION and No/100 DOLLARS
($60,000,000), which was recorded in the Essex County Clerk's office on May
30, 1996, in Mortgage Book 6659, page 50 (the "Existing Mortgage").
WHEREAS, pursuant to the Credit Agreement, Mortgagee has agreed
to advance to the Borrowers W certain loans in the aggregate principal
amount of ONE HUNDRED FIFTY-FIVE MILLION and No/100 DOLLARS ($155,000,000)
including amounts already advanced under the Initial Loan (collectively,
the "Funding Loans") and (ii) a certain debt service line of credit
facility commitment in the principal amount of up to FIVE MILLION and
No/100 DOLLARS ($5,000,000) (the "Debt Service Loans"), which (a) Funding
Loans are to be advanced pursuant and subject to the terms and conditions
of the Credit Agreement and shall be evidenced by the Funding Loan Notes,
and (b) Debt Service Loans are to be advanced pursuant and subject to the
terms and conditions of the Credit Agreement and shall be evidenced by the
Debt Service Loan Notes, and which Funding Loans and Debt Service Loans
shall be secured, in part, by this Mortgage;
WHEREAS, the Borrowers are to be jointly and severally liable for
the repayment of the Funding Loans and the Debt Service Loans;
1
<PAGE>
WHEREAS, all capitalized terms not otherwise defined in this
Mortgage shall have the meaning given such terms in the Credit Agreement;
WHEREAS, it is a condition precedent to the funding of the
balance of the Funding Loans and the availability of the Debt Service Loans
under the Credit Agreement that Mortgagee and Mortgagor shall amend and
restate in their entirety the terms, covenants and conditions of the
Existing Mortgage and that Mortgagor shall execute and deliver this
Mortgage and grant the security interests pursuant to this Mortgage to the
Agent for the benefit of the Secured Parties as security for the
obligations of Borrowers under the Credit Agreement and the other Loan
Instruments;
NOW, THEREFORE, to secure the payment and performance of the Debt
(hereinafter defined) and the performance of the Borrowers, obligations
under the Credit Agreement and the Loan Instruments and the performance of
Mortgagor's obligations under this Mortgage, Mortgagor has mortgaged,
given, granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed
and assigned, and by these presents does mortgage, give, grant, bargain,
sell, alien, enfeoff, convey, confirm and assign unto Mortgagee all right,
title and interest of Mortgagor now owned, or hereafter acquired, in and to
the following property, rights and interests (such property, rights and
interests being hereinafter collectively referred to as the "Mortgaged
Property"):
(a) the Leasehold Premises;
(b) all buildings, improvements and fixtures now or hereafter
located on the Leasehold Premises, including, but not limited to, the
Newark Plant (the "Leasehold Premises Improvements");
(c) the Ground Lease and the leasehold estate created thereunder
and all other rights and interests of the tenant thereunder;
(d) all modifications, extensions and renewals of the Ground
Lease and all credits, deposits, options, privileges and rights of tenant
under the Ground Lease, including, but not limited to, the right to
exercise options, to give consents and to receive moneys payable
2
<PAGE>
to the tenant thereunder or in connection therewith (including the option
to purchase the Leasehold Premises pursuant to Section 39 of the Ground
Lease);
(e) the Easements and the interests created thereunder and in
connection therewith;
(f) any and all portions of the Newark Plant now or hereafter
located on the Easement Premises (the "Easement Improvements" and, together
with the Leasehold Premises Improvements, being hereinafter collectively
referred to as the "Improvements");
(g) all the estate, right, title, claim or demand of any nature
whatsoever of Mortgagor, either in law or in equity, in possession or
expectancy, in and to the Mortgaged Property or any part thereof;
(h) any and all easements (other than the Easements), rights-of-
way, gores of land, streets, ways, alleys, passages, sewer rights, waters,
water courses, water rights and powers, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments, revocable
consents, options, appendages and appurtenances of any nature whatsoever,
in any way belonging, relating or pertaining to the Mortgaged Property
(including, but not limited to, any and all development rights, option
rights, air rights or similar or comparable rights of any nature whatsoever
now or hereafter appurtenant to the Premises or now or hereafter
transferred to the Premises) and all land lying in the bed of any street,
road or avenue, opened or proposed, in front of or adjoining the Premises
to the center line thereof;
(i) all machinery, apparatus, equipment, fittings, fixtures and
other property of every kind and nature whatsoever owned by Mortgagor, or
in which Mortgagor has or shall have an interest, now or hereafter located
upon the Premises, or appurtenant thereto, and usable in connection with
the present or future operation and occupancy of the Mortgaged Property and
all equipment, materials, supplies, apparatus and other items now or
hereafter attached to, installed in or used on the Premises (temporarily or
permanently) of any nature whatsoever and all renewals, replacements and
substitutions thereof and additions
3
<PAGE>
thereto, including but not limited to any and all partitions, ducts,
shafts, pipes, radiators, conduits, wiring, floor coverings, awnings,
motors, engines, boilers, stokers, pumps, dynamos, transformers, turbines,
generators, fans, blowers, vents, switchboards, elevators, mail or coal
conveyors, escalators, compressors, furnaces, cleaning equipment, call and
sprinkler systems, fire extinguishing apparatus, water and other tanks,
heating, ventilating, plumbing, laundry, incinerating, air conditioning and
air cooling systems and water, gas, telephone, telecommunications,
telemetry and electric equipment (collectively, the "Equipment"), and the
right, title and interest of Mortgagor in and to any of the ,Equipment
which may be subject to any security agreements (as defined in the Uniform
Commercial Code of the State of New Jersey (the "Uniform Commercial
Code")), superior in lien to the lien of this Mortgage;
(j) all awards or payments, including interest thereon, and the
right to receive the same, which may be made with respect to the Mortgaged
Property, whether from state fund sharing or from the exercise of the right
of eminent domain (including any transfer made in lieu of the exercise of
said right), changes of grade of street or for any other injury to or
decrease in the value of the Mortgaged Property, whether direct or
consequential, which said awards and payments are hereby assigned to
Mortgagee, and Mortgagee is hereby authorized to collect and receive the
proceeds thereof and to give proper receipts and acquittances therefor;
(k) all refunds or rebates of Taxes (as hereinafter defined) or
charges in lieu of Taxes, now or hereafter assessed or levied against the
Mortgaged Property;
(l) all leases (including oil, gas and other mineral leases),
subleases, franchises, licenses, concessions, permits, contracts
(including, without limitation, the Newark Power Purchase Agreement and the
Newark Steam Agreement) and other agreements (other than the Ground Lease
and the Easements) affecting the use or occupancy of the Mortgaged Property
now or hereafter entered into and any renewals or extensions thereof
(collectively, the "Other Leases");
4
<PAGE>
(m) the right to receive and apply the rents, issues and profits
of the Mortgaged Property under the Other Leases (collectively, the
"Rents") to the payment of the Debt;
(n) all inventory, accounts and general intangibles owned by
Mortgagor or in which Mortgagor now or hereafter shall have any right,
title or interest, now or hereafter located upon, arising in connection
with or concerning the Mortgaged Property;
(o) all proceeds of and any unearned premiums on any insurance
policies covering the Mortgaged Property, including, without limitation,
the right to receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Mortgaged Property;
(p) to the extent permitted by law, the right, in the name and
on behalf of Mortgagor, to appear in and defend any action or proceeding
brought with respect to the Mortgaged Property and to commence any action
or proceeding to protect the interest of Mortgagee in the Mortgaged
Property;
(q) all of Mortgagor's right, title and interest in and to all
plans and specifications prepared for or in connection with the
Improvements and all studies, data and drawings related thereto; and
(r) all products and proceeds of any of the Mortgaged Property
herein described.
TO HAVE AND TO HOLD the above granted and described Mortgaged
Property unto and to the proper use and benefit of Mortgagee, and the
successors and assigns of Mortgagee, forever, to secure the following
obligations (hereinafter collectively referred to as the "Debt"):
(i) payment of the indebtedness evidenced by the Funding Loan
Notes;
(ii) payment of the indebtedness evidenced by the Debt Service
Loan Notes (the Funding Loan Notes and the Debt Service Loan Notes being
hereinafter collectively referred to as the "Notes");
5
<PAGE>
(iii) payment of all amounts owing pursuant to any Interest
Rate Hedge Agreement;
(iv) payment, performance and observance of each term, covenant
and condition to be paid, performed or observed by Borrowers under the
Credit Agreement, the Notes and the other Loan Instruments;
(v) payment of all sums required to be paid and performance and
observance of each term, covenant and condition contained in this mortgage
to be performed or observed by Mortgagor under this Mortgage; and
(vi) payment of all sums expended or advanced by Mortgagee
pursuant to the terms of this Mortgage, the Credit Agreement or any other
Loan Instruments.
PROVIDED, ALWAYS, and these presents are upon this express
condition, if Borrowers shall well and truly pay to Mortgagee the Debt at
the time and in the manner provided in the Notes, the Credit Agreement and
the Loan Instruments and shall well and truly abide by and comply with each
and every covenant and condition set forth herein, in the Notes, the Credit
Agreement and the Loan Instruments then these presents and the estate
hereby granted shall cease, determine and be void.
AND Mortgagor covenants with and represents and warrants to
Mortgagee as follows:
1. Payment of Debt. Mortgagor shall pay the Debt at the time
and in the manner provided for its payment in the Notes, the Credit
Agreement and the Loan Instruments.
2. Warranty of Title. Subject only to the Permitted Liens,
Mortgagor warrants that Mortgagor is the owner and holder of (i) a
leasehold estate in and to the Leasehold Premises, (ii) the right to use
and enjoy each of the Easements, (iii) marketable title to the Improvements
and Equipment, and (iv) good title to all other portions of the Mortgaged
Property. Mortgagor covenants that Mortgagor will at all times and at
Mortgagor's sole expense warrant and defend the title to the Mortgaged
Property against the claims and demands of all persons whomsoever except
for Permitted Liens. In addition, Mortgagor represents and warrants that
(i) the Ground Lease is in full force and effect and has not been modified
or amended in any manner
6
<PAGE>
whatsoever, (ii) there are no uncured defaults under the Ground Lease and
no event has occurred, which but for the passage of time, or notice, or
both, would constitute a default under the Ground Lease, (iii) all rents
and other payments due and payable under the Ground Lease have been paid in
full and (iv) no action is pending and no notice has been given or received
for the purpose of terminating, and no event has occurred or condition
exists that could result in termination of, the Ground Lease.
3. Insurance. Mortgagor will keep the Improvements and the
Equipment insured as shall, from time to time, be required in accordance
with Sections 4.25 and 5.12 of the Credit Agreement. If at any time
Mortgagee is not in receipt of written evidence that all insurance required
hereunder and under the Credit Agreement is in full force and effect,
Mortgagee shall have the right without notice to Mortgagor to take such
action as Mortgagee deems necessary to protect the Mortgaged Property,
including, without limitation, the obtaining of such insurance coverage as
Mortgagee in its sole discretion deems appropriate, and all expenses
incurred by Mortgagee in connection with such action or in obtaining such
insurance and keeping it in ,effect shall be paid by Mortgagor to Mortgagee
upon demand. Any amounts not so paid by Mortgagor shall be deemed secured
by this Mortgage. Mortgagor shall at all times comply with and shall cause
the Improvements and Equipment and the use, occupancy, operation,
maintenance, alteration, repair and restoration thereof to comply with the
terms, conditions, stipulations and requirements of the insurance policies
procured and maintained pursuant to Sections 4.25 and 5.12 of the Credit
Agreement (the "Policies"). If the Premises, or any portion thereof, is
determined to be located in a Federally designated "special flood hazard
area", in addition to the other Policies required under this paragraph, a
flood insurance policy shall be delivered by Mortgagor to Mortgagee. If no
portion of the ?remises is located in a Federally designated "special flood
hazard area", such fact shall be substantiated by a certificate in form
reasonably satisfactory to Mortgagee from a licensed surveyor, appraiser or
professional engineer or other qualified person. If the Mortgaged Property
shall be damaged or destroyed, in whole or in part, by fire or other
property hazard or casualty, Mortgagor shall give prompt notice thereof to
Mortgagee and any Proceeds received by Mortgagee shall be held and
disbursed as set forth in Section 5.18 of the Credit Agreement.
7
<PAGE>
4. Payment of Taxes, etc. Mortgagor shall pay, or cause to be
paid, all taxes or charges in lieu of taxes, assessments, water rates,
sewer rents and other charges, including vault charges and license or
permit fees for the use of vaults, chutes and similar areas on or adjoining
the Premises, now or hereafter levied or assessed against the Mortgaged
Property (the "Taxes") prior to the date upon which any fine, penalty,
interest or cost may be added thereto or imposed by law for the nonpayment
thereof, subject, in all events, to Mortgagor's rights to contest Taxes in
accordance with Section 5.13 of the Credit Agreement. Mortgagor shall
deliver to Mortgagee, upon request, receipted bills, canceled checks and
other evidence satisfactory to Mortgagee evidencing the payment of the
Taxes prior to the date upon which any fine, penalty, interest or cost may
be added thereto or imposed by law for the nonpayment thereof (as any such
date may be extended pursuant to exercise of said right of Mortgagor to
contest Taxes in accordance with Section 5.13 of the Credit Agreement).
5. Condemnation. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise, Mortgagor shall
continue to pay the Debt at the time and in the manner provided for its
payment in the Notes, the Credit Agreement and the Loan Instruments and the
Debt shall not be reduced until (and only to the extent).any award or
payment therefor shall have been actually received and applied by Mortgagee
to the discharge of the Debt in accordance with the provisions of the
Credit Agreement. Mortgagee shall apply the amount of any such award or
payment in accordance with Section 5.18 of the Credit Agreement. If the
Mortgaged Property is sold, through foreclosure or otherwise, prior to the
receipt by Mortgagee of such award or payment, Mortgagee shall have the
right, whether or not a deficiency judgment on the Debt shall have been
sought, recovered or denied, to receive such award or payment, or a portion
thereof sufficient to pay the Debt, whichever is less. Mortgagor shall
file and prosecute its claim or claims for any such award or payment in
good faith and with due diligence and cause the same to be collected and
paid over to Mortgagee. Mortgagor hereby irrevocably authorizes and
empowers Mortgagee, in the name of Mortgagor or otherwise to collect and
receipt for any such award or payment and to file and prosecute such claim
or claims if (a) Mortgagor fails to do so within a reasonable time prior to
the expiration of the period allowed therefor under
8
<PAGE>
applicable law, or (b) an Event of Default has occurred and is continuing.
Although it is hereby expressly agreed that the same shall not be necessary
in any event, Mortgagor shall, upon demand of Mortgagee, make, execute and
deliver any and all assignments and other instruments sufficient for the
purpose of assigning any such award or payment to Mortgagee, free and clear
of any encumbrances of any kind or nature whatsoever.
6. Leases and Rents. (a) Mortgagor hereby assigns to Mortgagee
as security for the payment of the Debt and the observance and performance
by Borrowers of all of the terms, covenants and provisions of this
Mortgage, the Credit Agreement and the Loan Instruments on the Borrowers'
part to be observed or performed, all of Mortgagor's right, title and
interest in and to the Other Leases and the Rents. Subject to the terms of
this paragraph, Mortgagee waives the right to enter the Mortgaged Property
for the purpose of collecting the Rents, and grants Mortgagor the right to
collect the Rents. Mortgagor shall hold the Rents, or an amount sufficient
to discharge all sums then currently due on the Debt, in trust for use in
payment of the Debt. The right of Mortgagor to collect the Rents may be
revoked by Mortgagee upon the occurrence of any Event of Default by giving
notice of such revocation to Mortgagor. Following such notice, Mortgagee
may retain and apply the Rents toward payment of the Debt in accordance
with the provisions of the Credit Agreement, or to the operation,
maintenance and repair of the Mortgaged Property, and irrespective of
whether Mortgagee shall have commenced a foreclosure of this Mortgage or
shall have applied or arranged for the appointment of a receiver.
Mortgagor shall not, without the consent of Mortgagee, which consent shall
not be unreasonably withheld, conditioned or delayed, make, or suffer to be
made, any Other Leases or modify or cancel any Other Leases or accept
prepayments of installments of the Rents for a period of more than one (1)
month in advance or further assign the whole or any part of the Rents.
Mortgagor shall (i) fulfill or perform each and every provision of the
Other Leases on the part of Mortgagor to be fulfilled or performed, (ii)
promptly send copies of all notices of default which Mortgagor shall send
or receive under the Other Leases to Mortgagee, and (iii) enforce, short of
termination of the Other Leases, the performance or observance of the
provisions thereof by the other parties thereto.
9
<PAGE>
(b) Mortgagor agrees that it will not further pledge or assign
its interest in any of the Other Leases, or further assign the Rents so
long as any part of the Debt remains unpaid.
(c) Nothing contained in this paragraph shall be construed as
imposing on Mortgagee any of the obligations of the tenant under the Ground
Lease or of the lessor under the Other Leases.
7. Maintenance of the Mortgaged Property.
(a) Mortgagor shall cause the Mortgaged Property to be
maintained in good condition and repair in accordance with the provisions
of the Credit Agreement and will not commit or suffer to be committed any
waste of the Mortgaged Property. The Improvements and the Equipment shall
not be removed, demolished or materially altered (except for normal
replacement of the Equipment), without the consent of Mortgagee, which
consent shall not be unreasonably withheld, conditioned or delayed.
(b) Mortgagor shall promptly comply with all Laws and
Environmental Requirements affecting the Mortgaged Property, or any portion
thereof or the use thereof, in accordance with the provisions of the Credit
Agreement. Mortgagor shall observe and perform every term to be observed
and performed by Mortgagor (as tenant) under the Ground Lease and shall
also comply with the requirements of all Easements, rights-of-way,
easements, grants, privileges, licenses, franchises and restrictive
covenants which from time to time benefit or pertain to the whole or any
portion of the Mortgaged Property, and Mortgagor shall not modify, amend or
terminate, or surrender any of its rights under, the Ground Lease or any of
the Easements or such rights-of-way, easements, grants, privileges,
licenses, franchises or restrictive covenants. Except as otherwise
specifically permitted by the terms of the Credit Agreement, Mortgagor will
not alter the use of the Mortgaged Property without the prior consent of
Mortgagee, and Mortgagor will not, without obtaining the prior consent of
Mortgagee, initiate, join in or consent to any private restrictive
covenant, zoning ordinance, or other public or private restrictions,
limiting or affecting the uses which may be made of the Mortgaged Property
or any part thereof.
8. Estoppel Certificates. Mortgagor, within ten (10) days
after request by Mortgagee and at its expense,
10
<PAGE>
will furnish mortgagee with a statement, duly acknowledged and certified,
setting forth the amount of the Debt and the offsets or defenses thereto,
if any.
9. Transfer or Encumbrance of the Mortgaged Property. Except
as otherwise specifically permitted by the terms of the Credit Agreement,
no part of the Mortgaged Property and no legal or beneficial interest in
Mortgagor shall in any manner be further encumbered, sold, transferred,
assigned or conveyed, or permitted to be further encumbered, sold,
transferred, assigned or conveyed without the consent of Mortgagee. The
provisions of this paragraph shall apply to each and every such further
encumbrance, sale, transfer, assignment or conveyance, regardless of
whether or not Mortgagee has consented to, or waived by its action or
inaction its rights hereunder with respect to any such previous further
encumbrance, sale, transfer, assignment or conveyance and irrespective of
whether such further encumbrance, sale, transfer, assignment or conveyance
is voluntary, by reason of operation of law or is otherwise made.
10. Notice. All notices, consents, directions, approvals,
authorizations, instructions, demands, statements, requests and other
communications given or made hereunder or in connection herewith shall be
sent in accordance with the provisions of and to the addresses set forth in
Section 8.1 of the Credit Agreement.
11. Changes in Laws Regarding Taxation. In the event of the
passage after the date of this mortgage of any law of the State of New
Jersey deducting from the value of real property for the purpose of
taxation any lien or encumbrance thereon or changing in any way the laws
for the taxation of mortgages or deeds of trust or debts secured by
mortgages or deeds of trust for state or local purposes or the manner of
the collection of any such taxes, and imposing a tax, either directly or
indirectly, on this Mortgage, the Notes, the Credit Agreement, any of the
Loan Instruments or the Debt, Mortgagor shall, if permitted by law, pay any
tax imposed as a result of any such law within the statutory period or
within thirty (30) days after demand by Mortgagee, whichever is less,
provided, however, that if, in the opinion of the attorneys for Mortgagee,
Mortgagor is not permitted by law to pay such taxes, Mortgagee shall have
the right, at its option, to declare the Debt due and payable on
11
<PAGE>
a date specified in a prior notice to Mortgagor of not less than sixty (60)
days.
12. [Intentionally Omitted]
13. Sale of Mortgaged Property. If this Mortgage is foreclosed,
the Mortgaged Property, or any interest therein, may, at the discretion of
Mortgagee, be sold in one or more parcels or in several interests or
portions and in any order or manner.
14. No Credits on Account of the Debt. Mortgagor will not claim
or demand or be entitled to any credit or credits on account of the Debt
for any part of the Taxes assessed against the Mortgaged Property or any
part thereof and no deduction shall otherwise be made or claimed from the
taxable value of the Mortgaged Property, or any part thereof, by reason of
this Mortgage or the Debt.
15. Other Security for the Debt. Mortgagor shall observe and
perform all of the terms, covenants and provisions on the part of Mortgagor
to be observed and performed contained in the Credit Agreement and the Loan
'Instruments and in all other mortgages and other instruments or documents
evidencing, securing or guaranteeing payment of the Debt, in whole or in
part, or otherwise executed and delivered in connection with the Credit
Agreement, the Notes or this Mortgage.
16. Documentary Stamps. If at any time the United States of
America, any state thereof or any governmental subdivision of any such
state, shall require revenue or other stamps to be affixed to the Notes or
this Mortgage, Mortgagor will pay the same, with interest and penalties
thereon, if any.
17. Right of Entry. Mortgagee and its agents shall have the
right to enter and inspect the Mortgaged Property as provided in the Credit
Agreement.
18. Books and Records. Mortgagor will comply with all of the
provisions and requirements of the Credit Agreement concerning its books,
records and accounts reflecting the financial affairs of Mortgagor and the
Newark Plant.
12
<PAGE>
19. Ground Lease.
(a) Mortgagor shall (i) pay all rents, additional rents and
other sums required to be paid by the tenant under and pursuant to the
provisions of the Ground Lease, (ii) diligently perform and observe all of
the terms, covenants and conditions of the Ground Lease on the part of the
tenant thereunder to be performed and observed, unless such performance or
observance shall be waived or not required by the landlord under the Ground
Lease, to the end that all things shall be done which are necessary to keep
unimpaired the rights of the tenant under the Ground Lease, and (iii)
promptly notify Mortgagee of the giving of any notice by the landlord under
the Ground Lease of any default in the performance or observance of any of
the terms, covenants or conditions of the Ground Lease on the part of the
tenant thereunder to be performed or observed and deliver to Mortgagee a
true copy of each such notice. Mortgagor shall not, without the prior
consent of Mortgagee, which consent shall not be unreasonably withheld,
conditioned or delayed, surrender the leasehold estate created by the
Ground Lease or terminate or cancel the Ground Lease or modify, change,
supplement, alter or amend the Ground Lease, in any respect, either orally
or in writing, and Mortgagor hereby assigns to Mortgagee, as further
security for the payment of the Debt and for the performance and observance
of the terms, covenants and conditions of this Mortgage, the Credit
Agreement and the other Loan Instruments, all of the rights, privileges and
prerogatives of the tenant under the Ground Lease to surrender any
leasehold estate or easement interests created by the Ground Lease or to
terminate, cancel, modify, change, supplement, alter or amend the Ground
Lease, and any such surrender of the leasehold estate or easement interests
created by the Ground Lease or termination, cancellation, modification,
change, supplement, alteration or amendment of the Ground Lease without the
prior consent of Mortgagee, shall be void and of no force and effect. If
Mortgagor shall default in the performance or observance of any term,
covenant or condition of the Ground Lease to be performed or observed by
the tenant thereunder, then, without limiting the generality of the other
provisions of this Mortgage, and without waiving or releasing Mortgagor
from any of its obligations hereunder, Mortgagee shall have the right, but
shall be under no obligation, to pay any sums and to perform any act or
take any action as may be appropriate to cause all of the terms, covenants
and conditions of the Ground
13
<PAGE>
Lease on the part of the tenant thereunder to be performed or observed, to
be promptly performed or observed on behalf of Mortgagor, to the end that
the rights of Mortgagor in, to and under the Ground Lease shall be kept
unimpaired and free from default. If Mortgagee shall make any payment or
perform any act or take action in accordance with the preceding sentence,
Mortgagee will notify Mortgagor of the making of any such payment, the
performance of any such act, or taking of any such action. In any such
event, subject to the rights of lessees, and other occupants under the
Other Leases, Mortgagee and any person designated by Mortgagee shall have,
and are hereby granted, the right to enter upon the Mortgaged Property at
any time and from time to time for the purpose of taking any such action.
If the landlord under the Ground Lease shall deliver to Mortgagee a copy of
any notice of default sent by said landlord to Mortgagor, as tenant under
such Ground Lease, such notice shall constitute full protection to
Mortgagee for any action taken or omitted to be taken by Mortgagee, in good
faith, in reliance thereon. Mortgagor shall, from time to time, use its
reasonable efforts to obtain from the landlord under the Ground Lease such
certificates of estoppel with respect to compliance by Mortgagor with the
terms of the Ground Lease as may be reasonably requested by Mortgagee.
Mortgagor shall exercise each individual option, if any, to extend or renew
the term of the Ground Lease, or option to purchase or right of first
refusal with respect to purchase of the Leasehold Premises, as the case may
be, upon demand by Mortgagee made at any time within one (1) year of the
last day upon which any such option may be exercised, and Mortgagor hereby
expressly authorizes and appoints Mortgagee its attorney-in-fact to
exercise, either jointly or individually, any such option or right of first
refusal in the name of and upon behalf of Mortgagor, which power of
attorney shall be irrevocable and shall be deemed to be coupled with an
interest.
(b) Mortgagor shall not, without Mortgagee's prior written
consent, elect to treat either the Ground Lease or the leasehold estate
created thereby as terminated under Subsection 365(h)(1) of the Bankruptcy
Code, after rejection or disaffirmance of the Ground Lease by the landlord
thereunder or by any trustee of such party, and any such election made
without such consent shall be void and ineffective.
14
<PAGE>
(c) Subject to the Mortgagor's right to seek and retain certain
offsets as permitted hereunder, Mortgagor hereby unconditionally assigns,
transfers and sets over to Mortgagee all of Mortgagor's claims and rights
to the payment of damages that may hereafter arise as a result of any
rejection or disaffirmance of the Ground Lease by the landlord thereunder
or by any trustee of such party, pursuant to the Bankruptcy Code.
Mortgagee shall have and is hereby granted the right to proceed, in its own
name or in the name of the Mortgagor, in respect of any claim, suit, action
or proceeding relating to the rejection or disaffirmance of the Ground
Lease (including, without limitation, the right to file and prosecute, to
the exclusion of Mortgagor, any proofs of claim, complaints, motions,
applications, notices and other documents) in any case in respect of the
landlord under the Bankruptcy Code. This assignment constitutes a present,
irrevocable and unconditional assignment of the foregoing claims, rights
and remedies, and shall continue in effect until the Debt secured by this
Mortgage shall have been satisfied and discharged in full. Any amounts
received by Mortgagee as damages arising out of any such rejection of the
Ground Lease shall be applied toward payment of the Debt in such order and
priority as contemplated under the Credit Agreement.
(d) In the event that, pursuant to Subsection 365(h)(2) of the
Bankruptcy Code, Mortgagor seeks to offset against the rent payable under
the Ground Lease the amount of any damages caused by the nonperformance by
the landlord of such party's obligations under the Ground Lease after
rejection or disaffirmance thereof under the Bankruptcy Code, Mortgagor
shall, prior to effecting such offset, notify Mortgagee in writing of
Mortgagor's intent to do so, setting forth the amounts proposed to be so
offset and the basis therefor. Mortgagee shall have the right to object in
writing (stating the reasons therefor) to all Dr any part of such offset,
and, in the event of such objection, Mortgagor shall not effect any offset
of the amounts so objected to by Mortgagee. If Mortgagee shall have failed
to object as aforesaid within twenty (20) days after such notice, Mortgagor
may proceed to effect such offset in the amounts set forth in such notice.
Neither Mortgagee's failure to object as aforesaid nor any objection or
other communication between Mortgagor and Mortgagee relating to such offset
shall constitute an approval by Mortgagee of any such offset. If, in the
best business judgment of the Mortgagor,
15
<PAGE>
such offset is justified and Mortgagee has received the aforesaid notices
and has not objected but its time to do so has not expired, the Mortgagor
shall have the right to make such offset and shall set aside the offset
amount as a reserve to be paid only if Mortgagee objects within the
aforesaid time. Mortgagor shall indemnify and hold Mortgagee and its
officers, directors, employees and agents harmless from and against any and
all claims, demands, actions, suits, proceedings, damages, losses, costs
and expenses of every nature whatsoever actually incurred (including,
without limitation, reasonable legal fees and disbursements) arising from
or relating to any such offset by Mortgagor.
(e) Mortgagor shall, promptly after obtaining knowledge thereof,
use its best efforts to give prompt oral notice to Mortgagee of any actual
or contemplated filing by or against the landlord under the Ground Lease of
a petition under the Bankruptcy Code, and give prompt written notice
thereof to Mortgagee of such actual or contemplated filing. The aforesaid
written notice shall set forth any information available to Mortgagor
concerning the date or anticipated date of such filing, the court in which
such petition was filed or is expected to be filed, and the relief sought
or reasonably expected to be sought therein. Mortgagor shall, promptly
after receipt thereof, deliver to Mortgagee any and all notices, summonses,
pleadings, applications and other documents received by Mortgagor in
connection with any such petition and any proceedings related thereto.
(f) In the event that any action, proceeding, motion or notice
shall be commenced or. filed in respect of the landlord under the Ground
Lease or the Mortgaged Property or any part thereof, in connection with any
case under the Bankruptcy Code, Mortgagee shall have, and is hereby
granted, the option, to the exclusion of Mortgagor, exercisable upon notice
from Mortgagee to Mortgagor, to conduct and control any such litigation
with counsel of Mortgagee's choice. Mortgagee may proceed, in its own name
or in the name of Mortgagor, in connection with any such litigation, and
Mortgagor agrees to execute any and all powers, authorizations, consents
and other documents required by Mortgagee in connection therewith.
Mortgagor shall, upon demand, pay to Mortgagee all costs and expenses
(including without limitation, legal fees and disbursements) paid or
incurred by Mortgagee in connection with the prosecution or conduct of any
such proceedings, and, to the
16
<PAGE>
extent permitted by law, such costs and expenses shall be deemed expenses
incurred in upholding the lien of this Mortgage and added to the
indebtedness secured by this Mortgage. Mortgagor shall not, without the
prior written consent of Mortgagee, commence any action, suit, proceeding
or case, or file any application or make any motion, in respect of the
Ground Lease in any such case under the Bankruptcy Code.
(g) In the event that a petition under the Bankruptcy Code shall
be filed by or against Mortgagor, and Mortgagor, or anyone claiming through
or under Mortgagor or a trustee in bankruptcy shall have the right to
reject the Ground Lease pursuant to Section 365(a) of the Bankruptcy Code
or a successor statute, Mortgagor shall give Mortgagee at least ten (10)
days' prior written notice of the date on which application shall be made
to the court for authority to reject the Ground Lease; provided, however,
that if a trustee in bankruptcy shall have a right to reject the Ground
Lease in less than ten (10) days, then Mortgagor shall give such notice to
Mortgagee immediately upon Mortgagor's knowledge of such application.
Mortgagee shall have the exclusive right, but not the obligation (subject
to ,the rights of a trustee in bankruptcy), to exercise said right and
Mortgagor hereby assigns said right to Mortgagee. If at any time the
landlord under the Ground Lease, or anyone holding by, through or under the
landlord under the Ground Lease or a trustee in bankruptcy shall elect to
reject the Ground Lease pursuant to Section 365(a) of the Bankruptcy Code,
or a successor statute, thereby giving to Mortgagor the right to elect to
treat the Ground Lease as terminated pursuant to Section 365kri)(l) of the
Bankruptcy Code, or a successor statute, Mortgagee shall have the exclusive
right to exercise said right and Mortgagor hereby assigns said right to
Mortgagee. If either of the assignments provided for in this paragraph is
held to be enforceable, then Mortgagor, anyone claiming by, through or
under Mortgagor or a trustee in bankruptcy, shall not exercise rights
purportedly assigned to Mortgagee without the prior written consent of
Mortgagee, and if Mortgagee shall give such consent, Mortgagor, anyone
claiming by, through or under Mortgagor or a trustee in bankruptcy shall
promptly exercise either of said rights.
(h) To the extent permitted by applicable law, Mortgagor hereby
assigns, transfers and sets over to Mortgagee an exclusive right to apply
to the Bankruptcy
17
<PAGE>
Court under Subsection 365(d)(4) of the Bankruptcy Code for an order
extending the period during which the Ground Lease may be rejected or
assumed after the entry of any order for relief in respect of Mortgagor
under Chapter 7 or Chapter 11 of the Bankruptcy Code.
20. No Merger of Fee and Leasehold Estates. So long as any
portion of the Debt shall remain unpaid, unless Mortgagee shall otherwise
consent, then the fee title to the Leasehold Premises and the leasehold
estate therein created pursuant to the provisions of the Ground Lease and
the fee title to the Improvements and all Equipment constituting a fixture,
and the fee title to the Easement Premises and the interests in real
property arising under the provisions of the Easements, shall not merge but
shall always be kept separate and distinct, notwithstanding the union of
such estates in Mortgagor, or in any other person (including Mortgagee) by
purchase, operation of law or otherwise (including without limitation a
union of estates arising from a foreclosure sale purchase or deed in lieu
of foreclosure).
21. Performance of Other Agreements. Mortgagor shall observe
and perform each and every term to be observed or performed by Mortgagor
pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to the Mortgaged Property.
22. Defaults. The Debt shall become due at the option of
Mortgagee upon the occurrence of any one of the following events:
(a) if any Event of Default under the Credit Agreement shall
occur;
(b) if Mortgagor shall be in default beyond the expiration of
any applicable notice and cure period under any mortgage or deed of trust
covering any part of the Mortgaged Property whether superior or inferior in
lien to this Mortgage.
23. Right to Cure Defaults. If default in the performance of
any of the covenants of Mortgagor herein occurs, Mortgagee, without waiving
any default or releasing Mortgagor from any obligation, may (but shall be
under no obligation to) remedy the same for the account and at the cost and
expense of Mortgagor, and for such purpose shall
18
<PAGE>
have the right to enter upon the Mortgaged Property without thereby
becoming liable to Mortgagor or any person in possession thereof holding
under Mortgagor. If Mortgagee shall remedy such a Default or appear in,
defend or bring any action or proceeding to protect its interest in the
Mortgaged Property or to foreclose this Mortgage or collect the Debt, all
costs and expenses actually incurred (including, without limitation,
reasonable attorneys' fees) shall be paid by Mortgagor to Mortgagee on
demand with interest to the date of payment to Mortgagee at the Default
Interest Rate. All such costs and expenses incurred by Mortgagee, with
interest at the Default Interest Rate. shall be secured by this Mortgage.
24. Appointment of Receiver. Mortgagee, in any action to
foreclose this Mortgage or upon the actual or threatened waste to any part
of the Mortgaged Property or upon the occurrence of any default hereunder,
shall be at liberty, without notice, to apply for the appointment of a
receiver of the Rents, and shall be entitled to the appointment of such
receiver as a matter of right, without regard to the value of the Mortgaged
Property as security for the Debt, or the solvency or insolvency of any
person then liable for the payment of the Debt.
25. Remedies Upon an Event of Default. Upon the occurrence of
any event described in paragraph 22 of this Mortgage, then Mortgagee may,
to the extent permitted by law, exercise any right, power or remedy
permitted to it hereunder, under the Credit Agreement or under any other
Loan Instruments, and, without limiting the generality of the foregoing,
Mortgagee may, personally or by its agents, do any or all of the following:
(a) declare the Debt to be immediately due and payable, and if
the same is not paid on demand, at Mortgagee's option, bring suit for any
delinquent payments under the Notes and take any and all steps and any and
all other proceedings that Mortgagee deems necessary to enforce the
indebtedness and obligations secured hereby and to protect the lien of this
Mortgage; and
(b) enter and take possession of the Mortgaged Property or any
part thereof, exclude the Mortgagor and all persons claiming under the
Mortgagor whose claims are junior to this Mortgage, wholly or partly
19
<PAGE>
therefrom, and use, operate, manage and control the same either in the name
of the Mortgagor or otherwise as Mortgagee shall deem best, and upon such
entry, from time to time at the expense of the Mortgagor and the Mortgaged
Property, make all such repairs, replacements, alterations, additions or
improvements to the Mortgaged Property or any part thereof as Mortgagee may
deem proper and, whether or not Mortgagee has so entered and taken
possession of the Mortgaged Property or any part thereof, collect and
receive all the Rents and apply the same, to the extent permitted by law,
to the payment of all expenses which Mortgagee may be authorized to incur
under this Mortgage, the remainder to be applied to the payment of the Debt
until the same shall have been repaid in full; if Mortgagee demands or
attempts to take possession of the Mortgaged Property or any portion
thereof in the exercise of any rights hereunder, Mortgagor shall promptly
turn over and deliver complete possession thereto to Mortgagee; and
(c) proceed to protect and enforce its rights under this
Mortgage by suit for specific performance of any covenant contained herein,
in the Credit Agreement or in the Loan Instruments or in aid of the
execution of any power granted herein, in the Credit Agreement or in the
Loan Instruments, or for the foreclosure of this Mortgage and the sale of
the Mortgaged Property under the judgment or decree of a court of competent
jurisdiction, or for the enforcement of any other right as Mortgagee shall
deem effectual for such purpose; provided that in the event of a sale, by
foreclosure or otherwise, of less than ail of the Mortgaged Property, this
Mortgage shall continue as a lien on, and security interest in, the
remaining portion of the Mortgaged Property; and
(d) exercise any or all of the remedies available to a secured
party under the Uniform Commercial Code as provided in paragraph 35 hereof;
and
(e) without in any way limiting the rights hereunder pursuant to
paragraphs 6, 24 and 35 apply for the appointment of a receiver as a matter
of right, without regard to the adequacy of the security for the Debt or
the solvency of the Mortgagor. Mortgagor hereby irrevocably consents to
such appointment. Specifically, the Mortgagee or any receiver shall be
20
<PAGE>
entitled to take possession of the Mortgaged Property from the owners,
tenants and/or occupants of the whole or any part thereof and to collect
and receive the Rents and the value of the use and occupation of the
Mortgaged Property, or any part thereof, from the then owner, tenants
and/or occupants thereof for the benefit of Mortgagee.
26. Mortgagor as Tenant Holding over. In the event of any
foreclosure sale contemplated under paragraph 25 hereof, Mortgagor shall be
deemed to be a tenant holding over and shall forthwith deliver possession
to the purchaser or purchasers at such sale or be summarily dispossessed
according to provisions of law applicable to tenants holding over.
27. Discontinuance of Proceedings. In case Mortgagee shall have
proceeded to enforce any right, power or remedy under this Mortgage by
foreclosure, entry or otherwise, and such proceeding shall have been
withdrawn, discontinued or abandoned for any reason, or shall have been
determined adverse to Mortgagee, then in every such case (a) Mortgagor and
Mortgagee shall be restored to their former positions and rights, (b) all
rights, powers and remedies of Mortgagee shall continue as if no such
proceeding had been taken, (c) each and every uncured default declared or
occurring prior or subsequent to such withdrawal, discontinuance or
abandonment shall be or shall be deemed to be a continuing default and (d)
neither the Debt, this Mortgage, the Notes, the Credit Agreement nor the
other Loan Instruments, shall be or shall be deemed to have been affected
by such withdrawal, discontinuance or abandonment; and Mortgagor hereby
expressly waives the benefit of any statute or rule of law now provided, or
which may hereafter conflict with the above.
28. No Reinstatement. If a default shall have occurred and
Mortgagee shall have proceeded to enforce any right, power or remedy
permitted hereunder, then a tender of payment by Mortgagor or by anyone on
behalf of Mortgagor of any amount less than the amount necessary to satisfy
the Debt in full, or the acceptance by Mortgagee of any such payment so
tendered, shall not constitute a reinstatement of this Mortgage, the Notes,
the Credit Agreement or any Loan Instrument.
21
<PAGE>
29. Mortgagor's Waiver of Rights. To the full extent permitted
by law, except as otherwise specifically and expressly provided in this
Mortgage, the Credit Agreement or any Loan Instrument, Mortgagor waives the
benefit of all laws now existing or that hereafter may be enacted providing
for (i) any appraisement before sale of any portion of the Mortgaged
Property and (ii) the benefit of all Laws that may be hereafter enacted in
any way extending the time for the enforcement of the collection of the
Debt, or creating or extending a period of redemption from any sale made in
collecting said Debt. To the full extent that Mortgagor may do so,
Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, extension or redemption,
or any so-called "Moratorium Laws" and Mortgagor, for Mortgagor and its
successors and assigns, and for any and all persons ever claiming any
interest in the Mortgaged Property, hereby waives and releases all rights
of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the secured indebtedness and
marshaling in the event of foreclosure of the liens hereby created. If any
.Law referred to in this paragraph and now in force, of which Mortgagor,
Mortgagor's successors and assigns or any other person might take advantage
despite this paragraph, shall hereafter be repealed or cease to be in
force, such Law shall not thereafter be deemed to preclude the application
of this paragraph.
30. Non-Waiver. The failure of Mortgagee to insist upon strict
performance of any term of this Mortgage shall not be deemed to be a waiver
of any term of this Mortgage. Borrowers shall not be relieved of their
obligation to pay the Debt at the time and in the manner provided for its
payment in the Notes, the Credit Agreement and the Loan Instruments (nor
shall any of Mortgagor's other obligations hereunder, under the Credit
Agreement or the other Loan Instruments, nor shall the other Borrowers'
obligations under the Credit Agreement or the other Loan Instruments be in
any way affected) by reason of (i) failure of Mortgagee to comply with any
request of Mortgagor or the other Borrowers to take any action to foreclose
this Mortgage or otherwise enforce any of the provisions hereof or of the
Notes, the Credit Agreement, any other Loan Instruments or any other
mortgage, instrument or document evidencing, securing or guaranteeing
payment of the Debt or
22
<PAGE>
any portion thereof, (ii) the release, regardless of consideration, of the
whole or any part of the Mortgaged Property or any other security for the
Debt, or (iii) any agreement or stipulation between mortgagee and any
subsequent owner or owners of the Mortgaged Property or other person
extending the time of payment or otherwise modifying or supplementing the
terms of the Notes, the Credit Agreement, the Loan Instruments, this
Mortgage or any other mortgage, instrument or document evidencing, securing
or guaranteeing payment of the Debt or any portion thereof, without first
having obtained the consent of Mortgagor, and in the latter event,
Mortgagor shall continue to be obligated to pay the Debt at the time and in
the manner provided in the Notes, the Credit Agreement, the Loan
Instruments, and this Mortgage (as so extended, modified or supplemented,
if such be the case) and shall continue to be obligated to perform its
other obligations hereunder and under the Credit Agreement and the Loan
Instruments (in each case, as so extended, modified and supplemented)
unless expressly released and discharged from such obligation by Mortgagee
in writing. Regardless of consideration, and without the necessity for any
notice to or consent by the holder of any subordinate lien, encumbrance,
right, title or interest in or to the Mortgaged Property, Mortgagee may
release any person at any time liable for the payment of the Debt or any
portion thereof or any part of the security held for the Debt and may
extend the time of payment or otherwise modify the terms of the Notes, the
Credit Agreement, the Loan Instruments or this Mortgage (including, without
limitation, a modification of the interest rate payable on the principal
balance of the Notes) without in any manner impairing or affecting this
Mortgage or the lien thereof or the priority of this Mortgage, as so
extended and modified, as security for the Debt over any such subordinate
lien, encumbrance, right, title or interest.
31. Remedies Cumulative. Mortgagee may resort for the payment
of the Debt to any other security held by Mortgagee in such order and
manner as Mortgagee, in its discretion, may elect. Mortgagee may take
action to recover the Debt, or any portion thereof, or to enforce any
covenant hereof without prejudice to the rights of Mortgagee thereafter to
foreclose this Mortgage. Mortgagee shall not be limited exclusively to the
rights and remedies herein stated but shall be entitled to every additional
right and remedy now or hereafter afforded by Law or equity. The rights of
mortgagee under this Mortgage shall be separate,
23
<PAGE>
distinct and cumulative and none shall be given effect to the exclusion of
the others. No act of Mortgagee shall be construed as an election to
proceed under any one provision herein to the exclusion of any other
provision. Mortgagee shall be entitled to enforce payment of the Debt and
performance of any of the obligations of the Mortgagor and to exercise all
rights and powers under this Mortgage or under any other Loan Instrument or
any Laws now or hereafter in force, notwithstanding that some or all of
such obligations may now or hereafter be otherwise secured, whether by
mortgage, pledge, lien, assignment or otherwise; neither the acceptance of
this Mortgage nor its enforcement, whether by court action or pursuant to
other powers herein contained, shall prejudice or in any manner affect
Mortgagee's right to realize upon or enforce any other security now or
hereafter held by the Mortgagor, it being stipulated that Mortgagee shall
be entitled to enforce this Mortgage and any other security now or
hereafter held by Mortgagee in such order and manner as Mortgagee, in
accordance with the terms hereof, may determine; every power or remedy
given by the Credit Agreement, this Mortgage or any of the other Loan
Instruments to the Mortgagee or to which the Mortgagee is otherwise
entitled, may be exercised, concurrently or independently, from time to
time and as often as may be deemed expedient by Mortgagee.
32. Liability. If Mortgagor consists of more than one person,
the obligations and liabilities of each such person hereunder shall be
joint and several.
33. Prepayment After Default. If following the occurrence of
any default under this mortgage and an exercise by Mortgagee of its option
to declare the Debt immediately due, Mortgagor shall tender payment of an
amount sufficient to satisfy the entire Debt at any time prior to a sale of
the Mortgaged Property any such payment shall be accepted by Mortgagee only
if such payment is permitted at such time under the provisions of the
Credit Agreement.
34. Construction. The terms of this Mortgage shall be construed
in accordance with the laws of the State of New Jersey.
35. Security Agreement. This Mortgage constitutes both a real
property mortgage and a "security agreement" within the meaning of the
Uniform Commercial Code of the State of New Jersey and the Mortgaged
Property
24
<PAGE>
includes both real and personal property and all other rights and interest,
whether tangible or intangible in nature, of Mortgagor in the Mortgaged
Property. Mortgagor, by executing and delivering this Mortgage, has
granted to Mortgagee, as security for the Debt, a security interest in such
of the Mortgaged Property as is governed by the Uniform Commercial Code.
Upon the occurrence and continuation of an Event of Default hereunder,
Mortgagee, in addition to any other rights and remedies which it may have,
shall have and may exercise immediately and without demand, any and all
rights and remedies granted to a secured party upon default under the
Uniform Commercial Code including, without limiting the generality of the
foregoing, the right to take possession of such of the Mortgaged Property
as is governed by the Uniform Commercial Code personally, through an agent
or by means of a court-appointed receiver, and to take such other measures
as Mortgage may deem necessary for the care, protection and preservation of
such part of the Mortgaged Property. Upon request or demand of Mortgagee,
Mortgagor shall at its expense assemble such of the Mortgaged Property as
is governed by the Uniform Commercial Code and make it available to
Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall
pay to Mortgagee on demand any and all expenses, including reasonable legal
expense and attorneys' fees, incurred or paid by Mortgagee in protecting
the interest in the Mortgaged Property herein granted and in enforcing its
rights hereunder with respect to such part of the Mortgaged Property. Any
notice of sale, disposition or other intended action by Mortgagee with
respect to such part of the Mortgaged Property sent to Mortgagor in
accordance with the provisions of this mortgage at least five (5) days
prior to the date of any such sale, disposition or other action, shall
constitute reasonable notice to Mortgagor, and the method of sale or
disposition or other intended action set forth or specified in such notice
shall conclusively be deemed to be commercially reasonable within the
meaning of the Uniform Commercial Code unless objected to in writing by
Mortgagor within three (3) days after receipt by Mortgagor of such notice.
36. Further Acts, etc. Mortgagor will, at the cost of Mortgagor
and without expense to Mortgagee, do, execute, acknowledge and deliver all
and every such further acts, deeds, conveyances, mortgages, assignments,
notices of assignments, transfers and assurances as Mortgagee shall, from
time to time, require, for the better assuring, conveying, assigning,
transferring and confirming unto
25
<PAGE>
mortgagee the property and rights hereby mortgaged or intended now or
hereafter so to be, or which Mortgagor may be or may hereafter become bound
to convey or assign to Mortgagee, or for carrying out the intention or
facilitating the performance of the terms of this Mortgage or for filing,
registering or recording this Mortgage and, on demand, will execute and
deliver and hereby authorizes Mortgagee to execute in the name of Mortgagor
to the extent Mortgagee may lawfully do so, one or more financing
statements, chattel mortgages or comparable security instruments, to
evidence more effectively the lien hereof upon the Mortgaged Property.
37. Headings, etc. The headings and captions of various
paragraphs of this Mortgage are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or
intent of the provisions hereof.
38. Recording of Mortgage, etc. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time,
will cause this Mortgage, and any security instrument creating a lien or
evidencing the lien hereof upon the Mortgaged Property and each instrument
of further assurance to be filed, registered or recorded in such manner and
in such places as may be required by any present or future law in order to
publish notice of and fully to protect the lien hereof upon, and the
interest of Mortgagee in the Mortgaged Property. Mortgagor will pay all
filing, registration or recording fees, and all expenses actually incurred
incident to the preparation, execution and acknowledgment of this Mortgage,
any mortgage supplemental hereto, any security instrument with respect to
the Mortgaged Property and any instrument of further assurance, and all
Federal, state, county and municipal taxes, duties, imposts, assessments
and charges (including, without limitation, documentary stamp taxes and
intangible personal property taxes) arising out of or in connection with
the execution and delivery of this Mortgage or the Debt secured hereby, any
mortgage supplemental hereto, any security instrument or financing
statement with respect to the Mortgaged Property or any instrument of
further assurance. Mortgagor shall hold harmless and indemnify Mortgagee,
its successors and assigns, against any liability incurred by reason of the
imposition of any tax on the making and recording of this Mortgage.
26
<PAGE>
39. Usury Laws. This Mortgage, the Credit Agreement and the
Notes are subject to the express condition that at no time shall Mortgagor
be obligated or required to pay interest on the principal balance due under
the Notes at a rate which could subject the holder of the Notes to either
civil or criminal liability as a result of being in excess of the maximum
interest rate which Mortgagor is permitted by Law to contract or agree to
pay. If by the terms of this Mortgage, the Credit Agreement or the Notes,
Mortgagor is at any time required or obligated to pay interest on the
principal balance due under the Notes at a rate in excess of such maximum
rate, the rate of interest under the Notes (and the Credit Agreement) shall
be deemed to be immediately reduced to such maximum rate and the interest
payable shall be computed at such maximum rate and all prior interest
payments in excess of such maximum rate shall be applied and shall be
deemed to have been payments in reduction of the principal balance of the
Notes.
40. Sole Discretion of Mortgagee. Except as otherwise
specifically provided in this Mortgage, wherever pursuant to this Mortgage,
Mortgagee exercises any right given to it to consent or to withhold its
consent, to approve or disapprove, or any arrangement or term is to be
satisfactory to Mortgagee, the decision of Mortgagee to consent or to
withhold its consent, to approve or disapprove or to decide that
arrangements or terms are satisfactory or not satisfactory shall be in the
sole discretion of Mortgagee and shall be final and conclusive.
41. Recovery of Sums Required To Be Paid. Mortgagee shall have
the right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to
whether or not the balance of the Debt shall be due, and without prejudice
to the right of Mortgagee thereafter to bring an action of foreclosure, or
any other action, f(r a default or defaults by Mortgagor existing at the
time such earlier action was commenced.
42. Absolute and Unconditional Obligation. Mortgagor
acknowledges that Borrower's obligation to pay the Debt in accordance with
the provisions of the Notes, the Credit Agreement and the Loan Instruments
is and shall at all times continue to be absolute and unconditional in all
respects, and shall at all times be valid and enforceable irrespective of
any other agreements or circumstances of any
27
<PAGE>
nature whatsoever which might otherwise constitute a defense to the Notes,
the Credit Agreement or any of the Loan Instruments or the obligation of
Borrowers thereunder to pay the Debt or the obligations of any other person
relating to the Notes, the Credit Agreement or any of the Loan Instruments
or the obligations of Borrowers under the Notes, the Credit Agreement or
any of the Loan Instruments, and to the full extent permitted by law,
Mortgagor absolutely, unconditionally and irrevocably waives any and all
right to assert any defense, setoff, counterclaim or crossclaim of any
nature whatsoever with respect to the obligation of Borrowers to pay the
Debt in accordance with the provisions of the Notes, the Credit Agreement
and the Loan Instruments or the obligations of any other person relating to
the Notes, the Credit Agreement or any of the Loan Instruments or the
obligations of Borrowers under the Notes, the Credit Agreement or any of
the Loan Instruments, or in any action or proceeding brought by Mortgagee
to collect the Debt, or any portion thereof, or to enforce, foreclose and
realize upon the lien and security interest created by this Mortgage or any
other document or instrument securing repayment of the Debt, in whole or in
part.
43. Indemnification; Waiver of Offset.
(a) If Mortgagee, Agent or any of the Secured Parties are made a
party defendant to any litigation concerning the Notes, the Credit
Agreement, this Mortgage, any other Loan Instrument or the Mortgaged
Property or any part thereof or interest therein, or the occupancy thereof
by Mortgagor, then Mortgagor shall indemnify, defend and hold Mortgagee
and/or such Secured Parties, as the case may be, harmless from all
liability by reason of said litigation, including reasonable attorneys'
fees and expenses incurred by Mortgagee and/or such Secured Parties, as the
case may be, in any such litigation, whether or not any such litigation is
prosecuted to judgment. If Mortgagee commences an action against Mortgagor
to enforce any of the terms hereof or because of the breach by Mortgagor of
any of the terms hereof or for the recovery of any sum secured hereby,
Mortgagor shall pay the Mortgagee's attorneys' fees and expenses, together
with interest thereon at the Default Interest Rate from the date the same
are paid to the date of reimbursement by Mortgagor and the right to such
reasonable attorneys' fees and expenses shall be deemed to have accrued on
the commencement of such action, and shall be enforceable whether or not
such action is prosecuted to judgment. If
28
<PAGE>
Mortgagor breaches any term of this Mortgage, the Mortgagee may engage an
attorney or attorneys to protect Mortgagee's rights hereunder, and in the
event of such engagement following any breach by Mortgagor, Mortgagor shall
pay the Mortgagee's reasonable attorneys' fees and expenses so incurred,
whether or not an action is actually commenced against Mortgagor by reason
of breach.
(b) All sums secured by this Mortgage shall be paid in
accordance with the Credit Agreement, the Notes, and any other Loan
Instruments, as applicable, and without counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment, diminution or
reduction, and the obligations and liabilities of Mortgagor hereunder shall
in no way be released, discharged or otherwise affected (except as
expressly provided herein) by reason of (i) any claim which any of the
Borrowers (or Mortgagor) have or might have against Mortgagee or any of the
Secured Parties or (ii) any default or failure on the part of the Mortgagee
to perform or comply with any of the terms hereof or of any other agreement
with any of the Borrowers (or Mortgagor).
44. Authority. Mortgagor (and the undersigned representative of
Mortgagor) has full power, authority and legal right to execute this
Mortgage and to mortgage, give, grant, bargain, sell, alien, enfeoff,
convey, confirm and assign the Mortgaged Property pursuant to the terms
hereof and to keep and observe all of the terms of this mortgage on
Mortgagor's part to be kept and observed.
45. Actions and Proceedings. Mortgagee shall have the right to
appear in and defend any action or proceeding brought with respect to the
Mortgaged Property and to bring any action or proceeding, in the name and
on behalf of Mortgagor, which the Mortgagee, in its reasonable discretion,
feels should be brought to protect the Mortgagee's interest in the
Mortgaged Property.
46. Inapplicable Provisions. If any term, covenant or condition
of this Mortgage shall be held to be invalid, illegal or unenforceable in
any respect, this mortgage shall be construed without such provision.
47. Duplicate originals. This Mortgage may be executed in any
number of duplicate originals and each such
29
<PAGE>
duplicate original shall be deemed to constitute but one and the same
instrument.
48. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words
used in this Mortgage shall be used interchangeably in singular or plural
form and the word "Mortgagor" shall mean Mortgagor and any subsequent owner
or owners of the Mortgaged Property or any part thereof or interest
therein; the word "Agent" shall mean Agent or any successor agent appointed
by the Secured Parties; the word "Notes" shall mean each of the Notes or
any other evidence of indebtedness secured by this Mortgage; the word
"Borrowers" shall mean each of the Mortgagor and NRG Generating (Newark)
Cogeneration Inc. or either of them, as the context requires, and any
person becoming a borrower under the Credit Agreement and their respective
heirs, executors, administrators, legal representatives, successors and
assigns; the word "Mortgagee', shall mean all of or any of the entities
constituting Mortgagee, as the context requires, and shall include the
rights of Agent to act on behalf of the Secured Parties under and pursuant
to the Credit Agreement; and the words "Mortgaged Property" shall include
any portion of the Mortgaged Property or interest therein; the word "Debt"
shall mean all sums and performance secured by this Mortgage. Whenever the
context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
49. Remedies Not Exclusive. Mortgagee shall be entitled to
enforce payment and performance of any indebtedness or obligations secured
hereby and to exercise all rights and powers granted under this Mortgage or
under the Credit Agreement or the Notes or under any of the Loan
Instruments or under any Laws now or hereafter in force, notwithstanding
some or all of the said indebtedness and obligations secured hereby may now
or hereafter be otherwise secured, whether by mortgage, deed of trust,
pledge, lien, assignment or otherwise. Neither the acceptance of this
Mortgage nor its enforcement, whether by court action or other powers
herein contained, shall prejudice or in any manner affect Mortgagee's right
to realize upon or enforce any other security now or hereafter held by
Mortgagee, it being agreed that Mortgagee shall be entitled to enforce this
Mortgage and any other security now or hereafter held
30
<PAGE>
by Mortgagee, in such order and manner as it may in its absolute discretion
determine. No remedy herein conferred upon or reserved to Mortgagee is
intended to be exclusive of any other remedy herein or by Law provided or
permitted, but each shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at Law or in
equity or by statute. Every right, power or remedy given by the Credit
Agreement, this Mortgage or any of the Loan Instruments to Mortgagee may be
exercised, concurrently or independently, from time to time and as often as
may be deemed expedient by Mortgagee. Every right, power or remedy given
by this Mortgage to the Mortgagee may be exercised by Agent on behalf of
all Secured Parties pursuant to the Credit Agreement, whether so expressed
or not.
50. Joinder of Individual Special CO-Agent. An individual,
appointed by Agent in its discretion, may be joined as special co-agent (in
such capacity, the "Special Co-Agent") hereunder in order to comply with
any legal requirements respecting agents under mortgages of property in the
jurisdiction in which the Mortgaged Property or any part thereof is or may
be situated so that if, by any present or future law in New Jersey or in
any jurisdiction in which it may be necessary to perform any act in the
exercise of the rights of Mortgagee hereunder, the Agent shall be
incompetent or unqualified to so act, then all of the acts required to be
performed in such jurisdiction in the exercise of the rights of Mortgagee
hereunder created hereby shall be performed by the Special CO-Agent and the
Agent jointly, or the Special Co-Agent acting alone. In case the Special
Co-Agent shall resign or be removed, or die or become incapable of acting,
Mortgagee's interest in the Mortgaged Property, and all rights, powers,
trusts, duties and obligations of Mortgagee shall, so far as permitted by
law, vest in and be exercised by the Agent, unless and until a successor
Special Co-Agent shall be appointed. The Special Co-Agent shall not be
personally liable by reason of any act or omission of the Agent or any co-
agent or separate agent or by reason of any act or omission of the Special
Co-Agent taken or omitted to be taken pursuant to written instructions
received by him from the Agent. Notice to the Agent or a co-agent or
separate agent shall not constitute notice to the Special Co-Agent unless
and until such notice is actually received by the Special Co-Agent.
31
<PAGE>
51. Relationship. The relationship of Mortgagee to Mortgagor
hereunder is strictly and solely that of lender and borrower and nothing
contained in the Notes, this Mortgage, the Credit Agreement, or any other
Loan Instrument is intended to create, or shall in any event or under any
circumstance be construed as creating, a partnership, joint venture,
tenancy-in-common, joint tenancy or other relationship of any nature
whatsoever between Mortgagee and Mortgagor other than as lender and
borrower.
52. Waiver of Notice. Mortgagor shall not be entitled to any
notices of any nature whatsoever from Mortgagee except with respect to
matters for which this Mortgage specifically and expressly provides for the
giving of notice by Mortgagee to Mortgagor and Mortgagor hereby expressly
waives the right to receive any notice from Mortgagee with respect to any
matter for which this mortgage does not specifically and expressly provide
for the giving of notice by Mortgagee to Mortgagor.
53. Waiver of Trial by Jury. Mortgagor hereby irrevocably and
unconditionally waives, and Mortgagee by its acceptance of the Notes and
this Mortgage irrevocably and I unconditionally waives, any and all rights
to trial by jury in any action, suit or counterclaim arising in connection
with, out of or otherwise relating to the Notes, this Mortgage, the Credit
Agreement, or the other Loan Instruments.
54. Waiver of Statutory Rights. Mortgagor shall not and will
not apply for or avail itself of any appraisement, valuation, stay,
extension or exemption laws, or any so-called "moratorium laws," now
existing or hereafter enacted, in order to prevent or hinder the
enforcement or foreclosure of this Mortgage, but hereby waives the benefit
of such laws to the full extent that Mortgagor may do so under applicable
law. Mortgagor, for itself and all who may claim through or under it,
waives any and all right to have the property and estates comprising the
Mortgaged Property marshalled upon any foreclosure of the lien of this
Mortgage and agrees that any court having jurisdiction to foreclose such
lien may order the Mortgaged Property sold as an entirety. Mortgagor
hereby waives for itself and all who may claim through or under it, and to
the full extent Mortgagor may do so under applicable law, any and all
rights of redemption from sale under any order or
32
<PAGE>
decree of foreclosure of this Mortgage or granted under any statute now
existing or hereafter enacted.
55. Credit Agreement. This Mortgage is subject to all of the
terms, covenants and conditions of the Credit Agreement, which Credit
Agreement and all of the terms, covenants and conditions thereof are by
this reference incorporated herein and made a part hereof with the same
force and effect as if set forth at length herein. The proceeds of the
Funding Loans and Debt Service Loans secured hereby are to be advanced by
Mortgagee to Mortgagor in accordance with the provisions of the Credit
Agreement. Mortgagor shall observe and perform all of the terms, covenants
and conditions of the Credit Agreement on Mortgagor's part to be observed
or performed. All advances made and all indebtedness arising and accruing
under the Credit Agreement with respect to the Funding Loans or Debt
Service Loans thereunder from time to time shall be secured hereby. In the
event of any conflict or ambiguity between the terms, covenants and
conditions of this Mortgage and the Credit Agreement, the terms, covenants
and conditions which shall enlarge the rights and remedies of Mortgagee and
the interest of Mortgagee in the Mortgaged Property, afford Mortgagee
greater financial security in the Mortgaged Property and better assure
Payment of the Debt in full, shall control.
56. No Oral Change. This Mortgage may only be modified or
amended by an agreement in writing signed by Mortgagor and Mortgagee, and
may only be released, discharged or satisfied of record by an agreement in
writing signed by Mortgagee. No waiver of any term, covenant or provision
of this Mortgage shall be effective unless given in writing by Mortgagee
and if so given by Mortgagee shall only be effective in the specific
instance in which given. Mortgagor acknowledges that the Notes, this
Mortgage, the Credit Agreement and the other Loan Instruments set forth the
entire agreement and understanding of Mortgagor and Borrowers with respect
to the Debt secured hereby and that no oral or other agreements,
understanding, representation or warranties exist with respect to the Debt
secured hereby other than those set forth in the Notes, this Mortgage, the
Credit Agreement and the other Loan Instruments.
57. True Copy. Mortgagor acknowledges receipt of a true copy of
this Mortgage.
33
<PAGE>
58. Amendment and Restatement of Existing Mortgage. The terms
covenants and conditions of this Mortgage supersede and restate in their
entirety the terms, covenants and conditions of the Existing mortgage.
IN WITNESS WHEREOF, This Mortgage has been duly executed as of
the day and year first above written under seal.
ATTEST: NRG GENERATING (NEWARK)
COGENERATION INC.
/s/ By: /s/ Leonard Bluhm
Name: Name: Leonard A. Bluhm
Title: Title: President
34
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
Be it remembered that on this 28th day of June, 1996, before me,
/s/ Barbara J. Vitale, a notary public, personally appeared Leonard A.
Bluhm, the President of NRG GENERATING (NEWARK) COGENERATION INC., who I am
satisfied is the person who has signed the foregoing instrument, and he did
acknowledge that he signed, sealed with the seal of the said corporation,
and delivered said instrument as the officer above stated, and that the
foregoing instrument is the voluntary act and deed of said corporation,
made by virtue of the authority of its board of directors.
/s/ Barbara J. Vitale
Notary Public
My commission expires:
[Seal]
<PAGE>
EXHIBIT A
(Description of Premises)
ALL THAT CERTAIN TRACT, PARCEL AND LOT OF LAND LYING AND BEING SITUATE IN
THE CITY OF NEWARK, COUNTY OF ESSEX, STATE OF NEW JERSEY, BEING MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE NORTHEASTERLY SECTION OF LOT 75 BLOCK 2412 AS
SHOWN ON THE CITY OF NEWARK TAX MAPS, WHICH POINT IS DISTANT SOUTHERLY
28.01 FEET MEASURED AT RIGHT ANGLES FROM THE SOUTHERLY LINE OF LANDS NOW OR
FORMERLY OF CENTRAL RAILROAD OF NEW JERSEY AND DISTANT WESTERLY 62.74 FEET
MEASURED AT RIGHT ANGLES FROM THE WESTERLY SIDE OF BLANCHARD STREET (50
FEET WIDE); THENCE
(1) SOUTH 13 DEGREES 04 MINUTES 40 SECONDS EAST 98.26 FEET; THENCE
(2) SOUTH 01 DEGREES 30 MINUTES WEST 73.90 FEET; THENCE
(3) NORTH 88 DEGREES 30 MINUTES WEST 191.00 FEET; THENCE
(4) NORTH 01 DEGREES 30 MINUTES EAST 175.00 FEET; THENCE
(5) SOUTH 86 DEGREES 26 MINUTES EAST 166.37 FEET TO THE POINT OR PLACE OF
BEGINNING.
<PAGE>
EXHIBIT B
(Description of Easements)
SPECIFIC ACCESS EASEMENT SURROUNDING THE ABOVE MENTIONED PROPERTY: PROVIDED
THAT TENANT SHALL NOT INTERFERE WITH THE CONDUCT OF LANDLORD'S BUSINESS
OPERATION AT THE ENTIRE PROPERTY, TENANT, ITS AGENT, CONTRACTORS, EMPLOYEES
AND INVITEES SHALL RAVE THE NON-EXCLUSIVE RIGHT OF ACCESS TO AND INGRESS
AND EGRESS FOR PERSONNEL, TRUCKS AND OTHER VEHICLES OVER THAT PORTION OF
THE ENTIRE PREMISES WHICH IS DESCRIBED AS TRACT I DESCRIBED ON EXHIBIT C
HERETO.
TOGETHER WITH THOSE CERTAIN EASEMENTS FOR PARKING, INTERCONNECTION
FACILITIES, REPAIR EASEMENTS, DRY WELL SYSTEMS, UTILITIES, ACCESS, AND
OTHER EASEMENTS GRANTED BY NEWARK GROUP INDUSTRIES, INC., TO O'BRIEN
(NEWARK) COGENERATION, INC., PURSUANT TO THAT CERTAIN UNRECORDED LEASE
DATED JULY 18, 1988, A MEMORANDUM OF WHICH WAS RECORDED IN DEED BOOK 5036
PAGE 617, ESSEX COUNTY, NEW JERSEY RECORDS OVER ALL OR PART OF THE PREMISES
DESCRIBED AS .TRACT II DESCRIBED ON EXHIBIT C HERETO.
BEING IN ACCORDANCE WITH A SURVEY PREPARED BY CASEY & KELLER, INC., DATED
APRIL 29, 1996.
<PAGE>
EXHIBIT C
(Description of Easement Premises)
TRACT I
BEGINNING AT A POINT IN THE WESTERLY SIDE OF BLANCHARD STREET (50 FEET
WIDE) WHERE THE SAME IS INTERSECTED BY THE SOUTHERLY LINE OF LANDS NOW OR
FORMERLY OF CENTRAL RAILROAD OF NEW JERSEY, LOT 90 BLOCK 2412 AS SHOWN ON
THE CITY OF NEWARK TAX MAPS; THENCE
(1) ALONG SAID SIDE OF BLANCHARD STREET SOUTH 01 DEGREES 30 MINUTES WEST
202.50 FEET; THENCE
(2) NORTH 88 DEGREES 30 MINUTES WEST 249.00 FEET; THENCE
(3) NORTH 01 DEGREES 30 MINUTES EAST 204.17 FEET TO A POINT ON THE
SOUTHERLY LINE OF LANDS NOW OR FORMERLY CENTRAL RAILROAD OF NEW JERSEY
AFORESAID; THENCE
(4) ALONG SAID LANDS EASTERLY ON THE ARC OF A CURVE, CURVING TO THE RIGHT
WITH A RADIUS OF 298.45 FEET FOR DISTANCE OF 66.20 FEET TO A POINT OF
TANGENCY IN THE SAME; THENCE
(5) STILL ALONG SAID LANDS SOUTH 86 DEGREES 26 MINUTES EAST 183.24 FEET TO
THE WESTERLY SIDE OF BLANCHARD STREET AND THE POINT OR PLACE OF
BEGINNING.
TRACT II
THOSE CERTAIN LANDS OWNED BY NEWARK GROUP INDUSTRIES, INC. (FORMERLY KNOWN
AS PAPERBOARD MANUFACTURERS OF NEWARK, INC.), WITH A STREET ADDRESS AT 60
LOCKWOOD STREET, NEWARK, NEW JERSEY AND BEING TAX LOTS 75 AND 58 IN BLOCK
2412 ON THE NEWARK, NEW JERSEY MUNICIPAL TAX MAP.
<PAGE>
Exhibit 10.8.9
NRG GENERATING (PARLIN) COGENERATION INC.,
as Mortgagor
to
CREDIT SUISSE, AS AGENT FOR THE SECURED PARTIES,
as Mortgagee
LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS AND SECURITY AGREEMENT
(Leasehold and Easements)
Dated: As of June 28, 1996
Location: Part of Lot 1, Block 41
and Lot 1.04, Block 42 Borough of Sayreville County of
Middlesex State of New Jersey
RECORD AND RETURN TO:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Richard Sonkin, Esq.
MIDDLESEX COUNTY, NEW JERSEY
This instrument prepared by:
/s/ Christopher C. Beers
Name: Christopher C. Beers
<PAGE>
LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND
RENTS AND SECURITY AGREEMENT
THIS LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND
SECURITY AGREEMENT (this "Mortgage") made as of the 28th day of June, 1996
by NRG GENERATING (PARLIN) COGENERATION INC., a Delaware corporation having
an address at c/o NRG Energy, Inc., 1221 Nicollet Mall, Suite 700,
Minneapolis, Minnesota 55403 ("Mortgagor") and CREDIT SUISSE having an
address at Tower 49, 12 East 49th Street, New York, New York 10017, as
agent (in such capacity, "Agent") on behalf of and for the benefit of the
Secured Parties under the Credit Agreement (defined below) (the Agent,
acting on its own behalf and on behalf of the Secured Parties pursuant to
the Credit Agreement being hereinafter referred to as "Mortgagee"),
W I T N E S S E T H :
WHEREAS, Mortgagor is the owner and holder of a leasehold estate
in the premises described in Exhibit A attached hereto (hereinafter
referred to as the "Leasehold Premises") pursuant to a certain Ground Lease
dated as of January 2, 1987 between E. I. Du Pont de Nemours and Company
and O'Brien Energy Systems, Inc., a memorandum of which was recorded in the
Middlesex County Clerk's office on December 15, 1988, in Deed Book 3751,
page 4 (hereinafter referred to as the "Ground Lease");
WHEREAS, Mortgagor is also the holder of the those easement
rights pursuant to the instruments described in Exhibit B attached hereto
(collectively, the "Easements"), which Easements pertain to the premises,
or to portions thereof, described therein (collectively, the "Easement
Premises" and together with the Leasehold Premises being hereinafter
collectively referred to as the "Premises");
WHEREAS, Mortgagor proposes to operate on the Premises an
existing 122 MW power plant, including the related electric power
transmission, fuel supply and fuel transportation facilities, fuel storage
facilities and other facilities and goods that are ancillary, incidental,
necessary or reasonably related to the marketing, management, servicing,
ownership or operation of the foregoing (the "Parlin Plant");
WHEREAS, Mortgagee has simultaneously herewith extended to Mortgagor
and NRG Generating (Newark) Cogeneration Inc. ("NRG (Newark)"; Mortgagor
and NRG (Newark) being hereinafter collectively referred to as
<PAGE>
"Borrowers") (i) certain loans in the aggregate principal amount of ONE
HUNDRED FIFTY-FIVE MILLION and No/100 DOLLARS ($155,000,000) (collectively,
the "Funding Loans") and (ii) a certain debt service line of credit
facility commitment in the principal amount of up to FIVE MILLION and
No/100 DOLLARS ($5,000,000) (the "Debt Service Loans"), which (a) Funding
Loans are to be advanced pursuant and subject to the terms and conditions
of a certain Credit Agreement dated as of May 17, 1996 among Mortgagee,
Credit Suisse, Greenwich Funding Corporation and any other Purchasing
Lender and the Borrowers (as the same may be amended, modified or
supplemented from time to time, the "Credit Agreement") and shall be
evidenced by the Funding Loan Notes, and (b) Debt Service Loans are to be
advanced pursuant and subject to the terms and conditions of the Credit
Agreement and shall be evidenced by the Debt Service Loan Notes, and which
Funding Loans and Debt Service Loans shall be secured, in part, by this
Mortgage;
WHEREAS, the Borrowers are to be jointly and severally liable for
the repayment of the Funding Loans and the Debt Service Loans;
WHEREAS, all capitalized terms not otherwise defined in this
Mortgage shall have the meaning given such terms in the Credit Agreement;
WHEREAS, it is a condition precedent to the making of certain of
the Funding Loans and the availability of the Debt Service Loans under the
Credit Agreement that Mortgagor shall execute and deliver this Mortgage and
grant the security interests pursuant to this Mortgage to the Agent for the
benefit of the Secured Parties as security for the obligations of Borrowers
under the Credit Agreement and the other Loan Instruments;
NOW, THEREFORE, to secure the payment and performance of the Debt
(hereinafter defined) and the performance of the Borrowers' obligations
under the Credit Agreement and the Loan Instruments and the performance of
the Mortgagor's obligations under this Mortgage, Mortgagor has mortgaged,
given, granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed
and assigned, and by these presents does mortgage, give, grant, bargain,
sell, alien, enfeoff, convey, confirm and assign unto Mortgagee all right,
title and interest of Mortgagor now owned, or hereafter acquired, in and to
the following property, rights and interests (such property, rights and
interests being hereinafter collectively referred to as the "Mortgaged
Property"):
2
<PAGE>
(a) the Leasehold Premises;
(b) all buildings, improvements and fixtures now or hereafter located
on the Leasehold Premises, including, but not limited to, the Parlin Plant
(the "Leasehold Premises Improvements");
(c) the Ground Lease and the leasehold estate created thereunder and
all other rights and interests of the tenant thereunder;
(d) all modifications, extensions and renewals of the Ground Lease
and all credits, deposits, options, privileges and rights of tenant under
the Ground Lease, including, but not limited to, the right to exercise
options, to give consents and to receive moneys payable to the tenant
thereunder or in connection therewith;
(e) the Easements and the interests created thereunder and in
connection therewith;
(f) any and all portions of the Parlin Plant now or hereafter located
on the Easement Premises (the "Easement Improvements" and, together with
the Leasehold Premises Improvements, being hereinafter collectively
referred to as the "Improvements");
(g) all the estate, right, title, claim or demand of any nature
whatsoever of Mortgagor, either in law or in equity, in possession or
expectancy, in and to the Mortgaged Property or any part thereof;
(h) any and all easements (other than the Easements), rights-of-way,
gores of land, streets, ways, alleys, passages, sewer rights, waters, water
courses, water rights and powers, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments, revocable
consents, options, appendages and appurtenances of any nature whatsoever,
in any way belonging, relating or pertaining to the Mortgaged Property
(including, but not limited to, any and all development rights, option
rights, air rights or similar or comparable rights of any nature whatsoever
now or hereafter appurtenant to the Premises or now or hereafter
transferred to the Premises) and all land lying in the bed of any street,
road or avenue, opened or proposed, in front of or adjoining the Premises
to the center line thereof;
3
<PAGE>
(i) all machinery, apparatus, equipment, fittings, fixtures and other
property of every kind and nature whatsoever owned by Mortgagor, or in
which Mortgagor has or shall have an interest, now or hereafter located
upon the Premises, or appurtenant thereto, and usable in connection with
the present or future operation and occupancy of the Mortgaged Property and
all equipment, materials, supplies, apparatus and other items now or
hereafter attached to, installed in or used on the Premises (temporarily or
permanently) of any nature whatsoever and all renewals, replacements and
substitutions thereof and additions thereto, including but not limited to
any and all partitions, ducts, shafts, pipes, radiators, conduits, wiring,
floor coverings, awnings, motors, engines, boilers, stokers, pumps,
dynamos, transformers, turbines, generators, fans, blowers, vents,
switchboards, elevators, mail or coal conveyors, escalators, compressors,
furnaces, cleaning equipment, call and sprinkler systems, fire
extinguishing apparatus, water and other tanks, heating, ventilating,
plumbing, laundry, incinerating, air conditioning and air cooling systems
and water, gas, telephone, telecommunications, telemetry and electric
equipment (collectively, the "Equipment"), and the right, title and
interest of Mortgagor in and to any of the Equipment which may be subject
to any security agreements (as defined in the Uniform Commercial Code of
the State of New Jersey (the "Uniform Commercial Code")), superior in lien
to the lien of this Mortgage;
(j) all awards or payments, including interest thereon, and the right
to receive the same, which may be made with respect to the Mortgaged
Property, whether from state fund sharing or from the exercise of the right
of eminent domain (including any transfer made in lieu of the exercise of
said right), changes of grade of street or for any other injury to or
decrease in the value of the Mortgaged Property, whether direct or
consequential, which said awards and payments are hereby assigned to
Mortgagee, and Mortgagee is hereby authorized to collect and receive the
proceeds thereof and to give proper receipts and acquittances therefor;
(k) all refunds or rebates of Taxes (as hereinafter defined) or
charges in lieu of Taxes, now or hereafter assessed or levied against the
Mortgaged Property;
4
<PAGE>
(1) all leases (including oil, gas and other mineral leases),
subleases, franchises, licenses, concessions, permits, contracts
(including, without limitation, the Parlin Power Purchase Agreement and the
Parlin Steam Agreement) and other agreements (other than the Ground Lease
and the Easements) affecting the use or occupancy of the Mortgaged Property
now or hereafter entered into and any renewals or extensions thereof
(collectively, the "Other Leases");
(m) the right to receive and apply the rents, issues and profits of
the Mortgaged Property under the Other Leases (collectively, the "Rents")
to the payment of the Debt;
(n) all inventory, accounts and general intangibles owned by
Mortgagor or in which Mortgagor now or hereafter shall have any right,
title or interest, now or hereafter located upon, arising in connection
with or concerning the Mortgaged Property;
(o) all proceeds of and any unearned premiums on any insurance
policies covering the Mortgaged Property, including, without limitation,
the right to receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Mortgaged Property;
(p) to the extent permitted by law, the right, in the name and on
behalf of Mortgagor, to appear in and defend any action or proceeding
brought with respect to the Mortgaged Property and to commence any action
or proceeding to protect the interest of Mortgagee in the Mortgaged
Property;
(q) all of Mortgagor's right, title and interest in and to all plans
and specifications prepared for or in connection with the Improvements and
all studies, data and drawings related thereto; and
(r) all products and proceeds of any of the Mortgaged Property herein
described.
TO HAVE AND TO HOLD the above granted and described Mortgaged Property
unto and to the proper use and benefit of Mortgagee, and the successors and
assigns of Mortgagee, forever, to secure the following obligations
(hereinafter collectively referred to as the "Debt"):
5
<PAGE>
(i) payment of the indebtedness evidenced by the Funding Loan Notes;
(ii) payment of the indebtedness evidenced by the Debt Service Loan
Notes (the Funding Loan Notes and the Debt Service Loan Notes being
hereinafter collectively referred to as the "Notes");
(iii) payment of all amounts owing pursuant to any Interest Rate Hedge
Agreement;
(iv) payment, performance and observance of each term, covenant and
condition to be paid, performed or observed by Borrowers under the Credit
Agreement, the Notes and the other Loan Instruments;
(v) payment of all sums required to be paid and performance and
observance of each term, covenant and condition contained in this Mortgage
to be performed or observed by Mortgagor under this mortgage; and
(vi) payment of all sums expended or advanced by Mortgagee pursuant to
the terms of this Mortgage, the Credit Agreement or any other Loan
Instruments.
PROVIDED, ALWAYS, and these presents are upon this express
condition, if Borrowers shall well and truly pay to Mortgagee the Debt at
the time and in the manner provided in the Notes, the Credit Agreement and
the Loan Instruments and shall well and truly abide by and comply with each
and every covenant and condition set forth herein, in the Notes, the Credit
Agreement and the Loan Instruments then these presents and the estate
hereby granted shall cease, determine and be void.
AND Mortgagor covenants with and represents and warrants to
Mortgagee as follows:
1. Payment of Debt. Mortgagor shall pay the Debt at the time
and in the manner provided for its payment in the Notes, the Credit
Agreement and the Loan Instruments.
2. Warranty of Title. Subject only to the Permitted Liens,
Mortgagor warrants that Mortgagor is the owner and holder of W a leasehold
estate in and to the Leasehold Premises, (ii) the right to use and enjoy
the Easements, (iii) marketable title to the improvements and Equipment,
and (iv) good title to all other portions of the Mortgaged Property.
Mortgagor covenants that Mortgagor will at all times and at Mortgagor's
sole expense warrant and
6
<PAGE>
defend the title to the Mortgaged Property against the claims and demands
of all persons whomsoever except for Permitted Liens. In addition,
Mortgagor represents and warrants that (i) the Ground Lease is in full
force and effect and has not been modified or amended in any manner
whatsoever, (ii) there are no uncured defaults under the Ground Lease and
no event has occurred, which but for the passage of time, or notice, or
both, would constitute a default under the Ground Lease, (iii) all rents
and other payments due and payable under the Ground Lease have been paid in
full and (iv) no action is pending and no notice has been given or received
for the purpose of terminating, and no event has occurred or condition
exists that could result in termination of, the Ground Lease.
3. Insurance. Mortgagor will keep the Improvements and the
Equipment insured as shall, from time to time, be required in accordance
with Sections 4.25 and 5.12 of the Credit Agreement. If at any time
Mortgagee is not in receipt of written evidence that all insurance required
hereunder and under the Credit Agreement is in full force and effect,
Mortgagee shall have the right without notice to Mortgagor to take such
action as Mortgagee deems necessary to protect the Mortgaged Property,
including, without limitation, the obtaining of such insurance coverage as
Mortgagee in its sole discretion deems appropriate, and all expenses
incurred by Mortgagee in connection with such action or in obtaining such
insurance and keeping it in effect shall be paid by Mortgagor to Mortgagee
upon demand. Any amounts not so paid by Mortgagor shall be deemed secured
by this Mortgage. Mortgagor shall at all times comply with and shall cause
the Improvements and Equipment and the use, occupancy, operation,
maintenance, alteration, repair and restoration thereof to comply with the
terms, conditions, stipulations and requirements of the insurance policies
procured and maintained pursuant to Sections 4.25 and 5.12 of the Credit
Agreement (the "Policies"). If the Premises, or any portion thereof, is
determined to be located in a Federally designated "special flood hazard
area", in addition to the other Policies required under this paragraph, a
flood insurance policy shall be delivered by Mortgagor to Mortgagee. If no
portion of the Premises is located in a Federally designated "special flood
hazard area", such fact shall be substantiated by a certificate in form
reasonably satisfactory to Mortgagee from a licensed surveyor, appraiser or
professional engineer or other qualified person. If the Mortgaged Property
shall be damaged or destroyed, in whole or in part, by fire or other
property hazard or casualty, Mortgagor shall give prompt notice thereof to
Mortgagee and any Proceeds received by
7
<PAGE>
Mortgagee shall be held and disbursed as set forth in Section 5.18 of the
Credit Agreement.
4. Payment of Taxes, etc. Mortgagor shall pay, or cause to be
paid, all taxes or charges in lieu of taxes, assessments, water rates,
sewer rents and other charges, including vault charges and license or
permit fees for the use of vaults, chutes and similar areas on or adjoining
the Premises, now or hereafter levied or assessed against the Mortgaged
Property (the "Taxes") prior to the date upon which any fine, penalty,
interest or cost may be added thereto or imposed by law for the nonpayment
thereof, subject, in all events, to Mortgagor's rights to contest Taxes in
accordance with Section 5.13 of the Credit Agreement. Mortgagor shall
deliver to Mortgagee, upon request, receipted bills, canceled checks and
other evidence satisfactory to Mortgagee evidencing the payment of the
Taxes prior to the date upon which any fine, penalty, interest or cost may
be added thereto or imposed by law for the nonpayment thereof (as any such
date may be extended pursuant to exercise of said right of Mortgagor to
contest Taxes in accordance with Section 5.13 of the Credit Agreement).
5. Condemnation. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise, Mortgagor shall
continue to pay the Debt at the time and in the manner provided for its
payment in the Notes, the Credit Agreement and the Loan Instruments and the
Debt shall not be reduced until (and only to the extent) any award or
payment therefor shall have been actually received and applied by Mortgagee
to the discharge of the Debt in accordance with the provisions of the
Credit Agreement. Mortgagee shall apply the amount of any such award or
payment in accordance with Section 5.18 of the Credit Agreement. If the
Mortgaged Property is sold, through foreclosure or otherwise, prior to the
receipt by Mortgagee of such award or payment, Mortgagee shall have the
right, whether or not a deficiency judgment on the Debt shall have been
sought, recovered or denied, to receive such award or payment, or a portion
thereof sufficient to pay the Debt, whichever is less. Mortgagor shall
file and prosecute its claim or claims for any such award or payment in
good faith and with due diligence and cause the same to be collected and
paid over to Mortgagee. Mortgagor hereby irrevocably authorizes and
empowers Mortgagee, in the name of Mortgagor or otherwise to collect and
receipt for any such award or payment and to file and prosecute such claim
or claims if (a) Mortgagor fails to do so within a reasonable time prior to
the expiration of the period allowed therefor under
8
<PAGE>
applicable law, or (b) an Event of Default has occurred and is continuing.
Although it is hereby expressly agreed that the same shall not be necessary
in any event, Mortgagor shall, upon demand of Mortgagee, make, execute and
deliver any and all assignments and other instruments sufficient for the
purpose of assigning any such award or payment to Mortgagee, free and clear
of any encumbrances of any kind or nature whatsoever.
6. Leases and Rents. (a) Mortgagor hereby assigns to Mortgagee
as security for the payment of the Debt and the observance and performance
by Borrowers of all of the terms, covenants and provisions of this
Mortgage, the Credit Agreement and the Loan Instruments on the Borrowers'
part to be observed or performed, all of Mortgagor's right, title and
interest in and to the Other Leases and the Rents. Subject to the terms of
this paragraph, Mortgagee waives the right to enter the Mortgaged Property
for the purpose of collecting the Rents, and grants Mortgagor the right to
collect the Rents. Mortgagor shall hold the Rents, or an amount sufficient
to discharge all sums then currently due on the Debt, in trust for use in
payment of the Debt. The right of Mortgagor to collect the Rents may be
revoked by Mortgagee upon the occurrence of any Event of Default by giving
notice of such revocation to Mortgagor. Following such notice, Mortgagee
may retain and apply the Rents toward payment of the Debt in accordance
with the provisions of the Credit Agreement, or to the operation,
maintenance and repair of the Mortgaged Property, and irrespective of
whether Mortgagee shall have commenced a foreclosure of this Mortgage or
shall have applied or arranged for the appointment of a receiver.
Mortgagor shall not, without the consent of Mortgagee, which consent shall
not be unreasonably withheld, conditioned or delayed, make, or suffer to be
made, any Other Leases or modify or cancel any Other Leases or accept
prepayments of installments of the Rents for a period of more than one (1)
month in advance or
further assign the whole or any part of the Rents. Mortgagor shall (i)
fulfill or perform each and every provision of the Other Leases on the part
of Mortgagor to be fulfilled or performed, (ii) promptly send copies of all
notices of default which Mortgagor shall send or receive under the Other
Leases to Mortgagee, and (iii) enforce, short of termination of the Other
Leases, the performance or observance of the provisions thereof by the
other parties thereto.
(b) Mortgagor agrees that it will not further pledge or assign
its interest in any of the Other Leases, or
9
<PAGE>
further assign the Rents so long as any part of the Debt
remains unpaid.
(c) Nothing contained in this paragraph shall be construed as
imposing on Mortgagee any of the obligations of the tenant under the Ground
Lease or of the lessor under the Other Leases.
7. Maintenance of the Mortgaged Property.
(a) Mortgagor shall cause the Mortgaged Property to be
maintained in good condition and-repair in accordance with the provisions
of the Credit Agreement and will not commit or suffer to be committed any
waste of the Mortgaged Property. The Improvements and the Equipment shall
not be removed, demolished or materially altered (except for normal
replacement of the Equipment), without the consent of Mortgagee, which
consent shall not be unreasonably withheld, conditioned or delayed.
(b) Mortgagor shall promptly comply with all Laws and
Environmental Requirements affecting the Mortgaged Property, or any portion
thereof or the use thereof, in accordance with the provisions of the Credit
Agreement. Mortgagor shall observe and perform every term to be observed
and performed by Mortgagor (as tenant) under the Ground Lease and shall
also comply with the requirements of the Easements and all other rights-of-
way, easements, grants, privileges, licenses, franchises and restrictive
covenants which from time to time benefit or pertain to the whole or any
portion of the Mortgaged Property, and Mortgagor shall not modify, amend or
terminate, or surrender any of its rights under, the Ground Lease, the
Easements or any such rights-of-way, easements, grants, privileges,
licenses, franchises or restrictive covenants. Except as otherwise
specifically permitted by the terms of the Credit Agreement, Mortgagor will
not alter the use of the Mortgaged Property without the prior consent of
Mortgagee, and Mortgagor will not, without obtaining the prior consent of
Mortgagee, initiate, join in or consent to any private restrictive
covenant, zoning ordinance, or other public or private restrictions,
limiting or affecting the uses which may be made of the Mortgaged Property
or any part thereof.
8. Estoppel Certificates. Mortgagor, within ten (10) days
after request by Mortgagee and at its expense, will furnish Mortgagee with
a statement, duly acknowledged and certified, setting forth the amount of
the Debt and the offsets or defenses thereto, if any.
10
<PAGE>
9. Transfer or Encumbrance of the Mortgaged Property. Except
as otherwise specifically permitted by the terms of the Credit Agreement,
no part of the Mortgaged Property and no legal or beneficial interest in
Mortgagor shall in any manner be further encumbered, sold, transferred,
assigned or conveyed, or permitted to be further encumbered, sold,
transferred, assigned or conveyed without the consent of Mortgagee. The
provisions of this paragraph shall apply to each and every such further
encumbrance, sale, transfer, assignment or conveyance, regardless of
whether or not Mortgagee has consented to, or waived by its action or
inaction its rights hereunder with respect to any such previous further
encumbrance, sale, transfer, assignment or conveyance and irrespective of
whether such further encumbrance, sale, transfer, assignment or conveyance
is voluntary, by reason of operation of law or is otherwise made.
10. Notice. All notices, consents, directions, approvals,
authorizations, instructions, demands, statements, requests and other
communications given or made hereunder or in connection herewith shall be
sent in accordance with the provisions of and to the addresses set forth in
Section 8.1 of the Credit Agreement.
11. Changes in Laws Regarding Taxation. In the event of the
passage after the date of this Mortgage of any law of the State of New
Jersey deducting from the value of real property for the purpose of
taxation any lien or encumbrance thereon or changing in any way the laws
for the taxation of mortgages or deeds of trust or debts secured by
mortgages or deeds of trust for state or local purposes or the manner of
the collection of any such taxes, and imposing a tax, either directly or
indirectly, on this Mortgage, the Notes, the Credit Agreement, any of the
Loan Instruments or the Debt, Mortgagor shall, if permitted by law, pay any
tax imposed as a result of any such law within the statutory period or
within thirty (30) days after demand by Mortgagee, whichever is less,
provided, however, that if, in the opinion of the attorneys for Mortgagee,
Mortgagor is not permitted by law to pay such taxes, Mortgagee shall have
the right, at its option, to declare the Debt due and payable on a date
specified in a prior notice to Mortgagor of not less than sixty (60) days.
12. [Intentionally Omitted]
13. Sale of Mortgaged Property. If this Mortgage is foreclosed,
the Mortgaged Property, or any interest therein, may, at the discretion of
Mortgagee, be sold in one
11
<PAGE>
or more parcels or in several interests or portions and in any order or
manner.
14. No Credits on Account of the Debt. Mortgagor will not claim
or demand or be entitled to any credit or credits on account of the Debt
for any part of the Taxes assessed against the Mortgaged Property or any
part thereof and no deduction shall otherwise be made or claimed from the
taxable value of the Mortgaged Property, or any part thereof, by reason of
this Mortgage or the Debt.
15. Other Security for the Debt. Mortgagor shall observe and
perform all of the terms, covenants and provisions on the part of Mortgagor
to be observed and performed contained in the Credit Agreement and the Loan
Instruments and in all other mortgages and other instruments or documents
evidencing, securing or guaranteeing payment of the Debt, in whole or in
part, or otherwise executed and delivered in connection with the Credit
Agreement, the Notes or this Mortgage.
16. Documentary Stamps. If at any time the United States of
America, any state thereof or any governmental subdivision of any such
state, shall require revenue or other stamps to be affixed to the Notes or
this Mortgage, Mortgagor will pay the same, with interest and penalties
thereon, if any.
17. Right of Entry. Mortgagee and its agents shall have the
right to enter and inspect the Mortgaged Property as provided in the Credit
Agreement.
18. Books and Records. Mortgagor will comply with all of the
provisions and requirements of the Credit Agreement concerning its books,
records and accounts reflecting the financial affairs of Mortgagor and the
Parlin Plant.
19. Ground Lease.
(a) Mortgagor shall (i) pay all rents, additional rents and
other sums required to be paid by the tenant under and pursuant to the
provisions of the Ground Lease, (ii) diligently perform and observe all of
the terms, covenants and conditions of the Ground Lease on the part of the
tenant thereunder to be performed and observed, unless such performance or
observance shall be waived or not required by the landlord under the Ground
Lease, to the end that all things shall be done which are necessary to keep
unimpaired the rights of the tenant under the Ground Lease,
12
<PAGE>
and (iii) promptly notify Mortgagee of the giving of any notice by the
landlord under the Ground Lease of any default in the performance or
observance of any of the terms, covenants or conditions of the Ground Lease
on the part of the tenant thereunder to be performed or observed and
deliver to Mortgagee a true copy of each such notice. Mortgagor shall not,
without the prior consent of Mortgagee, which consent shall not be
unreasonably withheld, conditioned or delayed, surrender the leasehold
estate created by the Ground Lease or terminate or cancel the Ground Lease
or modify, change, supplement, alter or amend the Ground Lease, in any
respect, either orally or in writing, and Mortgagor hereby assigns to
Mortgagee, as further security for the payment of the Debt and for the
performance and observance of the terms, covenants and conditions of this
Mortgage, the Credit Agreement and the other Loan Instruments, all of the
rights, privileges and prerogatives of the tenant under the Ground Lease to
surrender any leasehold estate or easement interests created by the Ground
Lease or to terminate, cancel, modify, change, supplement, alter or amend
the Ground Lease, and any such surrender of the leasehold estate or
easement interests created by the Ground Lease or termination,
cancellation, modification, change, supplement, alteration or amendment of
the Ground Lease without the prior consent of Mortgagee, shall be void and
of no force and effect. If Mortgagor shall default in the performance or
observance of any term, covenant or condition of the Ground Lease to be
performed or observed by the tenant thereunder, then, without limiting the
generality of the other provisions of this Mortgage, and without waiving or
releasing Mortgagor from any of its obligations hereunder, Mortgagee shall
have the right, but shall be under no obligation, to pay any sums and to
perform any act or take any action as may be appropriate to cause all of
the terms, covenants and conditions of the Ground Lease on the part of the
tenant thereunder to be performed or observed, to be promptly performed or
observed on behalf of Mortgagor, to the end that the rights of Mortgagor
in, to and under the Ground Lease shall be kept unimpaired and free from
default. If Mortgagee shall make any payment or perform any act or take
action in accordance with the preceding sentence, Mortgagee will notify
Mortgagor of the making of any such payment, the performance of any such
act, or taking of any such action. In any such event, subject to the
rights of lessees, and other occupants under the Other Leases, Mortgagee
and any person designated by Mortgagee shall have, and are hereby granted,
the right to enter upon the Mortgaged Property at any time and from time to
time for the purpose of taking any such action. If the landlord under the
Ground Lease shall deliver to Mortgagee a copy of
13
<PAGE>
any notice of default sent by said landlord to Mortgagor, as tenant under
such Ground Lease, such notice shall constitute full protection to
Mortgagee for any action taken or omitted to be taken by Mortgagee, in good
faith, in reliance thereon. Mortgagor shall, from time to time, use its
reasonable efforts to obtain from the landlord under the Ground Lease such
certificates of estoppel with respect to compliance by Mortgagor with the
terms of the Ground Lease as may be reasonably requested by Mortgagee.
Mortgagor shall exercise each individual option, if any, to extend or renew
the term of the Ground Lease, or option to purchase or right of first
refusal with respect to purchase of the Leasehold Premises, as the case may
be, upon demand by Mortgagee made at any time within one (1) year of the
last day upon which any such option may be exercised, and Mortgagor hereby
expressly authorizes and appoints Mortgagee its attorney-in-fact to
exercise, either jointly or individually, any such option or right of first
refusal in the name of and upon behalf of Mortgagor, which power of
attorney shall be irrevocable and shall be deemed to be coupled with an
interest.
(b) Mortgagor shall not, without Mortgagee's prior written
consent, elect to treat either the Ground Lease or the leasehold estate
created thereby as terminated under Subsection 365(h)(1) of the Bankruptcy
Code, after rejection or disaffirmance of the Ground Lease by the landlord
thereunder or by any trustee of such party, and any such election made
without such consent shall be void and ineffective.
(c) Subject to the Mortgagor's right to seek and retain certain
offsets as permitted hereunder, Mortgagor hereby unconditionally assigns,
transfers and sets over to Mortgagee all of Mortgagor's claims and rights
to the payment of damages that may hereafter arise as a result of any
rejection or disaffirmance of the Ground Lease by the landlord thereunder
or by any trustee of such party, pursuant to the Bankruptcy Code.
Mortgagee shall have and is hereby granted the right to proceed, in its own
name or in the name of the Mortgagor, in respect of any claim, suit, action
or proceeding relating to the rejection or disaffirmance of the Ground
Lease (including, without limitation, the right to file and prosecute, to
the exclusion of Mortgagor, any proofs of claim, complaints, motions,
applications, notices and other documents) in any case in respect of the
landlord under the Bankruptcy Code. This assignment constitutes a present,
irrevocable and unconditional assignment of the foregoing claims, rights
and remedies, and shall continue in effect until the Debt
14
<PAGE>
secured by this Mortgage shall have been satisfied and discharged in full.
Any amounts received by Mortgagee as damages arising out of any such
rejection of the Ground Lease shall be applied toward payment of the Debt
in such order and priority as contemplated under the Credit Agreement.
(d) In the event that, pursuant to Subsection 365(h)(2) of the
Bankruptcy Code, Mortgagor seeks to offset against the rent payable under
the Ground Lease the amount of any damages caused by the nonperformance by
the landlord of such party's obligations under the Ground Lease after
rejection or disaffirmance thereof under the Bankruptcy Code, Mortgagor
shall, prior to effecting such offset, notify Mortgagee in writing of
Mortgagor's intent to do so, setting forth the amounts proposed to be so
offset and the basis therefor. Mortgagee shall have the right to object in
writing (stating the reasons therefor) to all or any part of such offset,
and, in the event of such objection, Mortgagor shall not effect any offset
of the amounts so objected to by Mortgagee. If Mortgagee shall have failed
to object as aforesaid within twenty (20) days after such notice, Mortgagor
may proceed to effect such offset in the amounts set forth in such notice.
Neither Mortgagee's failure to object as aforesaid nor any objection or
other communication between Mortgagor and Mortgagee relating to such offset
shall constitute an approval by Mortgagee of any such offset. If, in the
best business judgment of the Mortgagor, such offset is justified and
Mortgagee has received the aforesaid notices and has not objected but its
time to do so has not expired, the Mortgagor shall have the right to make
such offset and shall set aside t@,- offset amount as a reserve to be paid
only if Mortgagee objects within the aforesaid time. Mortgagor shall
indemnify and hold Mortgagee and its officers, directors, employees and
agents harmless from and against any and all claims, demands, actions,
suits, proceedings, damages, losses, costs and expenses of every nature
whatsoever actually incurred (including, without limitation, reasonable
legal fees and disbursements) arising from or relating to any such offset
by Mortgagor.
(e) Mortgagor shall, promptly after obtaining knowledge thereof,
use its best efforts to give prompt oral notice to Mortgagee of any actual
or contemplated filing by or against the landlord under the Ground Lease of
a petition under the Bankruptcy Code, and give prompt written notice
thereof to Mortgagee of such actual or contemplated filing. The aforesaid
written notice shall set forth any information available to Mortgagor
concerning the date or anticipated
15
<PAGE>
date of such filing, the court in which such petition was filed or is
expected to be filed, and the relief sought or reasonably expected to be
sought therein. Mortgagor shall, promptly after receipt thereof, deliver
to Mortgagee any and all notices, summonses, pleadings, applications and
other documents received by Mortgagor in connection with any such petition
and any proceedings related thereto.
(f) In the event that any action, proceeding, motion or notice
shall be commenced or filed in respect of the landlord under the Ground
Lease or the Mortgaged Property or any part thereof, in connection with any
case under the Bankruptcy Code, Mortgagee shall have, and is hereby
granted, the option, to the exclusion of Mortgagor, exercisable upon notice
from Mortgagee to Mortgagor, to conduct and control any such litigation
with counsel of Mortgagee's choice. Mortgagee may proceed, in its own name
or in the name of Mortgagor, in connection with any such litigation, and
Mortgagor agrees to execute any and all powers, authorizations, consents
and other documents required by Mortgagee in connection therewith.
Mortgagor shall, upon demand, pay to Mortgagee all costs and expenses
(including without limitation, legal fees and disbursements) paid or
incurred by Mortgagee in connection with the prosecution or conduct of any
such proceedings, and, to the extent permitted by law, such costs and
expenses shall be deemed expenses incurred in upholding the lien of this
Mortgage and added to the indebtedness secured by this Mortgage. Mortgagor
shall not, without the prior written consent of Mortgagee, commence any
action, suit, proceeding or case, or file any application or make any
motion, in respect of the Ground Lease in any such case under the
Bankruptcy Code.
(g) In the event that a petition under the Bankruptcy Code shall
be filed by or against Mortgagor, and Mortgagor, or anyone claiming through
or under Mortgagor or a trustee in bankruptcy shall have the right to
reject the Ground Lease pursuant to Section 365(a) of the Bankruptcy Code
or a successor statute, Mortgagor shall give Mortgagee at least ten (10)
days' prior written notice of the date on which application shall be made
to the court for authority to reject the Ground Lease; provided, however,
that if a trustee in bankruptcy shall have a right to reject the Ground
Lease in less than ten (10) days, then Mortgagor shall give such notice to
Mortgagee immediately upon Mortgagor's knowledge of such application.
Mortgagee shall have the exclusive right, but not the obligation (subject
to the rights of a trustee in bankruptcy), to exercise said right and
Mortgagor hereby assigns said right to Mortgagee.
16
<PAGE>
If at any time the landlord under the Ground Lease, or anyone holding by,
through or under the landlord under the Ground Lease or a trustee in
bankruptcy shall elect to reject the Ground Lease pursuant to Section
365(a) of the Bankruptcy Code, or a successor statute, thereby giving to
Mortgagor the right to elect to treat the Ground Lease as terminated
pursuant to Section 365(h)(1) of the Bankruptcy Code, or a successor
statute, Mortgagee shall have the exclusive right to exercise said right
and Mortgagor hereby assigns said right to Mortgagee. If either of the
assignments provided for in this paragraph is held to be enforceable, then
Mortgagor, anyone claiming by, through or under Mortgagor or a trustee in
bankruptcy, shall not exercise rights purportedly assigned to Mortgagee
without the prior written consent of Mortgagee, and if Mortgagee shall give
such consent, Mortgagor, anyone claiming by, through or under Mortgagor or
a trustee in bankruptcy shall promptly exercise either of said rights.
(h) To the extent permitted by applicable law, Mortgagor hereby
assigns, transfers and sets over to Mortgagee an exclusive right to apply
to the Bankruptcy Court under Subsection 365(d)(4) of the Bankruptcy Code
for an order extending the period during which the Ground Lease may be
rejected or assumed after the entry of any order for relief in respect of
Mortgagor under Chapter 7 or Chapter 11 of the Bankruptcy Code.
20. No Merger of Fee and Leasehold Estates. So long as any
portion of the Debt shall remain unpaid, unless Mortgagee shall otherwise
consent, then the fee title to the Leasehold Premises and the leasehold
estate therein created pursuant to the provisions of the Ground Lease and
the fee title to the Improvements and all Equipment constituting a fixture,
and the fee title to the Easement Premises and the interests in real
property arising under the provisions of the Easements, shall not merge but
shall always be kept separate and distinct, notwithstanding the union of
such estates in Mortgagor, or in any other person (including Mortgagee) by
purchase, operation of law or otherwise (including without limitation a
union of estates arising from a foreclosure sale purchase or deed in lieu
of foreclosure).
21. Performance of Other Agreements. Mortgagor shall observe
and perform each and every term to be observed or performed by Mortgagor
pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to the Mortgaged Property.
17
<PAGE>
22. Defaults. The Debt shall become due at the option of
Mortgagee upon the occurrence of any one of the following events:
(a) if any Event of Default under the Credit Agreement shall
occur;
(b) if Mortgagor shall be in default beyond the expiration of
any applicable notice and cure period under any mortgage or deed of trust
covering any part of the Mortgaged Property whether superior or inferior in
lien to this Mortgage.
23. Right to Cure Defaults. If default in the performance of
any of the covenants of Mortgagor herein occurs, Mortgagee, without waiving
any default or releasing Mortgagor from any obligation, may (but shall be
under no obligation to) remedy the same for the account and at the cost and
expense of Mortgagor, and for such purpose shall have the right to enter
upon the Mortgaged Property without thereby becoming liable to Mortgagor or
any person in possession thereof holding under Mortgagor. If Mortgagee
shall remedy such a Default or appear in, defend or bring any action or
proceeding to protect its interest in the Mortgaged Property or to
foreclose this mortgage or collect the Debt, all costs and expenses
actually incurred (including, without limitation, reasonable attorneys'
fees) shall be paid by Mortgagor to Mortgagee on demand with interest to
the date of payment to Mortgagee at the Default Interest Rate. All such
costs and expenses incurred by Mortgagee, with interest at the Default
Interest Rate, shall be secured by this Mortgage
24. Appointment of Receiver. Mortgagee, in any action to
foreclose this Mortgage or upon the actual or threatened waste to any part
of the Mortgaged Property or upon the occurrence of any default hereunder,
shall be at liberty, without notice, to apply for the appointment of a
receiver of the Rents, and shall be entitled to the appointment of such
receiver as a matter of right, without regard to the value of the Mortgaged
Property as security for the Debt, or the solvency or insolvency of any
person then liable for the payment of the Debt.
25. Remedies Upon an Event of Default. Upon the occurrence of
any event described in paragraph 22 of this Mortgage, then Mortgagee may,
to the extent permitted by law, exercise any right, power or remedy
permitted to it hereunder, under the Credit Agreement or under any other
Loan Instruments, and, without limiting the generality of
18
<PAGE>
the foregoing, Mortgagee may, personally or by its agents, do any or all of
the following:
(a) declare the Debt to be immediately due and payable, and if
the same is not paid on demand, at Mortgagee's option, bring suit for any
delinquent payments under the Notes and take any and all steps and any and
all other proceedings that Mortgagee deems necessary to enforce the
indebtedness and obligations secured hereby and to protect the lien of this
Mortgage; and
(b) enter and take possession of the Mortgaged Property or any
part thereof, exclude the Mortgagor and all persons claiming under the
Mortgagor whose claims are junior to this Mortgage, wholly or partly
therefrom, and use, operate, manage and control the same either in the name
of the Mortgagor or otherwise as Mortgagee shall deem best, and upon such
entry, from time to time at the expense of the Mortgagor and the Mortgaged
Property, make all such repairs, replacements, alterations, additions or
improvements to the Mortgaged Property or any part thereof as Mortgagee may
deem proper and, whether or not Mortgagee has so entered and taken
possession of the Mortgaged Property or any part thereof, collect and
receive all the Rents and apply the same, to the extent permitted by law,
to the payment of all expenses which Mortgagee may be authorized to incur
under this Mortgage, the remainder to be applied to the payment of the Debt
until the same shall have been repaid in full; if Mortgagee demands or
attempts to take possession of the Mortgaged Property or any portion
thereof in the exercise of any rights hereunder, Mortgagor shall promptly
turn over and deliver complete possession thereto to Mortgagee; and
(c) proceed to protect and enforce its rights under this
Mortgage by suit for specific performance of any covenant contained herein,
in the Credit Agreement or in the Loan Instruments or in aid of the
execution of any power granted herein, in the Credit Agreement or in the
Loan Instruments, or for the foreclosure of this Mortgage and the sale of
the Mortgaged Property under the judgment or decree of a court of competent
jurisdiction, or for the enforcement of any other right as Mortgagee shall
deem effectual for such purpose; provided that in the event of a sale, by
foreclosure or otherwise, of less than all of the Mortgaged Property, this
Mortgage shall continue as a lien on, and security
19
<PAGE>
interest in, the remaining portion of the Mortgaged Property; and
(d) exercise any or all of the remedies available to a secured
party under the Uniform Commercial Code as provided in paragraph 35 hereof;
and
(e) without in any way limiting the rights hereunder pursuant to
paragraphs 6, 24 and 35 apply for the appointment of a receiver as a matter
of right, without regard to the adequacy of the security for the Debt or
the solvency of the Mortgagor. Mortgagor hereby irrevocably consents to
such appointment. Specifically, the Mortgagee or any receiver shall be
entitled to take possession of the Mortgaged Property from the owners,
tenants and/or occupants of the whole or any part thereof and to collect
and receive the Rents and the value of the use and occupation of the
Mortgaged Property, or any part thereof, from the then owner, tenants
and/or occupants thereof for the benefit of Mortgagee.
26. Mortgagor as Tenant Holding Over. In the event of any
foreclosure sale contemplated under paragraph 25 hereof, Mortgagor shall be
deemed to be a tenant holding over and shall forthwith deliver possession
to the purchaser or purchasers at such sale or be summarily dispossessed
according to provisions of law applicable to tenants holding over.
27. Discontinuance of Proceedings. In case Mortgagee shall have
proceeded to enforce any right, power or remedy under this Mortgage by
foreclosure, entry or otherwise, and such proceeding shall have been
withdrawn, discontinued or abandoned for any reason, or shall have been
determined adverse to Mortgagee, then in every such case (a) Mortgagor and
Mortgagee shall be restored to their former positions and rights, (b) all
rights, powers and remedies of Mortgagee shall continue as if no such
proceeding had been taken, (c) each and every uncured default declared or
occurring prior or subsequent to such withdrawal, discontinuance or
abandonment shall be or shall be deemed to be a continuing default and (d)
neither the Debt, this Mortgage, the Notes, the Credit Agreement nor the
other Loan Instruments, shall be or shall be deemed to have been affected
by such withdrawal, discontinuance or abandonment; and Mortgagor hereby
expressly waives the benefit of any statute or rule of law now provided, or
which may hereafter conflict with the above.
20
<PAGE>
28. No Reinstatement. If a default shall have occurred and
Mortgagee shall have proceeded to enforce any right, power or remedy
permitted hereunder, then a tender of payment by Mortgagor or by anyone on
behalf of Mortgagor of any amount less than the amount necessary to satisfy
the Debt in full, or the acceptance by Mortgagee of any such payment so
tendered, shall not constitute a reinstatement of this Mortgage, the Notes,
the Credit Agreement or any Loan Instrument.
29. Mortgagor's Waiver of Rights. To the full extent permitted
by law, except as otherwise specifically and expressly provided in this
Mortgage, the Credit Agreement or any Loan Instrument, Mortgagor waives the
benefit of all laws now existing or that hereafter may be enacted providing
for (i) any appraisement before sale of any portion of the Mortgaged
Property and (ii) the benefit of all Laws that may be hereafter enacted in
any way extending the time for the enforcement of the collection of the
Debt, or creating or extending a period of redemption from any sale made in
collecting said Debt. To the full extent that Mortgagor may do so,
Mortgagor agrees that Mortgagor will not at any time insist upon, plead,
claim or take the benefit or advantage of any law now or hereafter in force
providing for any appraisement, valuation, stay, extension or redemption,
or any so-called "Moratorium Laws" and Mortgagor, for Mortgagor and its
successors and assigns, and for any and all persons ever claiming any
interest in the Mortgaged Property, hereby waives and releases all rights
of redemption, valuation, appraisement, stay of execution, notice of
election to mature or declare due the whole of the secured indebtedness and
marshaling in the event of foreclosure of the liens hereby created. If any
Law referred to in this paragraph and now in force, of which Mortgagor,
Mortgagor's successors and assigns or any other person might take advantage
despite this paragraph, shall hereafter be repealed or cease to be in
force, such Law shall not thereafter be deemed to preclude the application
of this paragraph.
30. Non-Waiver. The failure of Mortgagee to insist upon strict
performance of any term of this Mortgage shall not be deemed to be a waiver
of any term of this Mortgage. Borrowers shall not be relieved of their
obligation to pay the Debt at the time and in the manner provided for its
payment in the Notes, the Credit Agreement and the Loan Instruments (nor
shall any of Mortgagor's other obligations hereunder, under the Credit
Agreement or the other Loan Instruments, nor shall the other Borrowers'
obligations under the Credit Agreement or the other Loan
21
<PAGE>
Instruments be in any way affected) by reason of (i) failure of Mortgagee
to comply with any request of Mortgagor or the other Borrowers to take any
action to foreclose this Mortgage or otherwise enforce any of the
provisions hereof or of the Notes, the Credit Agreement, any other Loan
Instruments or any other mortgage, instrument or document evidencing,
securing or guaranteeing payment of the Debt or any portion thereof, (ii)
the release, regardless of consideration, of the whole or any part of the
Mortgaged Property or any other security for the Debt, or (iii) any
agreement or stipulation between Mortgagee and any subsequent owner or
owners of the Mortgaged Property or other person extending the time of
payment or otherwise modifying or supplementing the terms of the Notes, the
Credit Agreement, the Loan Instruments, this Mortgage or any other
mortgage, instrument or document evidencing, securing or guaranteeing
payment of the Debt or any portion thereof, without first having obtained
the consent of Mortgagor, and in the latter event, Mortgagor shall continue
to be obligated to pay the Debt at the time and in the manner provided in
the Notes, the Credit Agreement, the Loan Instruments, and this Mortgage
(as so extended, modified or supplemented, if such be the case) and shall
continue to be obligated to perform its other obligations hereunder and
under the Credit Agreement and the Loan Instruments (in each case, as so
extended, modified and supplemented) unless expressly released and
discharged from such obligation by Mortgagee in writing. Regardless of
consideration, and without the necessity for any notice to or consent by
the holder of any subordinate lien, encumbrance, right, title or interest
in or to the Mortgaged Property, Mortgagee may release any person at any
time liable for the payment of the Debt or any portion thereof or any part
of the security held for the Debt and may extend the time of payment or
otherwise modify the terms of the Notes, the Credit Agreement, the Loan
Instruments or this Mortgage (including, without limitation, a modification
of the interest rate payable on the principal balance of the Notes) without
in any manner impairing or affecting this Mortgage or the lien thereof or
the priority of this Mortgage, as so extended and modified, as security for
the Debt over any such subordinate lien, encumbrance, right, title or
interest.
31. Remedies Cumulative. Mortgagee may resort for the payment
of the Debt to any other security held by Mortgagee in such order and
manner as Mortgagee, in its discretion, may elect. Mortgagee may take
action to recover the Debt, or any portion thereof, or to enforce any
covenant hereof without prejudice to the rights of Mortgagee thereafter to
foreclose this mortgage. Mortgagee shall not
22
<PAGE>
be limited exclusively to the rights and remedies herein stated but shall
be entitled to every additional right and remedy now or hereafter afforded
by Law or equity. The rights of Mortgagee under this Mortgage shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Mortgagee shall be construed as an
election to proceed under any one provision herein to the exclusion of any
other provision. Mortgagee shall be entitled to enforce payment of the
Debt and performance of any of the obligations of the Mortgagor and to
exercise all rights and powers under this Mortgage or under any other Loan
Instrument or any Laws now or hereafter in force, notwithstanding that some
or all of such obligations may now or hereafter be otherwise secured,
whether by mortgage, pledge, lien, assignment or otherwise; neither the
acceptance of this Mortgage nor its enforcement, whether by court action or
pursuant to other powers herein contained, shall prejudice or in any manner
affect Mortgagee's right to realize upon or enforce any other security now
or hereafter held by the Mortgagor, it being stipulated that Mortgagee
shall be entitled to enforce this Mortgage and any other security now or
hereafter held by Mortgagee in such order and manner as Mortgagee, in
accordance with the terms hereof, may determine; every power or remedy
given by the Credit Agreement, this Mortgage or any of the other Loan
Instruments to the Mortgagee or to which the Mortgagee is otherwise
entitled, may be exercised, concurrently or independently, from time to
time and as often as may be deemed expedient by Mortgagee.
32. Liability. It Mortgagor consists of more than one person,
the obligations and liabilities of each such person hereunder shall be
joint and several.
33. Prepayment After Default. If following the occurrence of
any default under this Mortgage and an exercise by Mortgagee of its option
to declare the Debt immediately due, Mortgagor shall tender payment of an
amount sufficient to satisfy the entire Debt at any time prior to a sale of
the Mortgaged Property any such payment shall be accepted by Mortgagee only
if such payment is permitted at such time under the provisions of the
Credit Agreement.
34. Construction. The terms of this Mortgage shall be construed
in accordance with the laws of the State of New Jersey.
35. Security Agreement. This Mortgage constitutes both a real
property mortgage and a "security agreement" within the meaning of the
Uniform Commercial Code
23
<PAGE>
of the State of New Jersey and the Mortgaged Property includes both real
and personal property and all other rights and interest, whether tangible
or intangible in nature, of Mortgagor in the Mortgaged Property.
Mortgagor, by executing and delivering this Mortgage, has granted to
Mortgagee, as security for the Debt, a security interest in such of the
Mortgaged Property as is governed by the Uniform Commercial Code. Upon the
occurrence and continuation of an Event of Default hereunder, Mortgagee, in
addition to any other rights and remedies which it may have, shall have and
may exercise immediately and without demand, any and all rights and
remedies granted to a secured party upon default under the Uniform
Commercial Code including, without limiting the generality of the
foregoing, the right to take possession of such of the Mortgaged Property
as is governed by the Uniform Commercial Code personally, through an agent
or by means of a court-appointed receiver, and to take such other measures
as Mortgage may deem necessary for the care, protection and preservation of
such part of the Mortgaged Property. Upon request or demand of Mortgagee,
Mortgagor shall at its expense assemble such of the Mortgaged Property as
is governed by the Uniform Commercial Code and make it available to
Mortgagee at a convenient place acceptable to Mortgagee. Mortgagor shall
pay to Mortgagee on demand any and all expenses, including reasonable legal
expense and attorneys' fees, incurred or paid by Mortgagee in protecting
the interest in the Mortgaged Property herein granted and in enforcing its
rights hereunder with respect to such part of the Mortgaged Property. Any
notice of sale, disposition or other intended action by Mortgagee with
respect to such part of the Mortgaged Property sent to Mortgagor in
accordance with the provisions of this Mortgage at least five (5) days
prior to the date of any such sale, disposition or other action, shall
constitute reasonable notice to Mortgagor, and the method of sale or
disposition or other intended action set forth or specified in such notice
shall conclusively be deemed to be commercially reasonable within the
meaning of the Uniform Commercial Code unless objected to in writing by
Mortgagor within three (3) days after receipt by Mortgagor of such notice.
36. Further Acts, etc. Mortgagor will, at the cost of Mortgagor
and without expense to Mortgagee, do, execute, acknowledge and deliver all
and every such further acts, deeds, conveyances, mortgages, assignments,
notices of assignments, transfers and assurances as Mortgagee shall, from
time to time, require, for the better assuring, conveying, assigning,
transferring and confirming unto Mortgagee the property and rights hereby
mortgaged or intended now or hereafter so to be, or which Mortgagor may
24
<PAGE>
be or may hereafter become bound to convey or assign to Mortgagee, or for
carrying out the intention or facilitating the performance of the terms of
this Mortgage or for filing, registering or recording this Mortgage and, on
demand, will execute and deliver and hereby authorizes Mortgagee to execute
in the name of Mortgagor to the extent Mortgagee may lawfully do so, one or
more financing statements, chattel mortgages or comparable security
instruments, to evidence more effectively the lien hereof upon the
Mortgaged Property.
37. Headings. etc. The headings and captions of various
paragraphs of this Mortgage are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or
intent of the provisions hereof.
38. Recording of Mortgage, etc. Mortgagor forthwith upon the
execution and delivery of this Mortgage and thereafter, from time to time,
will cause this Mortgage, and any security instrument creating a lien or
evidencing the lien hereof upon the Mortgaged Property and each instrument
of further assurance to be filed, registered or recorded in such manner and
in such places as may be required by any present or future law in order to
publish notice of and fully to protect the lien hereof upon, and the
interest of Mortgagee in the Mortgaged Property. Mortgagor will pay all
filing, registration or recording fees, and all expenses actually incurred
incident to the preparation, execution and acknowledgment of this Mortgage,
any mortgage supplemental hereto, any security instrument with respect to
the Mortgaged Property and any instrument of further assurance, and all
Federal, state, county and municipal taxes, duties, imposts, assessments
and charges (including, without limitation, documentary stamp taxes and
intangible personal property taxes) arising out of or in connection with
the execution and delivery of this Mortgage or the Debt secured hereby, any
mortgage supplemental hereto, any security instrument or financing
statement with respect to the Mortgaged Property or any instrument of
further assurance. Mortgagor shall hold harmless and indemnify Mortgagee,
its successors and assigns, against any liability incurred by reason of the
imposition of any tax on the making and recording of this Mortgage.
39. Usury Laws. This Mortgage, the Credit Agreement and the
Notes are subject to the express condition that at no time shall Mortgagor
be obligated or required to pay interest on the principal balance due under
the Notes at a rate which could subject the holder of the Notes to either
25
<PAGE>
civil or criminal liability as a result of being in excess of the maximum
interest rate which Mortgagor is permitted by Law to contract or agree to
pay. If by the terms of this Mortgage, the Credit Agreement or the Notes,
Mortgagor is at any time required or obligated to pay interest on the
principal balance due under the Notes at a rate in excess of such maximum
rate, the rate of interest under the Notes (and the Credit Agreement) shall
be deemed to be immediately reduced to such maximum rate and the interest
payable shall be computed at such maximum rate and all prior interest
payments in excess of such maximum rate shall be applied and shall be
deemed to have been payments in reduction of the principal balance of the
Notes.
40. Sole Discretion of Mortgagee. Except as otherwise
specifically provided in this Mortgage, wherever pursuant to this Mortgage,
Mortgagee exercises any right given to it to consent or to withhold its
consent, to approve or disapprove, or any arrangement or term is to be
satisfactory to Mortgagee, the decision of Mortgagee to consent or to
withhold its consent, to approve or disapprove or to decide that
arrangements or terms are satisfactory or not satisfactory shall be in the
sole discretion of Mortgagee and shall be final and conclusive.
41. Recovery of Sums Required To Be Paid. Mortgagee shall have
the right from time to time to take action to recover any sum or sums which
Constitute a part of the Debt as the same become due, without regard to
whether or not the balance of the Debt shall be due, and without prejudice
to the right of Mortgagee thereafter to bring an action of foreclosure, or
any other action, for a default or defaults by Mortgagor existing at the
time such earlier action was commenced.
42. Absolute and Unconditional Obligation. Mortgagor
acknowledges that Borrower's obligation to pay the Debt in accordance with
the provisions of the Notes, the Credit Agreement and the Loan Instruments
is and shall at all times continue to be absolute and unconditional in all
respects, and shall at all times be valid and enforceable irrespective of
any other agreements or circumstances of any nature whatsoever which might
otherwise constitute a defense to the Notes, the Credit Agreement or any of
the Loan Instruments or the obligation of Borrowers thereunder to pay the
Debt or the obligations of any other person relating to the Notes, the
Credit Agreement or any of the Loan Instruments or the obligations of
Borrowers under the Notes, the Credit Agreement or any of the Loan
Instruments, and to the full extent permitted by law, Mortgagor absolutely,
26
<PAGE>
unconditionally and irrevocably waives any and all right to assert any
defense, setoff, counterclaim or crossclaim of any nature whatsoever with
respect to the obligation of Borrowers to pay the Debt in accordance with
the provisions of the Notes, the Credit Agreement and the Loan Instruments
or the obligations of any other person relating to the Notes, the Credit
Agreement or any of the Loan Instruments or the obligations of Borrowers
under the Notes, the Credit Agreement or any of the Loan Instruments, or in
any action or proceeding brought by Mortgagee to collect the Debt, or any
portion thereof, or to enforce, foreclose and realize upon the lien and
security interest created by this mortgage or any other document or
instrument securing repayment of the Debt, in whole or in part.
43. Indemnification; Waiver of Offset.
(a) If Mortgagee, Agent or any of the Secured
Parties are made a party defendant to any litigation concerning the Notes,
the Credit Agreement, this Mortgage, any other Loan Instrument or the
Mortgaged Property or any part thereof or interest therein, or the
occupancy thereof by Mortgagor, then Mortgagor shall indemnify, defend and
hold Mortgagee and/or such Secured Parties, as the case may be, harmless
from all liability by reason of said litigation, including reasonable
attorneys' fees and expenses incurred by Mortgagee and/or such Secured
Parties, as the case may be, in any such litigation, whether or not any
such litigation is prosecuted to judgment. If Mortgagee commences an
action against Mortgagor to enforce any of the terms hereof or because of
the breach by Mortgagor of any of the terms hereof or for the recovery of
any sum secured hereby, Mortgagor shall pay the Mortgagee's attorneys' fees
and expenses, together with interest thereon at the Default Interest Rate
from the date the same are paid to the date of reimbursement by Mortgagor
and the right to such reasonable attorneys' fees and expenses shall be
deemed to have accrued on the commencement of such action, and shall be
enforceable whether or not such action is prosecuted to judgment. if
Mortgagor breaches any term of this Mortgage, the Mortgagee may engage an
attorney or attorneys to protect Mortgagee's rights hereunder, and in the
event of such engagement following any breach by Mortgagor, Mortgagor shall
pay the Mortgagee's reasonable attorneys' fees and expenses so incurred,
whether or not an action is actually commenced against mortgagor by reason
of breach.
(b) All sums secured by this Mortgage shall be paid in
accordance with the Credit Agreement, the Notes, and any other Loan
Instruments, as applicable, and without
27
<PAGE>
counterclaim, setoff, deduction or defense and without abatement,
suspension, deferment, diminution or reduction, and the obligations and
liabilities of Mortgagor hereunder shall in no way be released, discharged
or otherwise affected (except as expressly provided herein) by reason of
(i) any claim which any of the Borrowers (or Mortgagor) have or might have
against Mortgagee or any of the Secured Parties or (ii) any default or
failure on the part of the Mortgagee to perform or comply with any of the
terms hereof or of any other agreement with any of the Borrowers (or
Mortgagor).
44. Authority. Mortgagor (and the undersigned representative of
Mortgagor) has full power, authority and legal right to execute this
Mortgage and to mortgage, give, grant, bargain, sell, alien, enfeoff,
convey, confirm and assign the Mortgaged Property pursuant to the terms
hereof and to keep and observe all of the terms of this Mortgage on
Mortgagor's part to be kept and observed.
45. Actions and Proceedings. Mortgagee shall have the right to
appear in and defend any action or proceeding brought with respect to the
Mortgaged Property and to bring any action or proceeding, in the name and
on behalf of Mortgagor, which the Mortgagee, in its reasonable discretion,
feels should be brought to protect the Mortgagee's interest in the
Mortgaged Property.
46. Inapplicable Provisions. If any term, covenant or condition
of this Mortgage shall be held to be invalid, illegal or unenforceable in
any respect, this Mortgage shall be construed without such provision.
47. Duplicate Originals. This mortgage may be executed in any
number of duplicate originals and each such duplicate original shall be
deemed to constitute but one and the same instrument.
48. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words
used in this Mortgage shall be used interchangeably in singular or plural
form and the word "Mortgagor" shall mean Mortgagor and any subsequent owner
or owners of the Mortgaged Property or any part thereof or interest
therein; the word "Agent" shall mean Agent or any successor agent appointed
by the Secured Parties; the word "Notes" shall mean each of the Notes or
any other evidence of indebtedness secured by this Mortgage; the word
"Borrowers" shall mean each of the Mortgagor and NRG Generating (Newark)
Cogeneration Inc. or either of them,
28
<PAGE>
as the context requires, and any person becoming a borrower under the
Credit Agreement and their respective heirs, executors, administrators,
legal representatives, successors and assigns; the word "Mortgagee" shall
mean all of or any of the entities constituting Mortgagee, as the context
requires, and shall include the rights of Agent to act on behalf of the
Secured Parties under and pursuant to the Credit Agreement; and the words
"Mortgaged Property" shall include any portion of the Mortgaged Property or
interest therein; the word "Debt" shall mean all sums and performance
secured by this Mortgage. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural
and vice versa.
49. Remedies Not Exclusive. Mortgagee shall be entitled to
enforce payment and performance of any indebtedness or obligations secured
hereby and to exercise all rights and powers granted under this Mortgage or
under the Credit Agreement or the Notes or under any of the Loan
Instruments or under any Laws now or hereafter in force, notwithstanding
some or all of the said indebtedness and obligations secured hereby may now
or hereafter be otherwise secured, whether by mortgage, deed of trust,
pledge, lien, assignment or otherwise. Neither the acceptance of this
Mortgage nor its enforcement, whether by court action or other powers
herein contained, shall prejudice or in any manner affect Mortgagee's right
to realize upon or enforce any other security now or hereafter held by
Mortgagee, it being agreed that Mortgagee shall be entitled to enforce this
Mortgage and any other security now or hereafter held by Mortgagee, in such
order and manner as it may in its absolute discretion determine. No remedy
herein conferred upon or reserved to Mortgagee is intended to be exclusive
of any other remedy herein or by Law provided or permitted, but each shall
be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at Law or in equity or by statute.
Every right, power or remedy given by the Credit Agreement, this Mortgage
or any of the Loan Instruments to Mortgagee may be exercised, concurrently
or independently, from time to time and as often as may be deemed expedient
by Mortgagee. Every right, power or remedy given by this Mortgage to the
Mortgagee may be exercised by Agent on behalf of all Secured Parties
pursuant to the Credit Agreement, whether so expressed or not.
50. Joinder of Individual Special Co-Agent. An individual,
appointed by Agent in its discretion, may be
29
<PAGE>
joined as special co-agent (in such capacity, the "Special Co-Agent")
hereunder in order to comply with any legal requirements respecting agents
under mortgages of property in the jurisdiction in which the Mortgaged
Property or any part thereof is or may be situated so that if, by any
present or future law in New Jersey or in any jurisdiction in which it may
be necessary to perform any act in the exercise of the rights of Mortgagee
hereunder, the Agent shall be incompetent or unqualified to so act, then
all of the acts required to be performed in such jurisdiction in the
exercise of the rights of Mortgagee hereunder created hereby shall be
performed by the Special Co-Agent and the Agent jointly, or the Special Co-
Agent acting alone. In case the Special Co-Agent shall resign or be
removed, or die or become incapable of acting, Mortgagee's interest in the
Mortgaged Property, and all rights, powers, trusts, duties and obligations
of Mortgagee shall, so far as permitted by law, vest in and be exercised by
the Agent, unless and until a successor Special Co-Agent shall be
appointed. The Special Co-Agent shall not be personally liable by reason
of any act or omission of the Agent or any co-agent or separate agent or by
reason of any act or omission of the Special Co-Agent taken or omitted to
be taken pursuant to written instructions received by him from the Agent.
Notice to the Agent or a co-agent or separate agent shall not constitute
notice to the Special Co-Agent unless and until such notice is actually
received by the Special Co-Agent.
51. Relationship. The relationship of Mortgagee to Mortgagor
hereunder is strictly and solely that of lender and borrower and nothing
contained in the Notes, this Mortgage, the Credit Agreement, or any other
Loan Instrument is intended to create, or shall in any event or under any
circumstance be construed as creating, a partnership, joint venture,
tenancy-in-common, joint tenancy or other relationship of any nature
whatsoever between Mortgagee and Mortgagor other than as lender and
borrower.
52. Waiver of Notice. Mortgagor shall not be entitled to any
notices of any nature whatsoever from Mortgagee except with respect to
matters for which this Mortgage specifically and expressly provides for the
giving of notice by Mortgagee to Mortgagor and Mortgagor hereby expressly
waives the right to receive any notice from Mortgagee with respect to any
matter for which this Mortgage does not specifically and expressly provide
for the giving of notice by Mortgagee to Mortgagor.
53. Waiver of Trial by Jury. Mortgagor hereby irrevocably and
unconditionally waives, and Mortgagee by its
30
<PAGE>
acceptance of the Notes and this Mortgage irrevocably and unconditionally
waives, any and all rights to trial by jury in any action, suit or
counterclaim arising in connection with, out of or otherwise relating to
the Notes, this Mortgage, the Credit Agreement, or the other Loan
Instruments.
54. Waiver of Statutory Rights. Mortgagor shall not and will
not apply for or avail itself of any appraisement, valuation, stay,
extension or exemption laws, or any so-called "moratorium laws," now
existing or hereafter enacted, in order to prevent or hinder the
enforcement or foreclosure of this Mortgage, but hereby waives the benefit
of such laws to the full extent that Mortgagor may do so under applicable
law. Mortgagor, for itself and all who may claim through or under it,
waives any and all right to have the property and estates comprising the
Mortgaged Property marshalled upon any foreclosure of the lien of this
Mortgage and agrees that any court having jurisdiction to foreclose such
lien may order the Mortgaged Property sold as an entirety. Mortgagor
hereby waives for itself and all who may claim through or under it, and to
the full extent Mortgagor may do so under applicable law, any and all
rights of redemption from sale under any order or decree of foreclosure of
this Mortgage or granted under any statute now existing or hereafter
enacted.
55. Credit Agreement. This Mortgage is subject to all of the
terms, covenants and conditions of the Credit Agreement, which Credit
Agreement and all of the terms, covenants and conditions thereof are by
this reference incorporated herein and made a part hereof with the same
force and effect as if set forth at length herein. The proceeds of the
Funding Loans and Debt Service Loans secured hereby are to be advanced by
Mortgagee to Mortgagor in accordance with the provisions of the Credit
Agreement. Mortgagor shall observe and perform all of the terms, covenants
and conditions of the Credit Agreement on Mortgagor's part to be observed
or performed. All advances made and all indebtedness arising and accruing
under the Credit Agreement with respect to the Funding Loans or Debt
Service Loans thereunder from time to time shall be secured hereby. In the
event of any conflict or ambiguity between the terms, covenants and
conditions of this Mortgage and the Credit Agreement, the terms, covenants
and conditions which shall enlarge the rights and remedies of Mortgagee and
the
31
<PAGE>
interest of Mortgagee in the Mortgaged Property, afford Mortgagee greater
financial security in the Mortgaged Property and better assure payment of
the Debt in full, shall control.
56. No Oral Change. This Mortgage may only be modified or
amended by an agreement in writing signed by Mortgagor and Mortgagee, and
may only be released, discharged or satisfied of record by an agreement in
writing signed by Mortgagee. No waiver of any term, covenant or provision
of this Mortgage shall be effective unless given in writing by Mortgagee
and if so given by Mortgagee shall only be effective in the specific
instance in which given. Mortgagor acknowledges that the Notes, this
mortgage, the Credit Agreement and the other Loan Instruments set forth the
entire agreement and understanding of Mortgagor and Borrowers with respect
to the Debt secured hereby and that no oral or other agreements,
understanding, representation or warranties exist with respect to the Debt
secured hereby other than those set forth in the Notes, this Mortgage, the
Credit Agreement and the other Loan Instruments.
57. True Copy. Mortgagor acknowledges receipt of a true copy of
this Mortgage.
IN WITNESS WHEREOF, Mortgagor has duly executed this Mortgage as
of the day and year first above written under seal.
ATTEST: NRG GENERATING (PARLIN)
COGENERATION INC.
/s/ By: /s/ Leonard Bluhm
Name: Name: Leonard A. Bluhm
Title: Title: President
32
<PAGE>
STATE OF NEW YORK )
ss.:
COUNTY OF NEW YORK )
Be it remembered that on this 28th day of June, 1996, before me,
/s/ Barbara J. Vitale, a notary public, personally appeared Leonard A.
Bluhm, the President of NRG GENERATING (PARLIN) COGENERATION INC., who I am
satisfied is the person who has signed the foregoing instrument, and he did
acknowledge that he signed, sealed with the seal of the said corporation,
and delivered said instrument as the officer above stated, and that the
foregoing instrument is the voluntary act and deed of said corporation,
made by virtue of the authority of its board of directors.
/s/ Barbara J. Vitale
Notary Public
My commission expires:
[Seal]
<PAGE>
EXHIBIT A
(Description of Premises)
BEGINNING at a point in the southerly line of Washington Road,
said point being the dividing line between the easterly line of Lot 1.04 in
Block 42 and the westerly line of Lot 1.03 in Block 42 of Middlesex County
now or formerly Young Mens Christian Association of Perth Amboy and
running;
thence (1) along the dividing line of Lots 1.03 and 1.04 in Block 42 and
along the westerly line of lands now or formerly Young Mens
Christian Association of Perth Amboy S 1 deg. 06 min. E 338.19
feet;
thence (2) S 86 deg.47 min.09 sec. E 156.06 feet;
thence (3) S 28 deg.49 min.27 sec. W 450.74 feet;
thence (4) S 33 deg.30 min.27 sec. W 175.92 feet;
thence (5) N 61 deg.10 min.33 sec. W 267.36 feet;
thence (6) N 28 deg.49 min.27 sec. E 445.00 feet;
thence (7) S 82 deg.53 min.33 sec. E 110.00 feet;
thence (8) N 1 deg. 06 min W 382.02 feet, partially along the easterly
line of Lot 1.01 in Block 42, now or formerly E. I. Du Pont De
Nemours & Co., to the southerly line of Washington Road;
thence (9) along said southerly line of Washington Road, N 88 deg. 54 min.
E 70.00 feet to the point or place of BEGINNING.
CONTAINING 175,124.6 square feet or 4.020 acres, as described and
depicted on that certain survey prepared by Casey & Keller, Inc., certified
by Herbert H. Keller, N.J. P.L.S. Reg. #8225; N.J. P.P. Req.# 747, dated
June 19, 1996.
TOGETHER WITH, rights under that certain Easement for Common
Roadway, recorded in Deed Book 3899, Page 340, as amended in Deed Book
3899, Page 348, Middlesex County records.
TOGETHER WITH, rights under that certain Reciprocal Easement
Agreement, dated June 28, 1996, between E. I. Du Pont De Nemours & Company
and NRG Generating (Parlin) Cogeneration Inc., to be recorded in Middlesex
County, New Jersey records.
<PAGE>
EXHIBIT B
(Description of the Easements)
1. Easement dated February 4, 1991 by and among E. I. Du Pont de Nemours
and Company, Borough of Sayreville and O'Brien (Parlin) Cogeneration,
Inc. recorded in the Middlesex County Clerk's Office on February 19,
1991 in Deed Book 3899, page 340 and re-recorded in said Clerk's Office
on February 19, 1991 in Deed Book 3899, page 348.
2. Reciprocal Easement Agreement dated June 28, 1996 between NRG
Generating (Parlin) Cogeneration Inc. and E. I. Du Pont de Nemours and
Company to be recorded in the Middlesex County Clerk's Office prior to
the recordation of this Mortgage.
<PAGE>
Exhibit 10.9.1
$10,000,000
LOAN AGREEMENT
Dated as of March 8, 1996
Between
NRG ENERGY, INC.
And
O'BRIEN (SCHUYLKILL) COGENERATION, INC.
<PAGE>
LOAN AGREEMENT, dated as of March 8, 1996, between O'BRIEN
(SCHUYKILL) COGENERATION, INC., a Delaware corporation (the "Company") and
NRG ENERGY, INC., a Delaware corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, all the outstanding capital stock of the Company is
owned by O'Brien Environmental Energy, Inc., a Delaware corporation (the
"Parent");
WHEREAS, the Parent is the debtor and the debtor in possession in
Chapter 11 case number 94-26723 (the "Case") pending before the United
States Bankruptcy Court for the District of New Jersey (the "Bankruptcy
Court");
WHEREAS, pursuant to the Composite Fourth Amended and Restated
Plan of Reorganization for the Parent proposed by the Lender, Wexford
Management Corp. and the official Committee of Equity Security Holders
dated January 31, 1995 (as amended and confirmed by order of the Bankruptcy
Court entered on February 22, 1996, the "NRG Plan"; capitalized terms used
herein without definition shall have the respective meanings assigned to
them in the NRG Plan), and subject to the terms and conditions of the
Amended and Restated Stock Purchase and Reorganization Agreement dated as
of January 31, 1996 between the Lender and the Parent, the Lender has the
right, subject to the fulfillment of certain conditions precedent by the
Parent and the Lender, to acquire 41.86% of the outstanding shares of
common Stock of the Parent;
WHEREAS, the Company is a partner in the Grays Ferry Cogeneration
Partnership (the "Partnership") established under the law of the State of
Pennsylvania pursuant to an Amended and Restated Partnership Agreement,
dated as of March 1, 1996 (as amended, supplemented or otherwise modified,
the "Partnership Agreement"), among the Company, Adwin (Schuykill)
Cogeneration, Inc., a Pennsylvania corporation, and Trigen-Schuylkill
Cogeneration, Inc., a Pennsylvania corporation;
WHEREAS, the Partnership is developing a cogeneration facility
(the "Facility") to be constructed in Philadelphia, Pennsylvania;
WHEREAS, it is a condition of the construction financing for the
Facility being obtained as of March 1, 1996 by the Partnership from a
syndicate of lenders (the "Banks") for whom The Chase Manhattan Bank, N.A.
is acting as agent (the "Agent") that the Partnership pay $30,000,000 (the
"Partnership Equity Contribution") to the Agent on the terms and conditions
set forth in the Credit Agreement, dated as of
<PAGE>
March 1, 1996 (the "Partnership Credit Agreement"), among the Partnership,
the Banks and Chase;
WHEREAS, pursuant to the Partnership Credit Agreement and the
Partnership Agreement, the Partnership Equity Contribution has been
subdivided into three $10,000,000 tranches -- A, B and C, and the Company
is responsible for contributing $10,000,000 (the "Required Equity
Contribution") to the Partnership so that the Partnership may make the
$10,000,000 Tranche A portion (the "Tranche A Obligation") of the
Partnership Equity contribution to the Agent;
WHEREAS, in order to provide assurance to the Banks and the Agent
that the Company will make the Required Equity Contribution and that the
Partnership will make the payment of the Tranche C Obligation, the Company
has requested that the Lender enter into a Guarantee, dated as of March 1,
1996 (the "Chase Guarantee"), in favor of the Agent pursuant to which the
Lender guarantees the payment by the Partnership of Tranche A obligation;
WHEREAS, the Company has agreed to reimburse the Lender for any
drawings under the Chase Guarantee;
WHEREAS, the Company has requested that the Lender agree to
provide the Company, with a loan in a principal amount of up to $10,000,000
on the terms and conditions set forth herein to fund the Required Equity
contribution;
WHEREAS, the Lender is willing to enter into the Chase Guarantee and to
lend up to $10,000,000 to the Company an the terms and conditions
set forth herein;
WHEREAS, the Parent is willing to guarantee to the Lender the
repayment by the Company of such reimbursement obligations and/or such loan
and to secure its guarantee obligations with a pledge of the shares of the
Company;
WHEREAS, the Lender and the Parent have agreed that upon the
effectiveness of the NRG Plan, the Lender shall have the option under its
agreement with the Parent to forgive $3 million of any loan-outstanding
hereunder in exchange for 5.767% of the equity of the Parent;
NOW, THEREFORE, the Company and the Lender agree as follows:
2
<PAGE>
A. ARTICLE 1
B. Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the
terms defined in the caption hereto shall have the meanings set forth
therein, and the following terms have the following meanings:
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or
indirect common control with such specified Parson or (ii) any Person who
is a director or officer (a) of such Person, (b) of any subsidiary of such
Person or (c) of any Person described in clause (i) above. For the
purposes of this definition, "control" when used with respect to any Person
means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "Controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of Sections 11.04 and
11.05 of the Guaranty only, "Affiliate,, shall also mean any beneficial
owner of shares representing 5% or more of the total voting power of the
Voting Stock (on a fully diluted basis) of the Parent or of rights or
warrants to purchase such Voting Stock (whether or not currently
exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Agent" shall have the meaning assigned thereto in the Recitals.
"Agreement" means this Loan Agreement, as amended, supplemented
or Modified from time to time.
"Asset Disposition" means, with respect to any Person, any sale,
lease, transfer or other disposition of shares of Capital Stock of a
Restricted Subsidiary (as defined in the Parent Guaranty) (other than
directors, qualifying shares), property or other assets (each referred to
for the purposes of this definition as a "disposition") by such Person or
any of its Restricted Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction).
"Bank Pledge Agreement" means a pledge agreement to be made by
the Parent in favor of the Agent for the ratable benefit of the Banks with
respect to the Pledged Shares.
"Bankruptcy Court" shall have the meaning assigned thereto in the
Recitals.
3
<PAGE>
"Bankruptcy Law" shall have the meaning assigned thereto in
Section 8.01.
"Banks" shall have the meaning assigned thereto in the Recitals.
"Board of Directors" means, with respect to any Person, the Board
of Directors of such Person or any committee thereof duly authorized to act
on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in New York city are authorized or required
by law to close.
"Capital Stock" of any Person means any and all shares,
interests, rights to purchase, Warrants, options, participations or other
equivalents of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities
convertible into such equity.
"Capitalized Lease obligations" means an obligation that is
required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligation shall be the capitalized amount
of such obligation determined in accordance with GAAP; and the Stated
Maturity thereof shall be the date of the last payment of rent or any other
amount due under such lease.
"Case" shall have the meaning assigned thereto in the Recitals.
"Chase Guarantee" shall have the meaning assigned thereto in the
Recitals.
"Closing Date" means the date on which the Lender makes the Loan.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial L/C" means a commercial documentary letter of credit
under which the issuer agrees to make payments in Dollars for the account
of the Parent, on behalf of the Parent or a Subsidiary thereof, in respect
of obligations of the Parent or such Subsidiary in connection with the
purchase of goods or services in the ordinary course of business.
"Commonly Controlled Entity" means, with respect to any Person,
an entity, whether or not incorporated, which is
4
<PAGE>
under Common Control with such Person within the meaning of Section 414(b)
or (c) of the Code.
"Company" means the party named as such in this Agreement until a
successor replaces it and, thereafter, means the successor.
"Contingent obligation" means as to any Person, any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness,
dividends or other obligations ("primary obligations") of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including any obligation of such Person, whether or not contingent (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or
hold harmless the owner of any such primary obligation against loss in
respect thereof; provided, however, that the term contingent obligation
shall not include endorsements of instruments for deposit or collection in
the ordinary course of business. The amount of any Contingent obligation
shall be deemed to be an amount equal to the stated or determinable amount
(based upon the maximum reasonably anticipated net liability in respect
thereof as determined by the Company in good faith) of the primary
obligation or portion thereof in respect of which such Contingent
obligation is made or, if not stated or determinable, the maximum
reasonably anticipated net liability in respect thereof (assuming such
Person is required to perform thereunder) as determined by the Company in
good faith.
"Contractual Obligation" means as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"Credit Documents" means the collective reference to this
Agreement, the Note, the Parent Guarantee, the Parent option Agreement and
the Parent Pledge Agreement.
"Currency Agreement" means in respect of a Person any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or a beneficiary.
5
<PAGE>
"Custodian" shall have the meaning assigned thereto in Section
8.01.
6. "Default means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable or exercisable) or
upon the happening of any event (i) matures or is mandatorily redeemable
pursuant to a sinking fund obligation or otherwise, (ii) is convertible or
exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable
at the option of the holder thereof, in whole or in part, in each case an
or prior to the first anniversary of the Stated Maturity of the Note.
"Dollars" and "$" means dollars in lawful currency of the United
States of America.
7. "Effective Date" shall have the meaning assigned thereto in
Section 4.01.
"Equity Contribution Agreement" shall have the meaning assigned
thereto in the Recitals.
"Event of Default" shall have the meaning assigned thereto in
Section 8.01.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Facility" shall have the meaning assigned thereto in the
Recitals.
"Final Order" shall have the meaning assigned thereto in Section
4.01.
"Fiscal Date" means the Saturday closest to February 1, May 1,
August 1 or November 1, as the case may be, in any calendar year.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
6
<PAGE>
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keepwell, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in
any other manner the obligee of such Indebtedness or other obligation of
the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part) ; provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Highest Lawful Rate" shall have the meaning assigned thereto in
section 9.10.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; Provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such person becomes a Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication) :
(i) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money,
(ii) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other
similar instruments,
(iii) all obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations
with respect thereto) ,
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables) ,
which purchase price is
7
<PAGE>
due more that six months after the date of placing such property in service
or taking delivery and title thereto or the completion of such services,
(v) all Capitalized Lease Obligations of such Person,
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified
Stock or, with respect to any Subsidiary of the Company, any
Preferred Stock (but excluding, in each case, any accrued
dividends),
(vii) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by
such Person; provided, however, that the amount of Indebtedness
of such Person shall be the lesser of (A) the fair market value
of such asset at such date of determination and (B) the amount of
such Indebtedness of such other Persons,
(viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person, and
(ix) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as
described above and the maximum liability, upon the occurrence of the
contingency giving rise to the obligation, of any contingent obligations at
such date.
"Indemnified Liabilities" shall have the meaning assigned thereto
in Section 9.05(c).
"Interest Payment Date" means the last day of each March, June,
September and December, commencing on the first such day to occur after the
Loan is made.
"Interest Period:
(i) initially, the period commencing on the Closing Date and ending
one month thereafter; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period and ending one month thereafter;
8
<PAGE>
Provided that, all of the foregoing Provisions relating to Interest Periods
are subject to the following:
(1) if any Interest Period would otherwise and on a day that is
not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension
would be to carry such interest Period into another calendar
month in which event such Interest Period shall end on the
immediately preceding Business Day;
(2) any Interest Period that would otherwise extend beyond the
Maturity Date shall end an the Maturity Date; and
(3) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Business Day of a
calendar month.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement,
interest rate option agreement, interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, interest rate hedge
agreement or other similar agreement or arrangement as to which such Person
is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance,
loan (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable an the balance sheet of such
Person) or other extension of credit (including by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or services
for the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by such
Person.
"Leased Properties" shall have the meaning assigned thereto in
Section 3.10.
"Lender" means the party named in this Agreement, until one or
more successors replace it, and thereafter means the successor or
successors.
9
<PAGE>
"LIBOR": with respect to each day during each Interest Period,
the rate per annum equal to arithmetic mean of quotations provided by four
major banks in the London interbank market selected by the Servicer as such
quotations appear an Telerate Page 3875 of the Dow Jones Telerate Service
(or such other page as may replace Telerate Page 3875 on that service for
the purpose of displaying London interbank offered rates of major banks) as
of 11:00 a.m. (London time) two Business Days prior to the beginning of
such Interest Period.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof).
"Loan" shall have the meaning set forth in Section 2.01.
"Maturity Date's shall have the meaning assigned thereto in
Section 2.04.
"Note" means the Note substantially in the form attached hereto
as Exhibit A.
"Notice Event" shall have the meaning assigned thereto in section
5.08.
"INRG Plan" shall have the meaning assigned thereto in the
Recitals.
"NRG Plan Effective Date" shall have mean the date on which the
NRG Plan shall become effective.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Treasurer or the Secretary or Clerk of the Company.
"Officers, Certificate" means a certificate signed by two
Officers.
"Outside Date" means May 15, 1996, as the same may extended in
writing by the Company and the Lender.
"Parent" shall have the meaning assigned thereto in the Recitals.
"Parent Guarantee" means a guarantee, substantially in the form
of Exhibit B, to be made by the Parent in favor of the Lender.
10
<PAGE>
"Parent option Agreement" means an agreement, substantially in
the form of Exhibit D, to be made by the Parent in favor of the Lender.
"Parent Pledge Agreement" means a pledge substantially in the
form of Exhibit C, to be made Parent in favor of the Lender.
"Partnership" shall have the meaning assigned thereto in the
Recitals.
"Partnership credit Agreement" shall have the meaning assigned
thereto in the Recitals.
"Partnership Equity Contribution" shall have the meaning assigned
thereto in the Recitals.
"Partnership interest" shall have the meaning assigned thereto in
Section 7.01.
"Permitted Liens" means, with respect to any Person:
(a) Liens for taxes, assessments or other governmental charges not
yet delinquent or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of the such Person in accordance with
GAAP;
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairman's or other like Liens arising in the ordinary course of
business in respect of obligations which are not yet due or which
are bonded or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto
are maintained on the books of such Person in accordance with
GAAP;
(c) pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, tenders, trade or
government contracts (other than for borrowed money), leases,
licenses, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(e) easements (including reciprocal easement agreements), rights-of-
way, building, zoning and similar restrictions, utility
agreements, covenants,
11
<PAGE>
reservations, restrictions, encroachments, changes, and other similar
encumbrances or title defects incurred, or leases or subleases granted to
others, in the ordinary course of business, which do not in the aggregate
materially detract from the aggregate value of the properties of such
Person or in the aggregate materially interfere with or adversely affect in
any material respect the ordinary conduct of the business of such person or
the properties subject thereto;
(f) Bankers' liens arising by operation of law;
(g) With respect to the Parent, Liens on documents of title and the
property covered thereby securing Indebtedness in respect of any
Commercial L/Cs;
(h) (i) mortgages, liens, security interests, restrictions or
encumbrances that have been placed by any developer, landlord or
other third party on property over which such Person has easement
rights or on any Leased Property and subordination or similar
agreements relating thereto and (ii) any condemnation or eminent
domain proceedings affecting any real property;
(i) Liens an goods (and Proceeds thereof) held by such Person to be
sold on a consignment basis in the ordinary course of business;
(j) Leases or subleases to third parties;
(k) Liens in connection with workmen's compensation obligations and
general liability exposure of such Person; and
(l) Liens securing Indebtedness Incurred by the Company under Section
6.01(b)(ii) or (iii) or by the Parent under Section 11.01(b)(ii)
or (iii) of the Parent Guarantee.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or
any other entity.
"Pledged Shares" shall have the meaning assigned thereto in the
Parent Pledge Agreement.
"Preferred Stock" as applied to the Capital Stock of any
corporation means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such
12
<PAGE>
corporation, over shares of capital Stock of any other class of such
corporation.
"principal" of a Note means the principal of the Note plus the
premium, if any, payable on the Note which is due or overdue or is to
become due at the relevant time.
a. "Register" shall have the meaning assigned thereto in Section 2.10(b).
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as from time to time in effect.
"Reimbursement Obligation" means the obligation of the Company to
reimburse the Lender pursuant to Section 2.02 for amounts paid by the
Lender under the Chase Guarantee.
"Related Business" means, with respect to any Person, those
businesses in which such Person or any of its Subsidiaries is engaged on
the date of this Agreement, or which are directly related thereto.
"Required Equity Contribution" shall have the meaning assigned
thereto in the Recitals.
"Requirement of Law" means, as to any Person, the Articles or
Certificate of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation, order, or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property, or to which such Person or any of its
property is subject.
"Responsible officer" means, with respect to any Person, the
president, chief executive officer, the chief operating officer, the chief
financial officer, treasurer, controller or any vice president of such
Person.
"Restricted Payment" shall have the meaning assigned thereto in
Section 6.02(a).
"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for
the repurchase of such security at the option of the holder thereof upon
the happening of any contingency beyond the control of the issuer unless
such contingency has occurred).
13
<PAGE>
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total
voting power of shares of capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by (i)
such Person or (ii) one or more Subsidiaries of such Person.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors
created, assumed or Guaranteed by such Person arising in the ordinary
course of business in connection with the acquisition of goods or services.
"Tranche A Obligation" shall have the meaning assigned thereto in
the Recitals.
"Transferee', shall have the meaning set forth in Section
9.06(b).
"Uniform Commercial Code" means the New York Uniform Commercial
Code as in effect from time to time.
"Voting Stock" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled to vote in
the election of directors.
SECTION 1.02. Rules of Construction. Unless the context
otherwise requires:
(1) a term has the meaning assigned to it;
(2) as used herein and in the Note and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to
the company and its Subsidiaries not defined in Section 1.01 and accounting
terms partly d6fined in Section 1.01 to the extent not defined shall have
the respective meanings given to them under GAAP. All computations
determining compliance with financial covenants or terms, including
definitions used therein, shall be prepared in accordance with generally
accepted accounting principles in effect at the time of the preparation of,
and in conformity with those used to prepare, the historical financial
statements of the Company;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
14
<PAGE>
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to secured indebtedness merely by virtue of its nature as unsecured
indebtedness;
(7) the principal amount of any noninterest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP and accretion of principal on such security shall be
deemed to be the Incurrence of Indebtedness;
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred stock, whichever is greater;
(9) unless otherwise specified therein, all terms defined in this
Agreement shall have the defined meanings when used in the Note or any
certificate or other document made or delivered pursuant hereto;
(10) the words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement, and section,
Section, schedule and exhibit references are to this Agreement unless
otherwise specified; and
(11) as used in this Agreement, references to a fiscal year of the
Company identified only by a year refer to the fiscal year of the Company
ended on the Fiscal Date at the end of the fourth fiscal quarter of the
Company which falls in the immediately succeeding calendar year.
References to the last day of any fiscal year or fiscal quarter of the
Company, or to a fiscal year or quarter ended on a certain date, shall be
deemed to refer to the Fiscal Date at the end of such fiscal year or
quarter.
B. ARTICLE 2
C. Loan and Reimbursement Obligation
SECTION 2.01. Loan. (a) Subject to the terms and conditions
hereof, the Lender agrees to make a loan in Dollars (the "Loan") to the
Company on the Closing Date, in
15
<PAGE>
aggregate principal amount not in excess of ten million dollars
($10,ooo,ooo).
(b) The proceeds of the Loan shall be used solely to make the
Required Equity Contribution to the Partnership.
SECTION 2.02. Chase Guarantee and Reimbursement Obligation. (a)
Subject to the terms and conditions hereof, the Lender, in reliance on the
agreement of the Company set forth in paragraph (b), agrees to enter into
the Chase Guarantee on the Effective Date.
(b) (i) The Company agrees to reimburse the Lender on each
date on which the Lender notifies the Company of the date and amount of
demand for payment presented under the Chase Guarantee and paid by the
Lender for the amount of such demand so paid and any taxes, fees, charges
or other costs or expenses incurred by the Lender in connection with such
payment. Each such payment shall be made to the Lender at the office of
the Lender located at 1221 Nicollet Mall, Minneapolis, Minnesota in Dollars
and in immediately available funds.
(ii) Interest shall be payable on any and all amounts remaining
unpaid by the Company under this section 2.02(b) from the date such amounts
become payable (whether at stated maturity, by acceleration or otherwise)
until payment in full at LIBOR plus 4.00%.
(iii) The Company's obligations under this Section 2.02 shall
be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Company may have or have had against the Lender or any beneficiary of the
Chase Guarantee.
(iv) The Company also agrees with the Lender that the Lender
shall not be responsible for, and the Reimbursement Obligations of the
Company hereunder shall not be affected by, among other things, the
validity or genuineness of documents or of any endorsements thereon, even
though such documents shall in fact prove to be invalid, fraudulent or
forged, or any dispute between or among the Company and any beneficiary of
the Chase Guarantee or any claims whatsoever of the Company against any
beneficiary of the Chase Guarantee.
(v) The Company agrees that any action taken or omitted by the
Lender under or in connection with the Chase Guarantee, if done in the
absence of gross negligence of willful misconduct, shall be binding on the
Company and shall not result in any liability of the Lender to the Company.
SECTION 2.03. Borrowing. The Company shall borrow the entire
amount of the Loan on the Closing Date. The
16
<PAGE>
company shall give the Lender not less than three Business Days' prior
written notice of the Closing Date, specifying the principal amount of the
Loan it is requesting.
SECTION 2.04. Maturity. The Loan will mature on the date that is
eight years following the closing Data (the "Maturity Date").
SECTION 2.05. Optional and Mandatory Prepayments; Repayments of Loan.
(a) The Company may at any time and from time to time prepay
the Loan, in whole or in part, without premium or penalty, upon at least
five days irrevocable notice to the Lender. If such notice is given, the
Company shall make such prepayment, and the payment amount specified in
such notice shall be due and payable on the date specified therein.
Partial prepayments of the Loan shall be in an aggregate principal amount
equal to the lesser of (A) $500,000, or a whole multiple of $100,000 in
excess thereof and (B) the aggregate unpaid principal amount of the Loan.
(b) (i) If, subsequent to the Closing Date, the Company or any
of its Subsidiaries shall obtain any dividend or other distributions from
the Partnership, 100% of the cash proceeds thereof less (A) appropriate
reserves for any taxes or other charges imposed by any Governmental
Authority an the Company or its property, or allocable to the Company, and
(B) appropriate reserves for any other operating expenses of the Company
shall be promptly applied toward the prepayment of the Loan.
(ii) The Company shall give the Lender at least one Business
Day's notice of each prepayment or mandatory reduction pursuant to this
Section 2.05(b) setting forth the date and amount thereof.
(c) Accrued interest on the amount of any prepayments shall be
paid on the date Of such prepayment.
SECTION 2.06. Interest Rate and Payment Dates.
(a) The Loan shall bear interest for each day during each
Interest Period on the unpaid principal thereof at a rate per annum equal
to LIBOR determined for such day plus 4.00%.
(b) If all or a portion of (i) the principal amount of the
Loan or (ii) any interest payable thereon shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise) the Loan,
and-any such overdue amount shall, without limiting the rights of the
Lender under Section 8,
17
<PAGE>
bear interest at a rate per annum which is 2.00% above the rate of interest
otherwise applicable to the Loan from the date of such non-payment until
paid in full (as well after as before judgment).
(c) Interest shall be payable in arrears on each Interest Payment
Date.
SECTION 2.07. Computation of Interest and Fees.
Interest in respect of the Loan, shall be calculated on the basis of a 365
(or 366 as the case may be) day year for the actual days elapsed.
SECTION 2.08. Treatment of Payments.
(a) Whenever any payment received by the Lender under this
Agreement or the Note is insufficient to pay in full all amounts then due
and payable to the Lender under this Agreement or the Note such payment
shall be applied by the Lender in the following order: first, to the
payment of fees and expenses due and payable to the Lender under and in
connection with this Agreement and the Note including the payment of all
expenses due and payable under Section 9.05; second, to the payment of
interest then due and payable on the Loan; and third, to the payment of the
principal amount of the Loan which is then due and payable; or
(b) All payments (including prepayments) to be made by the
company on account of principal, interest and fees shall be made without
set-off or counterclaim and shall be made to the Lender at the office of
the Lender located at 1221 Nicollet Mall, Minneapolis, Minnesota in lawful
money of the United States of America and in immediately available funds.
If any payment hereunder would become due and payable on a day other than a
Business Day, such payment shall become due and payable on the next
succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
SECTION 2.09. Indemnity. The Company agrees to indemnify the
Lender and to hold the Lender harmless from any loss or expense (but
without duplication of any amounts payable as default interest) which the
Lender may sustain or incur as a consequence of default by the Company in
making any prepayment after the Company has given a notice in accordance
with Section 2.05. This covenant shall survive termination of this
Agreement and repayment of the Loan.
18
<PAGE>
SECTION 2.10. Repayment of the Loan; Evidence of Debt.
(a) The Company hereby unconditionally promises to pay to the
Lender the then unpaid principal amount of the Loan in accordance with the
terms hereof and the Note. The Company hereby further agrees to pay
interest on the unpaid principal amount of the Loan from time to time
outstanding from the date hereof until payment in full thereof at the rates
per annum, and on the dates, set forth in Section 2.06.
(b) The Lender shall maintain a Register (the 'Register") in
which shall be recorded (i) the aX0unt of the Loan made hereunder, (ii) the
amount of any principal or interest due and payable or to become due and
payable from the Company to the Lender hereunder and (iii) the amount of
any sum received by the Lender hereunder from the Company.
(c) The entries made in the Register to the extent permitted
by applicable law, shall be prima facie evidence of the existence and
amounts of the obligations of the Company therein recorded; Provided,
however, that the failure of the Lender to maintain the Register, or any
error therein, shall not in any manner affect the obligation of the Company
to repay (with applicable interest) the Loan made to the company by the
Lender in accordance with the terms of this Agreement.
(d) The Company agrees that, on the Effective Date, the
Company will execute and deliver to the Lender the Note evidencing the
Loan: The parties hereto acknowledge and agree that the "issue price" of
the Note, within the meaning of Section 1273(b) of the Internal Revenue
code of 1986, as .amended, is $10 million, that for purposes of Treasury
Regulation S 1.1273-2(h) no amount is allocated to the right granted to the
Lender by the Guarantor pursuant to that certain letter agreement dated
February 28, 1996 from the Guarantor to the Lender, and that, consistent
with Treasury Regulation S 1. 1273-2 (j) , no amount will be allocated to
the option to convert a portion of the Note into stock of the Parent
pursuant to the Parent option Agreement for purposes of determining the
issue price of the Note.
SECTION 2.11. Termination of the Commitment. The Company shall
have the right at any time prior to the making of the Loan, upon prior
written notice to the Lender, to terminate this Agreement and the
obligation of the Lender to make the Loan.
19
<PAGE>
ARTICLE 3
Representations and Warranties
In order to induce the Lender to enter into this Agreement and to
make the Loan, the Company hereby represents and warrants to the Lender, as
follows (all representations and warranties are made as of the Effective
Date, as of the Closing Date and with respect to the entire period
following the Effective Date, as if made at any time during such period):
SECTION 3.01. Corporate Existence. The Company is a corporation
duly organized and validly existing under the laws of the jurisdiction of
its incorporation.
SECTION 3.02, Corporate Power; Authorization. The Company has
the corporate power and authority to make, deliver and perform each of the
Credit Documents to which it is a party, and the Company has the corporate
power and authority and legal right to borrow hereunder. The Company has
taken all necessary corporate action to authorize the execution, delivery
and performance of each of the Credit Documents to which it is or will be a
party and the Company has taken all necessary corporate action to authorize
the borrowings hereunder. No consent or authorization of, or filing with,
any Person (including any Governmental Authority) is required in connection
with the execution, delivery or performance by the Company, or for the
validity or enforceability against the Company, of any credit Document
except for consents, authorizations and filings (a) which have been
obtained or made and are in full force and effect, and except such
consents, authorizations and filings, the failure to obtain or perform (i)
which would not have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the Company
and (ii) which would not adversely affect the validity or enforceability of
any of the Credit Documents or the rights or remedies of the Lender
thereunder.
SECTION 3.03. Enforceable Obligations. This Agreement, and each
of the other Credit Documents has been, duly executed and delivered on
behalf of the Company. This Agreement and each of the other Credit
Documents constitutes the legal, valid and binding obligation of the
Company, and is enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors, rights
generally and by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
20
<PAGE>
SECTION 3.04. No Legal Bar. The execution, delivery and
performance of each credit Document and the incurrence or issuance of and
use of the proceeds of the Loan do not violate any Requirement of Law or
any Contractual Obligation applicable to or binding upon the Company or any
of its properties or assets, in any manner which, individually or in the
aggregate, (i) would have a material adverse effect on the ability of the
Company to perform its obligations under the Credit Documents to which it
is a party or (ii) would have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company, and do not result in the creation or imposition of any Lien on any
of its properties or assets pursuant to any Requirement of Law applicable
to it, as the case may be, or any of its Contractual Obligations, except
for Permitted Liens.
D. ARTICLE 4
Conditions Precedent
SECTION 4:01. conditions to Effectiveness. This Agreement shall
become effective on the date (the "Effective Date") on which the following
conditions are satisfied to the satisfaction of the Lender:
(a) Credit Documents. The Lender shall have received (i) this
Agreement and the Note, each executed and delivered by a duly
authorized officer of the Company and(ii) each of the Parent
Guarantee, the Parent Option Agreement and the Parent Pledge
Agreement, each executed and delivered by a duly authorized
officer of the Parent.
(b) Corporate Proceedings of the Company. The Lender shall have
received a copy of the resolutions, in form and substance
reasonably satisfactory to the Lender, of the Board of Directors
of the Company authorizing (i) the execution, delivery and
performance of this Agreement, the Note and the other credit
Documents to which it is a party and (ii) the borrowings
contemplated hereunder, certified by the Secretary or an
Assistant Secretary of the Company as of the Effective Date,
which certificate shall be in form and substance reasonably
satisfactory to the Lender and shall state that the resolutions
thereby certified have not been amended, modified, revoked or
rescinded.
21
<PAGE>
(c) Company Incumbency Certificate. The Lender shall have received a
Certificate of the Company, dated the Effective Date, as to the
incumbency and signature of the officers of the Company executing
any credit Document reasonably satisfactory in form and substance
to the Lender, executed by the President or any Vice President
and the Secretary or any Assistant Secretary of the Company.
(d) Corporate Documents. The Lender shall have received true and
complete copies Of the certificate of incorporation and by-laws
of the Company, certified as of the Effective Date as complete
and correct copies thereof by the Secretary or an Assistant
Secretary of the Company.
(e) Pledged Stock: Stock Powers. The Agent shall have received the
certificates representing the shares pledged pursuant to the
Parent Pledge Agreement, together with an undated stock power for
each such certificate executed in blank by a duly authorized
officer of the pledgor thereof.
(f) Final order. The Lender shall have received a certified copy of
an order of the Bankruptcy court in form and substance reasonably
satisfactory to the Lender (the "Final order") which (i) shall be
in full force and effect, (ii) shall have been entered no later
than March 8, 1996, and (iii) shall not have been reversed,
modified or amended in any respect.
SECTION 4.02. Condition to Loan. The obligation of the Lender to
make the Loan on the Closing Date is subject to the satisfaction, or waiver
by the Lender, immediately prior to or concurrently with the making of the
Loan, of the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties made by the Company in or pursuant to the Credit
Documents shall be true and correct in all material respects on
and as of such date as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing
22
<PAGE>
on such date or after giving effect to the Loan requested to be
made on such date.
ARTICLE 5
Affirmative Covenants
The company hereby agrees that, so long as this Agreement remains
in effect, so long an (A) the Loan or the Chase Guarantee remains
outstanding and unpaid, or any other amount is owing to the Lender
hereunder or under any of the other credit Documents and (B) either (I) the
closing of the transactions contemplated by the Acquisition Agreement (as
defined in the NRG Plan) has occurred or (II) the Acquisition Agreement has
been terminated in accordance with its terms, except if the Guarantor has
or had (as mutually agreed by the parties hereto in writing or as finally
determined by a court) the right to terminate the Acquisition Agreement in
accordance with Section 7.2(b) or 7.2(d) of thereof, it shall:
SECTION 5.01. Notices. Subject to the last sentence of this
section promptly give notice to the Lender of any of the following (a
"Notice Event") :
(a) of the occurrence of any Default or Event of Default; and
(b) of a material adverse change known to the Company in the
business, assets, condition (financial or otherwise) or results of
operations of the Company.
Each notice pursuant to this Section 5.0a shall be accompanied by a
statement of a Responsible Officer setting forth details of the occurrence
referred to therein and (in the cases of clauses (a) through (b)) stating
what action the Company proposes to take with respect thereto. The Company
shall not be deemed in breach or default of its obligations under this
Section 5.01 due to the failure to notify the Lender of any Notice Event of
which the Lender shall have had actual knowledge as of the date notice of
such Notice Event was to have been provided.
SECTION 5.02. Maintenance of Books and Records. Maintain its
books and records in accordance with generally accepted accounting
principles and, during reasonable business hours and upon reasonable
notice, make available to the Lender the Company's books and records. The
Lender shall be entitled to make such investigation of the business of the
Company as the Lender reasonably requests; provided, however, that (i) the
Company shall not be required to provide its books and records to the
extent disclosure of them would compromise any attorney-client privilege
between the Company and its counsel
23
<PAGE>
and (ii) other than as any be provided in any order entered by the
Bankruptcy court, the Lender shall not be entitled to receive any document
or information concerning bids for the Guarantor or its assets submitted by
entities other than the Lender and its affiliates; and, provided, further,
that the Lender will continue to comply with the confidentiality agreement
previously entered into by the Lender with the Guarantor.
ARTICLE 6
So long as (A) this Agreement remains in effect or the Loan or
the Chase Guarantee remains outstanding and unpaid, or any other amount is
owing to the Lender hereunder or under any other Credit Document (it being
understood that each of the permitted exceptions to each of the covenants
in this Article 6 is in addition to, and not overlapping with, any other of
such permitted exceptions except to the extent expressly provided) and (B)
either (I) the closing of the transactions contemplated by the Acquisition
Agreement has occurred or (11) the Acquisition Agreement has been
terminated in accordance with its terms, except if the Guarantor has or had
(as mutually agreed by the parties hereto in writing or as finally
determined by a court) the right to terminate the Acquisition Agreement in
accordance with Section 7.2(b) or 7.2(d) of thereof:
SECTION 6.01. Limitation on Indebtedness.
(a) The Company shall not Incur any Indebtedness.
(b) Notwithstanding Section 6.01(a), the Company may Incur the
following Indebtedness:
(i) Indebtedness to the Banks or other Indebtedness incurred by the
Partnership to finance the construction or operation of the
Facility;
(ii) Indebtedness represented by the Loan;
(iii) Indebtedness of the Company in an aggregate principal amount at
any one time outstanding (excluding Indebtedness that is
permitted to be incurred pursuant to clause (ii) of this Section
6.01(b)) not in excess of $250,000; and
(iv) Indebtedness in connection with workmen's compensation
obligations and related general liability exposure of the
company.
24
<PAGE>
SECTION 6.02. Limitation on Sales of Assets. The Company shall
not make any Asset Disposition.
SECTION 6.03. Limitation on Liens. The Company shall not,
directly or indirectly, create or permit to exist any Lien an any of its
property or assets, whether owned on the date of this Agreement or
thereafter acquired, securing any obligation other than Permitted Liens.
SECTION 6.04. Limitation on Lines of Business. The Company shall
not engage in any business other than the construction, management and
ownership of the Facility or the ownership of an interest in the
Partnership.
SECTION 6.05. Limitation on Merger, Etc. The Company shall not
consolidate with or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person.
ARTICLE 7
[RESERVED)
ARTICLE 8
Defaults and Remedies
SECTION 8.01. Events of Default. An "Event of Default" occurs
if:
(1) the Company defaults in any payment of interest or any other
amount (other than those specified in (2) below) with respect to the Loan
or the Reimbursement obligations when the same becomes due and payable and
such default continues for a period of 10 days and the Guarantor fails to
make payment with respect thereto under the Guarantee;
(2) the Company (i) defaults in the payment of the principal of the
Loan or the Reimbursement Obligations when the same become due and payable
at its Stated Maturity, upon redemption, upon declaration or otherwise or
(ii) fails to redeem or purchase the Note when required pursuant to this
Agreement or the Note and, in either case, the Guarantor fails to make
payment with respect thereto under the Guarantee;
(3) at any time during which (A) either (1) the Lender shall
beneficially own (as such term is defined in the Securities Exchange Act of
1924, as amended) less than 26% of the equity securities (including,
without limitation, all capital Stock and any securities
25
<PAGE>
convertible into Capital Stock) of the Parent on a fully diluted basis or
(II) the Lender, directly or indirectly (e.g., through any Person that
"controls" (as defined in the Securities Exchange Act of 1934, as amended)
or is "controlled by" the Lender), shall have the right to appoint one-half
or more of the members of the Board of Directors of the Parent and (B)
either (I) the closing of the transactions contemplated by the Acquisition
Agreement has occurred or (11) the Acquisition Agreement has been
terminated in accordance with its terms, except if the Guarantor has or had
(as mutually agreed by the parties hereto in writing or as finally
determined by a court) the right to terminate the Acquisition Agreement in
accordance with Section 7.2(b) or 7.2(d) of thereof: (i) any representation
or warranty made or deemed made by the Company or the Parent in any Credit
Document shall prove to have been incorrect in any material respect on or
as of the date, or at any time during the period, that such representation
or warranty is made or deemed made; (ii) the facts or circumstances giving
rise to such incorrect representation or warranty would have a material
adverse effect on the Company's or the Parent's ability to pay the amounts
outstanding under the Loan (including principal and interest) as they
become due and payable; and (iii) both of the conditions in preceding
subclauses (i) and (ii) continue for 30 days after the notice specified
below;
(4) [RESERVED];
(5) at any time during which (A) either (1) the Lender shall
beneficially own (as such term is defined in the Securities Exchange Act of
1934, as amended) less than 26% of the equity securities (including,
without limitation, all Capital Stock and any securities convertible into
Capital Stock) of the Parent on a fully diluted basis or (11) the Lender,
directly or indirectly (e.g., through any Person that "controls" (as
defined in the securities Exchange Act of 1934, as amended) or is
"controlled by" the Lender), shall have the right to appoint one-half or
more of the members of the Board of Directors of the Parent and (B) either
(I) the closing of the transactions contemplated by the Acquisition
Agreement has occurred or (II) the Acquisition Agreement has been
terminated in accordance with its terms, except if the Guarantor has or had
(as mutually agreed by the parties hereto in writing or as finally
determined by a court) the right to terminate the Acquisition Agreement in
accordance with Section 7.2(b) or 7.2(d) of thereof: the Company shall
default in the observance or performance of any agreement contained in
Section 5.01(a) or Article 6 of this Agreement or the Parent shall
26
<PAGE>
default in the observance or performance of any agreement contained in
Section 11 or Section 12 of the Guaranty;
(6) the Company or the Parent fails to comply with any of its
agreements in the Credit Documents (other than those referred to in (1)
through (5) above) and such failure continues for 30 days after the notice
specified below, provided that in the case of Sections 11 and 12 of the
Parent Guarantee, (A) either (I) the Lender shall beneficially own (as such
term is defined in the Securities Exchange Act of 1934, as amended) less
than 264 of the equity securities (including, without limitation, all
Capital Stock and any securities convertible into Capital Stock) of the
Parent on a fully diluted basis or (11) the Lender, directly or indirectly
(e.g., through any Person that "controls" (as defined in the Securities
Exchange Act of 1934, as amended) or is "controlled by" the Lender), shall
have the right to appoint one-half or more of the members of the Board of
Directors of the Parent and (B) either (I) the closing of the transactions
contemplated by the Acquisition Agreement has occurred or (11) the
Acquisition Agreement has been terminated in accordance with its terms,
except if the Guarantor has or had (as mutually agreed by the parties
hereto in writing or as finally determined by a court) the right to
terminate the Acquisition Agreement in accordance with Section 7.2(b) or
7.2(d) of thereof;
(7) [Reserved];
(8) the Company pursuant to or within the meaning of any Bankruptcy
Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(9) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
27
<PAGE>
(A) is for relief against the company in an involuntary case;
(B) M appoints a Custodian of the Company or for any substantial
part of its property; or
(C) orders the winding up or liquidation of the Company;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(10) at any time during which (A) either (I) the Lender shall
beneficially own (as such term is defined in the Securities Exchange Act of
1934, as amended) less than 261 of the equity securities (including,
without limitation, all Capital stock and any securities convertible into
Capital Stock) of the Parent on a fully diluted basis or (II) the Lender,
directly or indirectly (e.g., through any Person that "controls" (as
defined in the Securities Exchange Act of 1934, as amended) or is
"controlled by" the Lender), shall have the right to appoint one-half or
more of the members of the Board of Directors of the Parent and (B) either
(I) the closing of the transactions contemplated by the Acquisition
Agreement has occurred or (II) the Acquisition Agreement has been
terminated in accordance with its terms, except if the Guarantor has or had
(as mutually agreed by the parties hereto in writing or as finally
determined by a court) the right to terminate the Acquisition Agreement in
accordance with Section 7.2(b) or 7.2(d) of thereof: any judgment or decree
for the payment of money in excess of $3,000,000 or its foreign currency
equivalent at the time is entered against the Company, the Parent or any
Subsidiary of the Parent and is not discharged and either (A) an
enforcement proceeding has been commenced by any creditor upon such
judgment or decree or (B) there is a period of 60 days following the entry
of such judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed;
(11) any Credit Document shall cease, for any reason, to be in full
force and affect or the Company or the Parent shall so assert in writing;
(12) the Bankruptcy Court shall enter an order (i) dismissing the
case, (ii) converting the Case to a case under Chapter 7 of the Bankruptcy
Code, (iii) appointing a trustee or examiner in the case or (iv) the
Guarantor shall make an application to the Bankruptcy Court in respect of
clauses (i), (ii) or (iii); or an application
28
<PAGE>
shall be made for the approval of, or there shall arise, any claim in the
Case having a priority superior to that of the Lender;
The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary or
involuntary or is affected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or
any similar Federal or state law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, custodian or
similar official under any Bankruptcy Law.
A Default under clauses (3) and (6) is not an Event of Default
until the Lender notifies the Company of the Default and the Company does
not cure such Default within the time specified after receipt of such
notice. Such notice must specify the Default, demand that it be remedied
and state that such notice is a "Notice of Default".
SECTION 8.02. Acceleration. If an Event of Default (other than an
Event of Default specified in section 8.01(a) or (9) with respect to the
Company) occurs and is continuing, the Lender by notice to the Company may
declare the principal of and accrued interest on the Loan (including,
without limitation, all amounts of Reimbursement Obligations, whether or
not the beneficiaries of the chase Guarantee shall have demanded payment
thereunder) to be due and payable. Upon such a declaration, such principal
and interest shall be due and payable immediately, if an Event of Default
specified in section 8.01(s) or (9) with respect to the Company (but not
any Subsidiary) occurs, the principal of and interest an the Loan
(including, without limitation, all amounts of Reimbursement obligations,
whether or not the beneficiaries of the Chase Guarantee shall have demanded
payment thereunder) shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Lender.
The Lender by notice to the Company may rescind an acceleration and its
consequences. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
SECTION 8.03. Other Remedies. If an Event of Default occurs and
is continuing, the Lender may pursue any available remedy to collect the
payment of principal of or interest on the Note (including, without
limitation, all amounts of Reimbursement Obligations, whether or not the
beneficiaries of the Chase Guarantee shall have demanded payment
29
<PAGE>
thereunder) or to enforce the performance of any provision of the Note or
this Agreement.
The Lender may maintain a proceeding even if it does not Possess the Note
or does not produce it in the proceeding. A delay or omission by the
Lender in exercising any right or remedy accruing upon an Event of Default
shall not-impair the right or remedy or constitute a waiver of or
acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
SECTION 8.04. Waiver Of Past Defaults. The Lender by notice to
the Company may waive an existing Default and its consequences. When a
Default is waived, it is deemed cured, but no such waiver shall extend to
any subsequent or other Default or impair any consequent right.
SECTTON 8.05. Priorities. If the Lender collects any money or
property pursuant to this Article a, it shall pay out the money or property
in the following order:
FIRST: to itself in accordance with the priority set forth in
Section 2.08; and
SECOND: to the extent of any excess, to the Company.
SECTION 8.06. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Agreement a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion
may assess reasonable costs, including reasonable attorneys' fees, against
any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant.
SECTION 8.07. Waiver of Stay of Extension Laws.
The Company (to the extent it may lawfully do so) shall not at any time
insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or the
performance of this Agreement; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any
such law, and shall not hinder, delay or impede the execution of any power
herein granted to the Lender, but shall suffer and permit the execution of
every such power as though no such law had been enacted.
30
<PAGE>
ARTICLE 9
E. Miscellaneous
SECTION 9.01. Amendments and Waivers. Except as otherwise
expressly set forth in this Agreement, no credit Document nor any terms
thereof may be amended, supplemented, waived or modified except in a
writing signed by the Company and the Lender.
SECTION 9.02. Notices. All noticed, requests and demands to or
upon the respective parties hereto to be effective shall be in writing
(including by telecopy or telex, if one is listed)t and, unless otherwise
expressly provided herein, shall be deemed to have been duly given or made
when delivered by hand, or three Business Days after being deposited in the
mail, postage prepaid, or, in the case of telecopy notice, when sent,
confirmation of receipt received, or, in the case of telex notice, when
sent, answerback received, addressed as follows, or to such other address
as may be hereafter notified by the respective parties hereto and any
future holders of the Note:
The Company: O'Brien (Schuykill)
Cogeneration, Inc.
225 South 8th Street
Philadelphia, PA 19106
Attention:
President or Chief
Executive Officer
Telephone: (215) 627-5500
Telecopier: (215) 922-5227
if to Lender NRG Energy, Inc.
1221 Nicollet Mail, Suite 700
Minneapolis, MN 55403
Attention: Vice
President, Business
Development
Telephone: (612) 373-5300
Telecopier: (612) 373-5430
With copies to: NRG Energy Inc.
Legal Department
1221 Nicollet Mail, Suite 700
Minneapolis, MN 55403
Attention: Vice President and
General Counsel
Telephone: (612) 373-5300
Telecopier: (612) 373-5392
31
<PAGE>
provided that any notice, request or demand to or upon the Lender pursuant
to Section 2.05 shall not be effective until received.
SECTION 9.03. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Lender, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, rarely, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
SECTION 9.04. Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document,
certificate or statement delivered pursuant hereto or in connection
herewith shall survive the execution and delivery of this Agreement and the
Note.
SECTION 9.05. Payment of Expenses and Taxes. The Company agrees
(a) to pay or reimburse the Lender for all its costs and expenses incurred
in connection with, and to pay, indemnify, and hold the Lender harmless
from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever arising out of or in
connection with, the enforcement or preservation of any rights under any
Credit Document and any such other documents, including reasonable fees and
disbursements of counsel to the Lender incurred in connection with the
foregoing, (b) to pay, indemnify, and to hold the Lender harmless from any
and all recording and filin4 fees and any and all liabilities with respect
to, or resulting from any delay in paying, stamp, excise and other similar
taxes (other than withholding taxes), if any, which may be payable or
determined to be payable in connection with the execution and delivery of,
or consummation of any of the transactions contemplated by, or any
amendment, supplement or modification of, or any waiver or consent under or
in respect of, any credit Document and any such other documents, and (c) to
pay, indemnify, and hold the Lender and its respective Affiliates, officers
and directors harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever (including
reasonable fees and disbursements of counsel) which may be incurred by or
asserted against the Lender or such Affiliates, officers or directors
arising out of or in connection with any investigation, litigation or
proceeding related to this Agreement, the other Credit Documents, the
proceeds of the Loan and the transactions contemplated by or
32
<PAGE>
in respect of such use of proceeds, or any of the other transactions
contemplated hereby, whether or not the Lender or such Affiliates, officers
or directors is a party thereto, including any of the foregoing relating to
the violation of, noncompliance with or liability under, any Environmental
Law applicable to the operations of the Company or any of the facilities
and properties owned, leased or operated by the Company or any of its
Subsidiaries (all the foregoing, collectively, the "indemnified
liabilities"); provided that the company shall have no obligation hereunder
with respect to indemnified liabilities of the Lender or any of its
respective Affiliates, officers and directors arising from (i) the gross
negligence or willful misconduct of the Lender or its respective directors
or officers; (ii) legal proceedings commenced against the Lender by any
security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor solely in its capacity as
such; (iii) legal proceedings commenced against the Lender by any
Transferee; or (iv) actions taken by the Company either at the direction of
the Board of Directors of the Company or pursuant to the Management
Agreement at such time as persons designated by the Lender or which the
Lender shall have the right to appoint shall constitute at least one-half
of the Board. The agreements in this Section 9.05 shall survive repayment
of the Note and all other amounts payable hereunder.
SECTION 9.06. Successors and Assigns; Participations and
Assignments.
(a) This Agreement shall be binding upon and inure to the
benefit of the Company, the Lender all future holders of the Note and the
Loan, and their respective successors and assigns, except that the Company
may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of the Lender.
(b) The Company hereby agrees that the Lender may, in
accordance with applicable law, at any time and from time to time assign
all or any part of its rights and obligations under this Agreement and the
Note to any Person (a "Transferee").
(c) The Company authorizes the Lender to disclose to any
prospective Transferee any and all financial information in the Lender's
possession concerning the Company and its Subsidiaries and Affiliates which
has been delivered to the Lender by or on behalf of the Company, subject to
receipt of a confidentiality agreement from such Prospective Transferee in
form and substance reasonably satisfactory to the Company.
33
<PAGE>
SECTION 9.07. Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement on any number of separate
counterparts and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
SECTION 9.08. Governing Law, This Agreement and the Note and the
rights and obligations of the parties under this Agreement and the Note
shall be governed by, and construed and interpreted in accordance with, the
law of the State of New York and applicable laws of the United States of
America.
SECTION 9.09. Submission to Jurisdiction; Waivers.
(a) Each party to this Agreement hereby irrevocably and unconditionally:
(i) submits of or itself and its property in any legal action or
proceeding relating to this Agreement or any of the other Credit
Documents, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the
courts of the State of New York, the courts of the United States
of America for the Southern District of New York, and appellate
courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in
any such court or that such action or proceeding was brought in
an inconvenient court and agrees not to plead or claim the, same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail),
postage prepaid, to such party at its address set forth in
Section 9.02; and
(iv) agrees that nothing herein shall affect the right to affect
service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction.
(b) Each party hereto unconditionally waives trial by jury in any legal
action or proceeding referred to in paragraph (a) above and any
counterclaim therein.
SECTION 9.10. Interest. Each provision in this Agreement and
each other Credit Document is expressly limited so that in no event
whatsoever shall the amount paid, or
34
<PAGE>
otherwise agreed to be paid, by the Company for the use, forbearance or
detention of the money to be loaned under this Agreement or any other
Credit Document or otherwise (including any sums paid as required by any
covenant or obligation contained herein or in any other credit Document
which in for the use, forbearance or detention of such money), exceed that
amount of money which would cause the effective rate of interest to exceed
the highest lawful rate permitted by applicable law (the "Highest Lawful
Rate"), and all amounts owed under this Agreement and each other Credit
Document shall be held to be subje6t to reduction to the affect that such
amounts so paid or agreed to be paid which are for the use, forbearance or
detention of money under this Agreement or such Credit Document shall in no
event exceed that amount of money which would cause the effective rate of
interest to exceed the Highest Lawful Rate. Notwithstanding any provision
in this Agreement or any other credit Document to the contrary, if the
maturity of the Loan or the obligations in respect of the other Credit
Documents are accelerated for any reason, or in the event of any prepayment
of all or any portion of the Loan or the obligations in respect of the
other Credit Documents by the Company or in any other event, earned
interest on the Loan and such other obligations of the Company may never
exceed the Highest Lawful Rate, and any unearned interest otherwise payable
on the Loan or the obligations in respect of the other Credit Documents
that is in excess of the Highest Lawful Rate shall be cancelled
automatically as of the date of such acceleration or prepayment or other
such event and (if theretofore paid) shall, at the option of the holder of
the Loan or such other obligations, be either refunded to the Company or
credited on the principal of the Loan. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the
Highest Lawful Rate, the Company and the Lender shall, to the maximum
extent permitted by applicable law, amortize, prorate, allocate and spread,
in equal parts during the period of the actual. term of this Agreement, all
interest at any time contracted for, charged, received or reserved in
connection with this Agreement.
SECTION 9.11. Termination. This Agreement shall terminate on the
first date on Which the chase Guarantee shall be returned to the Lender or
otherwise terminated and all principal of and interest on the Loan, the
Note, the Reimbursement Obligations, and all other obligations and
liabilities of the Borrower to the Lender, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses or
otherwise, shall have been indefeasibly paid in full.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered in New York,
35
<PAGE>
New York by their proper and duly authorized officers as of the day and
year first above written.
O'BRIEN (Schuylkill)
COGENERATION, INC.
By /s/ Sanders D. Newman
Name: Sanders D. Newman
Title: V. P. & Secretary
NRG ENERGY, INC.
by /s/ Craig A. Mataczynski
Name: Craig A. Mataczynski
Title: Vice President
36
<PAGE>
Exhibit 10.9.2
EXHIBIT D
OPTION AGREEMENT
OPTION AGREEMENT, dated as of March 8, 1996 (this "Agreement"), made by
O'BRIEN ENVIRONMENTAL ENERGY, INC.. a Delaware corporation, as a Debtor and
a Debtor-in-Possession under Chapter 11 of the Bankruptcy Code (the
"Parent"), in favor of NRG ENERGY, INC., a Delaware corporation (the
"Lender").
WITNESSETH
WHEREAS, Pursuant to the Loan Agreement, dated as of the date hereof
(as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), between O'BRIEN (SCHUYLKILL) COGENERATION, INC. (the
"Borrower") and the Lender, the Lender has agreed to make a Loan to the
Borrower upon the terms and subject to the conditions set forth therein, to
be evidenced by the Note issued by the Borrower under the Credit Agreement,
WHEREAS, pursuant to the Guarantee, dated as of the date hereof (as
amended, supplemented or otherwise modified from time to time, the
("Guarantee") made by the Parent in favor of the Lender, the Parent has
guaranteed the obligations of the Borrower to the Lender,
WHEREAS, it is a condition precedent to the obligation of the Lender
to make the Loan to the Borrower under the Credit Agreement that the Parent
shall have executed and delivered this Agreement to the Lender; and
WHEREAS, the Parent is the parent of the Borrower, and it is to the
advantage of Parent that the Lender make the Loan to the Borrower.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to enter into the Credit Agreement and to induce the Lender to make
the loan to the Borrower under the Credit Agreement, the Parent hereby
agrees with the Lender as follows:
1. Defined Terms. (a) Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
2. Option to Convert Portion of Loan to Common Stock. The Parent
hereby grants to the Lender, at any time after both (a) the NRG Plan
Effective Date and (b) the date on which the Lender shall have made the
Loan, the right, upon not less then fifteen Business Days' prior written
notice to the Parent, to exchange the Note for (1) a new promissory Note in
a principal amount which is $3 million less than the previously outstanding
principal amount of the Note for which it is exchanged and (2) that number
of shares of common stock of the Parent which would equal, on a fully
diluted basis, 5,767% of the shares of common stock of the Company (the
"Conversion Shares") as of the NRG Plan Effective Date. On the day
specified in the notice delivered pursuant to the preceding sentence, the
Lender shall deliver the Note to the Company in exchange for (1) the
delivery by the Company to the Lender of a new Note in a principal amount
which is $3 million less than the previously outstanding principal amount
of the old Note (and the Parent agrees to cause the Company to deliver such
new Note) and (2) the delivery by the Parent to the Lender of the
Conversion Shares.
3. Notices. All notices, requests and demands to or upon the Lender
or the Parent to be effective shall be in writing (or by telex, fax or
similar electronic transfer confirmed in writing) and
<PAGE>
shall be deemed to have been duly given or made (1) when delivered by hand
or (2) if given by mail, when deposited in the mails by certified m4 return
receipt requested, or (3) if by telex, fox or similar electronic transfer,
when sent and receipt his been confirmed, addressed as se forth in the
Agreement.
4. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
5. Amendments in Writing; No Waiver: Cumulative Remedies. None of
the terms or provisions of Ws Agreement may be waived, amended,
supplemented or otherwise modified except by a written instrument executed
by the Parent and the Lender.
6. Section Headings. The section headings used in this Agreement
are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof
7. Successors and Assigns. This Agreement shall be binding upon the
successors and assigns of the Parent and shall inure to the benefit of the
Lender and its successors and assigns.
8. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the law of the State of New
York.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered by its duly authorized officer as of the day
and year first above written.
O'BRIEN ENVIRONMENTAL ENERGY, INC.
By /s/ John B. Kelly
Name: John B. Kelly
Title: Chief Administrative Officer
2
<PAGE>
April 30, 1996
Craig A. Mataczynski
Vice President
NRG Energy, Inc.
1221 Nicollet Mail, Suite 700
Minneapolis, NN 55403-2445
Dear Craig:
I am writing to confirm our calculations for the number of shares of
NRG Generating (U.S.) Inc. ("Generating") that will be issuable to NRG
Energy, Inc. ("NRG") upon exercise of its $3 million dollar option granted
in connection with the Grey's Ferry project. As you know, on the closing
of the Plan of Reorganization, a total of 6,474,814 shares of Generating
Common Stock will be issued, 2,710,357 of which shares will be issued to
NRG or its designated affiliate. Based upon these numbers, and the terms
of the option (a copy of which is attached), the number of Generating
shares that NRG Energy is entitled to receive upon exercise of its option
in full is 396,301 shares of Generating Common Stock, and the exercise
price per share is $7.57. Attached is a chart showing how we calculated
these numbers. Please confirm your concurrence with our calculations by
countersigning this letter in the space provided below.
The Official Committee of
Equity Security Holders of
O'Brien Environmental Energy
By: /s/ Lawrence Littman
Lawrence Littman
Committee Chair
AGREED TO:
NRG ENERGY, INC.
By: /s/ Craig A. Mataczynski
<PAGE>
Exhibit 10.10.6
O'BRIEN
ENVIRONMENTAL
ENERGY
[Letterhead]
July 21, 1994
Mr. William L. Bardeen
Senior Vice President and Group Executive
Consumer Energy Services Group
PECO Energy Company
2301 Market Street
P.O. Box 8699
Philadelphia, PA 19101-8699
Re: Letter Agreement Regarding Amendment of the Energy Service Agreements
between the Philadelphia Municipal Authority and O'BRIEN Philadelphia
Cogeneration Inc. in Conjunction with the Execution of Economic
Efficiency Rider Contracts Between the City of Philadelphia Water
Department and PECO Energy Company.
Dear Bill:
This letter sets forth the terms and conditions agreed to by PECO Energy
Company ("PECO") and O'BRIEN Environmental Energy, Inc. ("O'BRIEN") under
which, (i) O'BRIEN will agree to seek amendments to the Energy Service
Agreements ("ESAs") between the Philadelphia Municipal Authority ("PMA")
and O'BRIEN Philadelphia Cogeneration Inc. ("OPCI") under which OPCI
currently provides standby electric generating services for the City of
Philadelphia Water Department ("PWD") at its Northeast and Southwest waste
water treatment facilities, and, (ii) PECO will offer and agree to enter
into new Economic Efficiency Rider contracts with the PWD that would
provide the PWD with the same level of economic benefits the PWD would have
otherwise received from OPCI under the ESAs.
The agreed upon terms and conditions are as follows:
1. PECO will loan O'BRIEN $5.5 million (the "Loan") on August 5, 1995,
the last date of O'BRIEN's final option period to repurchase the
common stock of OPCI (the "Stock Repurchase") from OPC Acquisition,
Inc. (OPCAI). O'BRIEN will use $5 million of the Loan proceeds or
such lesser amount as may be mutually agreed to by O'BRIEN and OPCAI
to purchase the OPCI common stock (the "Stock Repurchase Price") and
will assign the OPCI common stock to PECO as collateral for the Loan,
as described below. PECO will facilitate the Stock Repurchase by
wining the Stock Repurchase Price directly to OPCAI on behalf of
O'BRIEN. Until the Loan is repaid, O'BRIEN will make monthly payments
of $116,000 (the Monthly PECO Loan Payment) to PECO as provided in
Schedule 1 attached hereto. O'BRIEN may prepay the outstanding
balance of the Loan at any
<PAGE>
O'BRIEN
ENVIRONMENTAL
ENERGY
[Letterhead]
Mr. William L. Bardeen
July 21, 1994
Page 2
time without penalty. As further collateral for the Loan, O'BRIEN
promises to establish a lock-box arrangement with a bank, acceptable
to PECO and paid for by O'BRIEN, as described in the addendum to
Schedule 2 attached hereto, under which all service fees received by
OPCI from PMA will be directly deposited and all OPCI obligations,
including full payment to PECO, as provided in Schedule 1, are paid in
accordance with the Order of Monthly Service Fee Distributions
attached hereto as Schedule 2. Interest shall accumulate on any unpaid
balance (the Unpaid Balance) until paid in full. If there are
insufficient funds available in any month to make the total Monthly
PECO Loan Payment, or if there are excess funds available in any month
after all the obligations of Schedule 2 have been satisfied, the
remaining principal amount shall be adjusted and the term of the
Schedule 1 Loan Amortization Table shall be extended or shortened, as
the case may be, to amortize the adjusted principal amount using a
monthly payment of $116,000 and 12% annual interest rate.
Further O'BRIEN will not sell, move, pledge, or otherwise further
encumber the 22 megawatts of diesel fuel standby electric generating
equipment sets (the "Gen Sets") currently leased by O'Brien Rental
Services ("RENTAL") to OPCI and located on PWD property without either
obtaining PECO's prior written approval or by repaying the Loan in
full. Further,upon the effective date of this Letter Agreement,
O'BRIEN will immediately use its best efforts to grant PECO a second
lien or mortgage on the Gen Sets in an amount equal to any Unpaid
Balance due on the Loan. O'BRIEN will use its best efforts to obtain
the consent of the lenders who have a primary lien on the Gen Sets
(the "Primary Lenders") if such consent is necessary to permit O'BRIEN
to grant the second lien to PECO. O'BRIEN represents that, (i) as of
the date of this Letter Agreement, the projected schedule of payments
would result in a remaining balance of less than $600,000 that will be
owed to the Primary Lenders on all of the Gen Sets as of August, 1998,
and (ii) the original financing costs of the Gen Sets and related
equipment were greater than $8 million. O'BRIEN will provide PECO
with detailed schedules and other documents memorializing RENTAL's
obligations to the Primary Lenders with respect to the Gen Sets upon
request.
2. O'BRIEN will not sell or pledge the common stock of OPCI to any party
other than PECO until the Loan is repaid in full, except that O'BRIEN
may sell the common stock to OPCAI as provided in paragraph 5 below.
3. Subject to a right of first refusal on the sale of the OPC I common
stock which OPCAI has pursuant to Section 5 of Annex 11 to the Stock
Purchase Agreement by and among OPCAI and affiliates and O'BRIEN dated
November 12, 1993 (the "OPCAI Agreement"), after O'BRIEN has acquired
the OPCI common stock, O'BRIEN shall grant PECO an exclusive option to
acquire the OPCI common stock for the sum of $3 million, which option
PECO must exercise when, and only if, all of the following conditions
are satisfied:
(1) O'BRIEN and the PMA execute amended ESAs that include at least the
terms
<PAGE>
O'BRIEN
ENVIRONMENTAL
ENERGY
[Letterhead]
Mr. William L. Bardeen
July 21, 1994
Page 3
described below in paragraph 10, and the ESAs are acceptable to PECO;
(2) PECO and the PWD execute Economic Efficiency Rider Contracts (the "EER
contracts"), as described below in paragraphs 7 and 8;
(3) O'BRIEN and PECO execute a transfer agreement (the "Transfer
Agreement"), as described below in paragraph 1 0; and
(4) PECO pays the difference between $9.5 million and the then current
balance on the Loan to O'BRIEN and deems the Loan satisfied in full.
4. After O'BRIEN has acquired the common stock of OPCI, PECO shall have
the right to tender an offer to purchase the OPCI common stock for $3
million (the "Offer"), which offer shall be subject to the conditions
described above in paragraph 3.
5. If OPCAI, (i) exercises its rights to match the Offer, (ii) pays
O'BRIEN $3 million for the OPCI common stock in accordance with the
OPCAI Agreement, and (iii) makes the Lease Buyout Payment of $6.5
million, O'BRIEN shall immediately repay the Loan in full from the
proceeds of the payments received from OPCAI for the OPCI common stock
and the Lease Buyout and shall do so by requesting that OPCAI wire
directly to PECO an amount equal to the principal and interest due on
the Loan.
6. If OPCAI does not exercise its right to match, as soon as practicable
and at least thirty days after the date the Loan is executed, O'BRIEN
and PECO shall contact PWD and other relevant City of Philadelphia
representatives to seek PWD's agreement to an amendment of the ESAs as
described in paragraph 3 (1) above, the Transfer Agreement described
in paragraph 10 below, and the EER contracts as described in paragraph
7 below. O'BRIEN and its affiliates shall fully defend, indemnify,
and hold PECO harmless from and against any losses or damages that
PECO might suffer as the result of any legal action of any kind, if
any, brought by OPCAI, or by any other person or entity making a claim
based on the OPCAI Agreement, in connection with alleged violations of
rights, or alleged breaches of obligations, established by the OPCAI
Agreement,
7. PECO will offer EER contracts to the PWID for its Northeast and
Southwest waste water treatment facilities that would provide the same
level of economic benefits that the PWID would otherwise receive under
the ESAs. The EER contracts will provide a discount on PECO's full
Rate HT service to the PWD in a manner that is consistent with the
requirements of PECO's EER Tariff and the Pennsylvania Public Utility
Code. The combination of this discount and the timing of such
discount will provide the same level of economic benefits that the PWD
would have otherwise received at the PWID facilities from OPCI under
the ESAs.
<PAGE>
O'BRIEN
ENVIRONMENTAL
ENERGY
[Letterhead]
Mr. William L. Bardeen
July 21, 1994
Page 4
8. The EER contracts may include provisions similar to those provisions
relating to early termination contained in the "Term of Contract"
section of the EER contract executed on June 30, 1994 between
SmithKline Beecham Corporation and PECO if the PWD wishes to have such
provisions included.
9. O'BRIEN and PECO shall cooperate to obtain PWD's agreement to the
changes to the ESAs, to accept the transfer of obligations previously
owed to the PWD by OPCI to O'BRIEN, and to induce the PWD to enter
into the EER contracts on the terms and conditions described herein,
and shall endeavor to share any additional burdens, economic or
otherwise, which O'BRIEN and PECO deem reasonable and appropriate, to
bring about PWD's agreement and participation. O'BRIEN shall have
sole discretion to decide whether to accept any such burdens with
respect to the amended ESAs, and PECO shall have sole discretion to
decide whether to accept any such burdens with respect to the EER
contracts.
10. The amendment to the ESAs shall include provisions that, (i) permit
the PMA or PWD to enter into the EER contracts, and (ii) release
O'BRIEN or an affiliate of O'BRIEN from its obligation to maintain and
operate all diesel fuel standby electric generating equipment
currently located on PWD property. The amendment to the ESAs and the
Transfer Agreement between PECO and O'BRIEN will contain terms
ensuring that, upon closing of those agreements and the EER contracts,
(i) OPCI shall have no remaining obligations whatsoever to the PIVIA,
the PWD, or to O'BRIEN and any of its affiliates, or to any other
person or entity, and, (H) that O'BRIEN will assume any obligations
that OPCI had to the PIVIA, the PWD or to O'BRIEN and any of its
affiliates, or to any other person or entity, it being PECO's intent
to take whatever actions that may be necessary to cause OPCI to cease
to exist immediately following the execution of the amended ESAs,
Transfer Agreement, and the EER contracts.
11. If the PMA fails to execute the amended ESAs and the EER contracts
within 120 days after the date the Loan is made, PECO may issue a
second offer to purchase the common stock according to the same terms
and conditions as its first offer, as described above in paragraphs 3,
4 and 5.
12. On, or as soon as practicable after, the date on which there is no
longer any possibility that the amended ESAs and EER contracts
contemplated herein will be successfully negotiated and executed,
O'BRIEN and RENTAL shall enter into a written security agreement (the
"Security Agreement") with PECO that will obligate O'BRIEN and RENTAL
to, within six (6) months of the date the ESAs are terminated (the
"Final Repayment Date"), (i) pay to PECO the Unpaid Balance on the
Loan plus accumulated interest or, (ii) cause RENTAL to sell such
number of the Gen Sets as are required to pay the Unpaid Balance to
PECO and any remaining obligations to the Primary Lenders, and, (iii)
grant a security interest to PECO in the GEN SETS such that if O'BRIEN
fails to pay the full amount of the Unpaid Balance by the Final
Repayment Date, subject to any regulatory
<PAGE>
O'BRIEN
ENVIRONMENTAL
ENERGY
[Letterhead]
Mr. William L. Bardeen
July 21, 1994
Page 5
approvals that PECO deems necessary, O'BRIEN shall be obligated to
cause RENTAL to assign RENTAL's full interest in all of the Gen Sets
to PECO. The Security Agreement shall also provide, and O'BRIEN
hereby promises, that PECO shall be entitled to recover any costs
reasonably incurred by PECO or PECO's agent to sell the Gen Sets to
satisfy the Loan from the net proceeds of any such sale and any
balance remaining shall be returned to O'BRIEN. At the time O'BRIEN,
RENTAL, and PECO enter into the Security Agreement, O'BRIEN and RENTAL
shall execute whatever financing statements and other documents that
PECO, in its sole judgment, deems necessary to enable PECO to perfect
the security interest that the Security Agreement grants to PECO.
13. Should PECO, in its sole judgment, deem it necessary to obtain
approval, from the Federal Trade Commission, the Federal Energy
Regulatory Commission, Pennsylvania Public Utility Commission, or any
other agency or governmental entity, to undertake any of the actions
required by this Letter Agreement, O'BRIEN will undertake all actions
that, in PECO's sole judgment, are necessary, including making all
complementary or concurrent filings that may be required. PECO shall
not be required to undertake or fulfill any obligation imposed by this
Letter Agreement should an agency or other governmental entity
disapprove of or forbid PECo from fulfilling the obligation.
14. O'BRIEN will manage and lead negotiations with the PWD, PIVIA, and, as
appropriate, other City of Philadelphia officials, on the
restructuring and amendment of the ESAs and shall consult PECO on
strategy. PECO shall cooperate with O'BRIEN and shall attend meetings
with O'BRIEN and City officials in support of O'BRIEN's negotiations
consistent with the strategy. PECO shall not separately negotiate or
maintain contact with the City or any other party involved with the
ESAs, including OPCAI, Woodforde Energy, Inc., Mrs. Marsha Perelman or
any of her affiliates or representatives, regarding any amendment of
the ESAs or the provision of service under the EER contracts, except
with the prior written approval of O'BRIEN. Except for initial
telephone contacts to establish meeting dates and times, O'BRIEN shall
not separately discuss with the PWID, the PIVIA, or other City
officials, the EER contract provisions PECO has agreed to herein or
the details of the EER contracts as the negotiations proceed.
15. Upon the execution of the amended ESAs, the Transfer Agreement, and
the EER contracts contemplated herein, PECO will pay O'BRIEN the
difference between $9.5 million and the then remaining principal
amount and any accrued interest of the Loan owed to PECO by O'BRIEN
and shall provide O'BRIEN with written certification that the Loan has
been satisfied in full.
16. O'BRIEN represents to PECO that as of the date of this Letter
Agreement, it knows of no outstanding claims against OPCI, and
promises that, with respect to any claims that may be made or that
accrue against OPCI between the date of this Letter Agreement and the
date of the execution of the amended ESAs, the Transfer Agreement, and
the EER contracts, O'BRIEN and its affiliates shall fully indemnify
and hold PECO harmless from
<PAGE>
O'BRIEN
ENVIRONMENTAL
ENERGY
[Letterhead]
Mr. William L. Bardeen
July 21, 1994
Page 6
and against any losses or damages, including attorney's fees and expenses
incurred to defend against any such claims, that PECO might suffer as the
result of any such claims should PECO ever obtain title to the OPCI stock
as contemplated herein.
As with our original restructuring proposal and in accordance with our Non-
Disclosure Agreement, this Letter Agreement is hereby designated as
"Confidential" by O'BRIEN and may not be disclosed to any other party for
any purpose without O'BRIEN's or PECO's prior written permission.
By signing below, both parties intend to be legally bound by the foregoing.
Thank you for your consideration.
Sincerely, ACCEPTED AND AGREED TO BY:
/s/ Robert A. Shinn /S/ W. L. Bardeen
Robert A. Shinn W. L. Bardeen
Vice President for PECO Energy Company
O'BRIEN Environmental Energy, Inc. DATE: 7/21/94
cc:
cc: P. T. Eastman
F. L. O'BRIEN, III
L. Zalkin
J. Cooperman
<PAGE>
Schedule 1
Loan Amortization
Amount $5,500,000
Interest Rate/year 0.12
Monthly Payment 116,000
a. Unpaid
b. Month Balance Payment Interest Principal
1 5,500,000 116,000 55,000 61,000
2 5,439,000 116,000 54,390 61,610
3 5,377,390 116,000 53,774 62,226
4 5,315,164 116,000 53,152 62,848
5 5,252,316 116,000 52,523 63,477
6 5,188,839 116,000 51,888 64,112
7 5,124,727 116,000 51,247 64,753
8 5,059,974 116,000 50,600 65,400
9 4,994,574 116,000 49,946 66,054
10 4,928,520 116,000 49,285 66,715
11 4,861,805 116,000 48,618 67,382
12 4,794,423 116,000 47,944 68,056
13 4,726,367 116,000 47,264 68,736
14 4,657,631 116,000 46,576 69,424
15 4,588,207 116,000 45,882 70,118
16 4,518,089 116,000 45,181 70,819
17 4,447,270 116,000 44,473 71,527
18 4,375,743 116,000 43,757 72,243
19 4,303,500 116,000 43,03S 72,965
20 4,230,535 116,000 42,305 73,695
21 4,156,841 116,000 41,568 74,432
22 4,082,409 116,000 40,824 75,176
23 4,007,233 116,000 40,072 75,928
24 3,931,306 116,000 39,313 76,687
25 3,854,619 116,000 38,546 77,454
26 3,777,165 116,000 37,772 78,228
27 3,698,936 116,000 36,989 79,011
28 3,619,926 116,000 36,199 79,801
29 3,540,125 116,000 35,401 80,599
30 3,459,526 116,000 34,595 81,405
31 3,378,122 116,000 33,781 82,219
32 3,295,903 116,000 32,959 83,041
33 3,212,862 116,000 32,129 83,871
34 3,128,990 116,000 31,290 84,710
35 3,044,280 116,000 30,443 85,557
36 2,958,723 116,000 29,587 86,413
<PAGE>
Schedule 1, Loan Amortization
Page 2
37 2,872,310 116,000 28,723 87,277
38 2,785,034 116,000 27,850 88,150
39 2,696,884 116,000 26,969 89,031
40 2,607,853 116,000 26,079 89,921
41 2,517,931 116,000 25,179 90,821
42 2,427,111 116,000 24,271 91,729
43 2,335,382 116,000 23,354 92,646
44 2,242,735 116,000 22,427 93,573
45 2,149,163 116,000 21,492 94,508
46 2,054,654 116,000 20,547 95,453
47 1,959,201 116,000 19,592 96,408
48 1,862,793 116,000 18,628 97,372
49 1,765,421 116,000 17,654 98,346
50 1,667,075 116,000 16,671 99,329
51 1,567,746 116,000 15,677 100,323
52 1,467,423 116,000 14,674 101,326
53 1,366,098 116,000 13,661 102,339
54 1,263,759 116,000 12,638 103,362
55 1,160,396 116,000 11,604 104,396
56 1,056,000 116,000 10,560 105,440
57 950,560 116,000 9,506 106,494
58 844,066 116,000 8,441 107,559
59 736,506 116,000 7,365 108,635
60 627,871 116,000 6,279 109,721
61 518,150 116,000 5,182 110,818
62 407,332 116,000 4,073 111,927
63 295,405 116,000 2,954 113,046
64 182,359 116,000 1,824 114,176
65 68,183 116,000 682 68,183
Unadjusted Term: 5.42 Years
NOTE:
Commencing September 20, 1994, and on the 20th day of each succeeding month
during the term of the Loan, O'Brien will revise this Schedule 1 Loan
Amortization Table in accordance with section 1 of the Letter Agreement and
the provisions of Schedule 2 and forward the revised amortization table
(the "Revised Schedule 1") to PECO for approval, such approval not to be
unreasonably withheld. The Monthly PECO Loan Payment of $116,000 will
remain a constant in the Revised Schedule 1, while the remaining Term,
Unpaid Balance, Interest, and Principal payments in the revised Schedule 1
will be subject to adjustment.
The following examples illustrate how the original and revised versions of
Schedule 1 would be subject to change:
A. If, based on Schedule 2, only $100,000 of the first month's payment is
paid on time, then the Unpaid Balance for the second month will be
increased by $16,000 to $5,455,000 and the Interest due for the second
month will be $54,550.
B. If no payment is made in the first month, then the balance due for the
second month will be $5,555,000 and the interest due for the second
month will be $55,550.
C. If, based on Schedule 2, $130,000 is available and paid to PECO as
payment in the first month, then the Unpaid Balance for the second
month will be adjusted to $5,425,000 and the interest due for the
second month will be $54,250.
<PAGE>
(a) Schedule 2
(b) Order of Monthly Distribution Payments
1. Primary Gen Set Lenders' Lease Payments.
2. An amount equal to O'BRIEN's Lease Margin as defined below plus the
Operation & Maintenance Reimbursement of $25,000, such amount to be
escalated each year by four (4) percent, to PECO Energy.
3. If applicable, the estimated Preferred Stockholder Dividend to the
OPCI dividend reserve account.
4. The monthly PECO Loan Payment amount less the amount in line 2 above.
5. Operation & Maintenance Reimbursement of $25,000, such amount to be
escalated each year by four (4) percent, to O'BRIEN.
6. Any remaining amount to PECO to further reduce the remaining principal
amount of the loan.
For purposes of this Schedule 2, O'BRIEN's Lease Margin, means $195,761 per
month less the Primary Gen Set Lenders' Lease Payments.
<PAGE>
SCHEDULE 2 ADDENDUM
LOCKBOX ARRANGEMENTS
OPCI SERVICE FEES AND DISTRIBUTIONS
As provided in section one of the Letter Agreement, upon the making of the
Loan O'BRIEN will establish a Lockbox Account (the "Lockbox") with a bank
(the "Bank"), acceptable to PECO and paid for by O'BRIEN, to receive and
distribute OPCI service fees. The Bank will have standing instructions to
follow the following procedures each month with respect to the flow of
funds;
1. Monthly service fee checks will be remitted by the Philadelphia
Municipal Authority ("PMA') directly to the Bank in the name of OPCI.
These checks are typically received between the 10th and 12th day of
each month.
2. As with PECO's own billing and payment schedule, there is a time lag
(approximately 45 days) between the end of the applicable PECO billing
period and the date the OPCI service fees are paid. While O'BRIEN, as
the new holder of OPCI common stock, will be entitled to accrue
dividends commencing August 6, 1994 (the day after the Stock
Repurchase), the actual disbursement of the common stock dividend for
the period August 6 through August 22, 1994 will not be available
until October 12, 1994, and the common stock dividend accrued for the
period August 22 through September 22, 1994 will not be available
until November 12, 1994.
2. PECO, RENTAL and O'BRIEN will maintain a demand deposit account at the
Bank during the term of the Loan.
3. On the 12th of each month, the Bank will automatically debit the
account of OPCI and distribute payments in the amounts and in the
order of the distribution categories shown in Schedule 2. Since the
Preferred Stockholder Dividend (category number 4 on Schedule 2) is
payable quarterly, if applicable and if funds are available, the Bank
will debit the account of OPCI monthly in an amount estimated by
O'BRIEN to be the then current month's share of the then current
quarter's projected preferred stock dividend and deposit such amount
into a separate dividend reserve account to be established at the Bank
and controlled by OPCI. If applicable, the preferred stock dividend
will be calculated in accordance with the formula described in a
letter from O'BRIEN to OPCAI dated November 12, 1993 attached hereto
as Schedule 3.
4. OPCI will be entitled to maintain a minimum monthly working capital,
balance of $5,000 at all times during the term of the Loan.
<PAGE>
Exhibit 10.14
TRANSMISSION SERVICE
AND
INTERCONNECTION AGREEMENT
BETWEEN
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
AND
O'BRIEN ENERGY SYSTEMS, INC.
Dated as of the 17th day
Of November, 1987
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS 1
ARTICLE I DEFINITIONS 5
ARTICLE II BASIC SERVICE 13
ARTICLE III EXCESS SERVICE 14
ARTICLE IV PHASE-IN PERIOD 16
ARTICLE V INTERRUPTION, CURTAILMENT OR
REDUCTION OF SERVICE 17
Section A Public Service System
Conditions 17
Section B Project Conditions 20
Section C Service Conditions 23
ARTICLE VI OPERATIONS COORDINATION 25
ARTICLE VII NET ELECTRICAL POWER OUTPUT
SPECIFICATIONS 28
ARTICLE VIII TERM 28
ARTICLE IX EFFECTIVENESS AND ENFORCEABILITY 29
ARTICLE X TRANSMISSION SERVICE CHARGES 31
Section A 31
Section B 34
ARTICLE XI BILLING AND PAYMENT 35
ARTICLE XII METERING/RECORDS 38
ARTICLE XIII INTERCONNECTION 46
Section A Design, Construction and In-
stallation of Interconnection 46
Section B Interconnection Costs 49
i
<PAGE>
TABLE OF CONTENTS
PAGE
Section C Letter of Credit for
Interconnection Costs 54
Section D Cancellation Costs 56
ARTICLE XIV MAINTENANCE OF PLANT 58
ARTICLE XV USE OF THE PUBLIC SERVICE SYSTEM 58
ARTICLE XVI EASEMENTS 59
ARTICLE XVII PERMITS/APPROVALS 60
ARTICLE XVIII DEDICATION OF FACILITIES 63
ARTICLE XIX REARRANGEMENT 63
ARTICLE XX COGENERATION FACILITY/SUBSTATION
FACILITY 64
ARTICLE XXI LIABILITY 71
ARTICLE XXII FORCE MAJEURE 72
ARTICLE XXIII PROTECTIVE DEVICES 74
ARTICLE XXIV INDEMNIFICATION 74
ARTICLE XXV INSURANCE 77
ARTICLE XXVI WARRANTIES 78
ARTICLE XXVII EVENTS OF TERMINATION 78
ARTICLE XXVIII BREACH OF CONTRACT 81
ARTICLE XXIX ARBITRATION 83
ARTICLE XXX SPECIFIC PERFORMANCE 86
ARTICLE XXXI MODIFICATIONS 87
ARTICLE XXXII ASSIGNMENT/TRANSFER 88
ARTICLE XXXIII CURE BY FINANCIER 90
ii
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE XXXIV FINANCIER SECURITY AGREEMENT 94
ARTICLE XXXV DETERMINATION OF PSE&G COSTS 95
ARTICLE XXXVI STANDARD FOR PERFORMANCE 95
ARTICLE XXXVII STANDBY ELECTRIC SERVICE 96
ARTICLE XXXVIII ENTIRE AGREEMENT 97
ARTICLE XXXIX SUCCESSORS AND ASSIGNS 97
ARTICLE XL CHOICE OF LAW 98
ARTICLE XLI CAPTIONS 98
ARTICLE XLII COUNTERPARTS 99
ARTICLE XLIV SURVIVAL OF OBLIGATIONS 99
ARTICLE XLV MISCELLANEOUS 100
ARTICLE XLVI NOTICE OF AMENDMENTS TO PJM OR
MID-ATLANTIC AGREEMENTS 100
ARTICLE XLVII RESERVATIONS 101
ARTICLE XLVIII NOTICES 101
iii
<PAGE>
TRANSMISSION SERVICE
INTERCONNECTION AGREEMENT
This AGREEMENT made and entered into as of this 17th day of November, 1987
by and between PUBLIC SERVICE ELECTRIC AND GAS COMPANY, a New Jersey
corporation (PSE&G) and O'BRIEN ENERGY SYSTEMS, INC., a Delaware
corporation (O'BRIEN).
RECITALS
WHEREAS, O'BRIEN has been formed as a Delaware corporation to, among
other things, design, construct, own and operate a cogeneration facility at
the PROJECT SITE.
WHEREAS, O'BRIEN has made application to the Federal Energy Regulatory
Commission (FERC) for and has obtained from the FERC a certification that
the PROJECT is a qualifying facility pursuant to 18 C.F.R. Section 292.204.
WHEREAS, O'BRIEN, intends to maintain the COGENERATION FACILITY during
the term of this AGREEMENT in compliance with the requirements for a
qualifying facility established as of the effective date of this AGREEMENT
in accordance with Title 18,
<PAGE>
2
Code of Federal Regulations, Part 292, Subpart B, Section 292.203 through
292.207, inclusive.
WHEREAS, O'BRIEN has advised PSE&G that the NET ELECTRICAL POWER
OUTPUT OF THE COGENERATION FACILITY will be approximately 56,000 kilowatts;
WHEREAS, O'BRIEN estimates that it will commence pre-operation testing
of PROJECT equipment and facilities during the fourth quarter of 1989;
WHEREAS, O'BRIEN estimates that the DATE OF INITIAL OPERATION for the
PROJECT will be during the first quarter of 1990;
WHEREAS, O'BRIEN estimates that the DATE OF COMMERCIAL OPERATION for
the PROJECT will be in or about third quarter of 1990;
WHEREAS, O'BRIEN has an agreement with Jersey Central Power and Light
Company (JCP&L) entitled JCP&L Standard Contract - Long-Term Purchase for
Cogeneration and Small Power Production Located Outside JCP&L Service
Territory dated March 10, 1986 pursuant to which O'BRIEN has agreed to sell
to JCP&L and JCP&L has agreed to purchase from O'BRIEN the NET ELECTRICAL
POWER OUTPUT and associated NET ELECTRICAL ENERGY produced by the
COGENERATION FACILITY;
<PAGE>
3
WHEREAS, PSE&G is a public utility as defined in N.J.S.A. 48:2-13 and,
as such, is required by applicable statutes and regulations to furnish
safe, adequate and proper service to its retail and sale-for-resale
customers and further, to have and maintain its property, plant and
equipment in such condition as to enable it to do so;
WHEREAS, PSE&G owns and operates electric power transmission
facilities and, while O'BRIEN's planned PROJECT is not connected thereto,
the PROJECT will be located in an area which is in proximity to PSE&G's
electric power transmission facilities.
WHEREAS, O'BRIEN has requested PSE&G to: (i) design, construct,
install, operate and maintain the INTERCONNECTION so as to interconnect the
PROJECT with the electric power transmission facilities of PSE&G at PSE&G's
Essex Switching station; and (ii) receive NET ELECTRICAL POWER OUTPUT and
associated NET ELECTRICAL ENERGY produced by the COGENERATION FACILITY and
supplied to the RECEIPT POINT for DELIVERY TO JCP&L;
WHEREAS, JCP&L owns and operates electric power transmission
facilities which are interconnected with the electric power transmission
facilities of PSE&G;
WHEREAS, PSE&G and JCP&L are members of the Pennsylvania-New Jersey-
Maryland Interconnection (PJM);
<PAGE>
4
WHEREAS, PJM is a fully coordinated power pool which, pursuant to an
agreement executed by and among its members, affords to the member
utilities for the benefit of their customers reliable electric service at
the lowest possible cost;
WHEREAS, PSE&G has conducted engineering studies to ascertain the
feasibility of complying with O'BRIEN's requests to design, construct,
install, operate and maintain the INTERCONNECTION and to receive NET
ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY produced by
the COGENERATION FACILITY and supplied to the RECEIPT POINT for DELIVERY TO
JCP&L;
WHEREAS, PSE&G, as a result of the aforesaid engineering studies, has
determined that it is feasible to design, construct, install, operate and
maintain the INTERCONNECTION and to receive NET ELECTRICAL POWER OUTPUT and
associated NET ELECTRICAL ENERGY produced by the COGENERATION FACILITY and
supplied to the RECEIPT POINT for DELIVERY TO JCP&L, over the term of this
AGREEMENT;
WHEREAS, PSE&G and JCP&L have or will enter into an operating
agreement whereby the DELIVERY TO JCP&L of NET ELECTRICAL POWER OUTPUT and
associated NET ELECTRICAL ENERGY received by PSE&G from the COGENERATION
FACILITY at the RECEIPT POINT pursuant to this AGREEMENT will be effected
through an adjustment by and between JCP&L and PSE&G of their hourly
<PAGE>
5
measured interconnection energy interchange in an amount equal to the NET
ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY received by
PSE&G at the RECEIPT POINT;
NOW, THEREFORE, in consideration of the recitals and mutual covenants
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms when used herein with capitalization shall have
the following meanings, unless a different meaning shall be expressly
stated:
AGREEMENT means this Transmission Service and Interconnection
Agreement between O'BRIEN and PSE&G.
ALTERNATE PROJECT SITE means the site located on portions of parcels
in the City of Newark, County of Essex and State of New Jersey as follows:
(i) Lot 32 Block 2407 on the Tax Map of the City of Newark and being
commonly known as 335-347 Raymond Boulevard, Newark, New Jersey; and (ii)
Lot 5 Block 2406 on the Tax Map of the City of Newark and being commonly
known as 55-56 Lockwood Street, Newark, New Jersey; and (iii) that Lot
known as the Morris Canal Bed Property.
<PAGE>
6
BASIC SERVICE means the receipt by PSE&G at the RECEIPT POINT of a
level of kilowatts of NET ELECTRICAL POWER OUTPUT for DELIVERY TO JCP&L in
accordance with the level specified in Article II of this AGREEMENT.
BILLING STATEMENT means the monthly statement of charges PSE&G submits
to O'BRIEN for payment, as determined in accordance with Article X of this
AGREEMENT.
CANCELLATION COSTS means the actual costs and/or liabilities, PSE&G
incurs in connection with: (i) the cancellation of supplier and/or
contractor orders/agreements entered into to install and construct the
INTERCONNECTION; (ii) removal of interconnection facilities which have been
installed and are not required to maintain the integrity of the PSE&G
subtransmission network.
COGENERATION FACILITY means the gas turbine with heat recovery steam
generator, one (1) steam turbine, synchronous generators and all
appurtenant structures and equipment which O'BRIEN plans to construct,
install, own, operate and maintain at the PROJECT SITE, which generators
have in aggregate a nameplate rating of 51,400 kilowatts.
<PAGE>
7
COMMERCIAL OPERATION means the production of electric power and energy
at the COGENERATION FACILITY and the supply of such electric power and
energy to PSE&G at the RECEIPT POINT for DELIVERY TO JCP&L, commencing on
the DATE OF COMMERCIAL OPERATION.
CREDIT means Irrevocable Letter of Credit.
DATE OF COMMERCIAL OPERATION means the date O'BRIEN designates as the
date on which the electric generation units at the COGENERATION FACILITY
and the SUBSTATION FACILITY have been completed, tested and inspected and
are available for and capable of: (i) production of electrical power and
energy; and (ii) the supply thereof to PSE&G at the RECEIPT POINT for
DELIVERY TO JCP&L.
DATE OF INITIAL OPERATION means the date on which O'BRIEN
synchronizes, for the first time, any electric generation unit at the
COGENERATION FACILITY with the PUBLIC SERVICE SYSTEM.
DATE OF START-UP means the date PSE&G designates as the date on which
the SUBSTATION FACILITY will be energized and PSE&G commences the supply of
electric power and energy to the PROJECT.
<PAGE>
8
DELIVERY TO JCP&L means: (i) the hourly communication by PSE&G to
JCP&L of the amount of NET ELECTRICAL ENERGY produced by the COGENERATION
FACILITY which was received at the RECEIPT POINT by PSE&G for the account
of JCP&L during the previous hour; (ii) the simultaneous adjustment by
PSE&G of its hourly measured interconnection energy interchange in an
amount equal to the NET ELECTRICAL ENERGY so received; and (iii)the
simultaneous adjustment by JCP&L of its hourly measured interconnection
energy interchange in an amount equal to the NET ELECTRICAL ENERGY so
reported to JCP&L by PSE&G.
EXCESS SERVICE means the receipt by PSE&G at the RECEIPT POINT of a
level of kilowatts of NET ELECTRICAL POWER OUTPUT for DELIVERY TO JCP&L in
excess of the level of kilowatts of BASIC SERVICE then applicable pursuant
to and in accordance with the provisions of Article II of this AGREEMENT.
FINANCIER means any individual(s) or entity(ies): (i) lending money
to O'BRIEN for (a) the construction and operation of the PROJECT and/or (b)
the refinance or take-out of any such loan(s); and/or (ii) participating as
an equity investor in the PROJECT; and/or (iii) any lessor under a lease
finance arrangement. FINANCIER also includes any Trustee, acting on behalf
of any of the foregoing individual(s) or entity(ies).
<PAGE>
9
INITIAL OPERATION means the production of electric power and energy,
commencing on the DATE OF INITIAL OPERATION and prior to the DATE OF
COMMERCIAL OPERATION, by the PROJECT's electric generation unit(s) and the
supply of such electric power and energy to PSE&G at the RECEIPT POINT for
DELIVERY TO JCP&L.
INTERCONNECTION means the 26,000-volt line extension, circuit
reinforcements and associated terminal facility reinforcements to the
PUBLIC SERVICE SYSTEM to be designed, constructed and installed by PSE&G to
interconnect the PROJECT with and to the PUBLIC SERVICE SYSTEM for the
purpose of enabling PSE&G to receive up to 56,000 kilowatts of NET
ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY from the
COGENERATION FACILITY pursuant to the terms and conditions of this
AGREEMENT. The Proposed Plan for the INTERCONNECTION is set forth on
Exhibit 1.
ISSUER means a commercial bank or other entity issuing the CREDIT.
LOAN AGREEMENT mean any agreement between O'BRIEN and one or more
FINANCIERS pursuant to which O'BRIEN arranges for and obtains debt
financing to construct and/or operate the PROJECT.
<PAGE>
10
MONTH means calendar month commencing at 12:00.01 a.m. Eastern Time on
the first day of the calendar month and concluding at midnight Eastern time
on the final day of the same calendar month.
NET ELECTRICAL ENERGY means the gross amount of electrical energy in
kilowatt hours produced by electric generation unit(s) at the COGENERATION
FACILITY less: (i) the electrical energy consumed for use by the
COGENERATION FACILITY; and (ii) the electrical energy consumed in the
transformation and transmission of the electrical energy produced, if any,
prior to the receipt of such electrical energy production by PSE&G at the
RECEIPT POINT.
NET ELECTRICAL POWER OUTPUT means the gross amount of electrical power
in kilowatts produced by any electric generation unit(s) at the
COGENERATION FACILITY less: (i) the electrical power consumed for use by
the COGENERATION FACILITY; and (ii) the electrical power consumed in the
transformation and transmission of the electrical power produced, if any,
prior to the receipt of such electrical power production by PSE&G at the
RECEIPT POINT.
OPERATIONAL EMERGENCY means the existence of a physical or operational
condition and/or the occurrence of an event on the
<PAGE>
11
PUBLIC SERVICE SYSTEM which is imminently likely to endanger life or
property and/or affects or impairs and/or imminently will affect or impair:
(i) PSE&G's ability to discharge its statutory obligation(s) to provide
safe, adequate and proper service to retail and sale-for resale customers;
and/or (ii) the safety and/or reliability of the PUBLIC SERVICE SYSTEM.
ORIGINAL PROJECT SITE means the site located on Lots 58 and 75 of
Block 2412 in the City of Newark, County of Essex and State of New Jersey.
PROJECT means the COGENERATION FACILITY, SUBSTATION FACILITY and
associated facilities and equipment to be constructed, owned, operated and
maintained by O'BRIEN at the PROJECT SITE for the purpose of generating,
among other things, electric power and energy.
PROJECT SITE means ALTERNATE PROJECT SITE or ORIGINAL PROJECT SITE, as
applicable.
PUBLIC SERVICE SYSTEM means the electric power generation,
transmission, subtransmission and distribution facilities owned, operated
and maintained by PSE&G, which will include the circuit reinforcements and
associated terminal facility reinforcements required to complete the
INTERCONNECTION.
<PAGE>
12
RECEIPT POINT, also referred to as POINT OF INTERCONNECTION, is the
point of physical connection of the PROJECT to the PSE&G 26 KV
subtransmission system located at the point at which the PSE&G 26 KV
subtransmission system meets with and connects to the SUBSTATION FACILITY.
The RECEIPT POINT is identified on the Proposed Plan for the
INTERCONNECTION.
RELEASE NOTICE means the written notice O'BRIEN gives to PSE&G
authorizing PSE&G to commence the tasks associated with the design,
construction and installation of the INTERCONNECTION.
REQUIRED PERMIT means any permit, license or approval from any
regulatory or governmental body which is required to be obtained by PSE&G
to install, construct, own, operate and/or maintain the INTERCONNECTION.
SERVICE means the rendition by PSE&G to O'BRIEN of BASIC SERVICE only
or BASIC SERVICE and EXCESS SERVICE pursuant to and in accordance with this
AGREEMENT.
SUBSTATION FACILITY means the facilities to be constructed, installed,
owned, operated and maintained by O'BRIEN at the PROJECT SITE to connect
the COGENERATION FACILITY to the PUBLIC SERVICE SYSTEM for the purpose of
enabling O'BRIEN to supply to
<PAGE>
13
the RECEIPT POINT, in a safe and reliable manner, NET ELECTRICAL POWER
OUTPUT and associated NET ELECTRICAL ENERGY produced by the COGENERATION
FACILITY for receipt by PSE&G.
ARTICLE II
BASIC SERVICE
PSE&G shall be obligated, as hereinafter defined, effective with the
DATE OF COMMERCIAL OPERATION, to provide to O'BRIEN a level of BASIC
SERVICE up to but not in excess of 52,000 kilowatts. BASIC SERVICE shall
be subject to interruption, curtailment or reduction only as specified in
Article V.
Upon notice to PSE&G consistent with the provisions of this paragraph,
O'BRIEN shall have the right to renominate (Renomination) a level of BASIC
SERVICE up to but not in excess of a level of 56,000 kilowatts. In the
event O'BRIEN elects to make a Renomination, O'BRIEN shall notify PSE&G in
writing of the renominated level of BASIC SERVICE ninety (90) days prior to
the effective date for such renominated level of BASIC SERVICE.
Nothing herein shall limit the ability of O'BRIEN to make a
Renomination of BASIC SERVICE to any level below the level of BASIC SERVICE
in effect at the time of the Renomination, provided however that, in the
event O'BRIEN makes a Renomination in the form of a reduction to its level
of BASIC SERVICE (Reduced Level), O'BRIEN shall be obligated to provide
twenty-four (24) MONTHS notice to PSE&G prior to PSE&G being obligated to
provide BASIC SERVICE to O'BRIEN at a level greater than the Reduced Level
then in effect.
<PAGE>
14
Other than as provided for in Article XIII of this AGREEMENT, O'BRIEN
shall have no obligation to pay for the costs of any facilities and
equipment which PSE&G may be required to purchase, construct and install
solely as a consequence of providing a level of BASIC SERVICE to O'BRIEN
pursuant to any Renomination affected in accordance with this Article II.
ARTICLE III
EXCESS SERVICE
Effective with the DATE OF COMMERCIAL OPERATION, O'BRIEN may request
EXCESS SERVICE from PSE&G, and, if EXCESS SERVICE is requested, PSE&G shall
use best efforts, as hereinafter defined, to accommodate O'BRIEN's request.
However, PSE&G shall not be obligated in any way, at any time, to receive
at the RECEIPT POINT NET ELECTRICAL POWER OUTPUT in excess of 56,000
kilowatts. EXCESS SERVICE shall be subject to interruption, curtailment or
reduction only as specified in Article V.
PSE&G's commitment, if any, to provide EXCESS SERVICE, pursuant to
O'BRIEN's request therefor, shall be limited to a commitment to provide
such EXCESS SERVICE for a period of one (1) MONTH in duration. For any
MONTH in which O'BRIEN requires EXCESS SERVICE, O'BRIEN shall make a
request for same to PSE&G at least forty-five (45) calendar days prior to
the first day of the MONTH for which EXCESS SERVICE is requested
(Applicable Month). PSE&G shall notify O'BRIEN within twenty-one (21)
calendar days of O'BRIEN's request for EXCESS SERVICE of the
<PAGE>
15
amount, if any, of EXCESS SERVICE PSE&G is able to provide to O'BRIEN for
and during the Applicable Month. In the event PSE&G is able to provide
EXCESS SERVICE, PSE&G's commitment to provide EXCESS SERVICE shall be
limited to an obligation to provide EXCESS SERVICE, as agreed to by PSE&G,
solely for the Applicable Month. At the conclusion of the Applicable
Month, PSE&G's commitment and associated obligation for the Applicable
Month shall expire. In the event O'BRIEN desires to have PSE&G renew or
resume EXCESS SERVICE for any additional or other monthly period, O'BRIEN
shall make a request therefor as provided in this Article III. PSE&G's
ability to renew or resume EXCESS SERVICE for any additional or other
monthly period, the making of any commitment by PSE&G and the nature and
extent of any such commitment, will be determined by PSE&G at that time, in
accordance with the provisions of this Article. Any request by O'BRIEN for
EXCESS SERVICE and any decision by PSE&G relative to such request shall be
confirmed in writing by the other party within ten (10) days of any request
and decision, respectively.
PSE&G's best efforts to provide EXCESS SERVICE shall be contingent
upon PSE&G's ability to provide EXCESS SERVICE and such best efforts shall
be subordinate and subject to and must abide a determination by PSE&G that:
(i) the PUBLIC SERVICE SYSTEM is capable of receiving from the COGENERATION
FACILITY NET ELECTRICAL POWER OUTPUT in excess of the level of BASIC
SERVICE then applicable; and (ii) the rendition of EXCESS SERVICE is
compatible to and does not interfere with or impair
<PAGE>
16
PSE&G's ability to operate the PUBLIC SERVICE SYSTEM in a manner so as to
render safe, reliable, adequate, proper and economic service to its retail
and sale-for-resale customers. Except as otherwise provided in this
AGREEMENT, PSE&G shall not be obligated to: (i) construct, reinforce,
replace or enlarge any electric power generation, transmission,
subtransmission or distribution facilities; and/or (ii) adopt or engage in
any extraordinary operating practice(s), such as off-economic operation of
generating units, in order to meet or satisfy its best efforts commitment
to accommodate O'BRIEN's requests for EXCESS SERVICE.
ARTICLE IV
PHASE-IN PERIOD
Subject to the provisions of Article XX, PSE&G will energize the
SUBSTATION FACILITY and supply electric power and energy to the PROJECT as
of the DATE OF START-UP to permit O'BRIEN to conduct and complete testing
of PROJECT equipment and facilities.
Upon completion of pre-operation testing of PROJECT equipment
facilities, O'BRIEN plans to commence conducting test operations of its
electric generation units. O'BRIEN anticipates that the test operations of
the electric generation units will take approximately six (6) months
(hereinafter referred to as the Phase-In Period). The Phase-In Period will
commence on the DATE OF INITIAL OPERATION and shall terminate on
<PAGE>
17
the DATE OF COMMERCIAL OPERATION, except as may otherwise be agreed to in
writing by PSE&G.
O'BRIEN anticipates that during the Phase-In Period electric power and
energy will be produced at the COGENERATION FACILITY and supplied to PSE&G
at the RECEIPT POINT for DELIVERY TO JCP&L. PSE&G shall be obligated
during the Phase-In Period to receive at the RECEIPT POINT the electric
power and energy produced at the COGENERATION FACILITY for DELIVERY TO
JCP&L; provided however, PSE&G shall not be obligated to receive at the
RECEIPT POINT for and during any MONTH prior to the DATE OF COMMERCIAL
OPERATION a level of kilowatts in excess of the level of kilowatts of
BASIC SERVICE then available pursuant to and in accordance with the
provisions of Article II; provided however, PSE&G shall use best efforts,
as defined in Article III, to provide during the Phase-In Period a level of
SERVICE up to but not in excess of 56,000 kilowatts, when and as requested
by O'BRIEN.
ARTICLE V
INTERRUPTION, CURTAILMENT OR REDUCTION OF SERVICE
Section A
Public Service System Conditions
PSE&G intends to provide SERVICE to O'BRIEN without interruption,
curtailment or reduction. PSE&G shall use best efforts to provide same
without interruption, curtailment or reduction. However, PSE&G cannot and
does not guarantee that
<PAGE>
18
SERVICE will be free from interruption, curtailment or reduction. SERVICE
shall be subject to interruption, curtailment or reduction as a consequence
of any of the following actions, operational conditions and/or events: (i)
actions PSE&G must institute to enable PSE&G to operate the PUBLIC SERVICE
SYSTEM so as to discharge its statutory obligations to provide safe,
adequate and proper service to its retail and sale-for-resale customers;
(ii) actions PSE&G must institute to enable PSE&G to discharge its
obligations under the PJM Agreement; (iii) actions PSE&G must institute to
enable PSE&G to discharge its obligations under its Agreement with the Mid-
Atlantic Area Coordination Group; (iv) actions instituted on the PUBLIC
SERVICE SYSTEM by automatic control or actions PSE&G must institute by
manual control for the purpose of maintaining the overall safety and
reliability of or otherwise protecting the PUBLIC SERVICE SYSTEM; (v)
action(s) PSE&G must institute for the purpose of maintenance, repair,
improvement, reinforcement, relocation, rearrangement, replacement and/or
installation of any equipment or facilities on the PUBLIC SERVICE SYSTEM or
action(s) PSE&G must institute for the purpose of the investigation and/or
inspection of any such equipment or facilities on the PUBLIC SERVICE
SYSTEM; or (vi) PSE&G experiencing an event of Force Majeure, as defined in
Article XVIII, provided however, PSE&G may interrupt, curtail or reduce
SERVICE to O'BRIEN only where, and for as long as such event(s),
operational condition(s) or action(s) requires or necessitates
<PAGE>
19
an interruption, curtailment or reduction of SERVICE to O'BRIEN. Nothing
contained in this Section A shall permit PSE&G to interrupt, curtail or
reduce SERVICE to O'BRIEN solely for reasons of economic dispatch.
In exercising its operation discretion under the AGREEMENT, PSE&G will
not arbitrarily discriminate against O'BRIEN in allocating any required
curtailment, reduction or interruption of SERVICE as may be required by the
provisions of this Article V.
Where practicable, PSE&G shall give O'BRIEN advance notice of any
interruption, curtailment or reduction of SERVICE affected pursuant to this
Section A, the circumstances requiring or necessitating the interruption,
curtailment or reduction of SERVICE and, if able, the reasons therefor, and
the extent and duration thereof. In the event PSE&G is unable, for any
reason, to give O'BRIEN advance notice of such an interruption, curtailment
or reduction of SERVICE, PSE&G shall, as soon thereafter as practicable,
contact O'BRIEN to confirm such interruption, curtailment or reduction,
explaining the circumstances requiring or necessitating the interruption,
curtailment or reduction, and, if able, furnish the reasons therefor and
the extent and duration thereof.
In the event SERVICE is interrupted, curtailed or reduced by PSE&G for
any reason specified in this Section A, PSE&G shall use best efforts to
resume SERVICE to O'BRIEN.
<PAGE>
20
Section B
Project Conditions
PSE&G may interrupt, curtail or reduce SERVICE to O'BRIEN in the event
O'BRIEN fails to meet, satisfy or discharge its obligations under articles
VI, VII, or XI, as such obligations are defined therein; provided however,
any such interruption, curtailment or reduction of SERVICE for or on
account of O'BRIEN's failure to meet, satisfy or discharge such obligations
may only be effected by PSE&G pursuant to and in accordance with the
provisions of this Section B.
In the event O'BRIEN fails to meet, satisfy or discharge its
obligations under the Articles specified in the preceding paragraph and, as
a consequence, a condition arises, a practice exists or an event occurs at
the PROJECT which creates an OPERATIONAL EMERGENCY, PSE&G shall have the
right to interrupt, curtail or reduce SERVICE to O'BRIEN without being
obligated to provide to O'BRIEN notice thereof or without being obligated
to afford to O'BRIEN, prior to any such interruption, curtailment or
reduction of SERVICE, a right to cure the precipitating cause of or the
event, condition or practice which exists or occurs (Cause); provided
however, where practicable, PSE&G shall provide O'BRIEN with advance notice
of the interruption, curtailment or reduction, the circumstances requiring
or necessitating the interruption, curtailment or reduction and, if known,
the reasons therefor. In the event PSE&G is unable, for any reason, to
give O'BRIEN advance notice of such an
<PAGE>
21
interruption, curtailment or reduction of SERVICE, PSE&G shall, as soon
thereafter as practicable, contact O'BRIEN to confirm such interruption,
curtailment or reduction, and, inform O'BRIEN of the circumstances
requiring or necessitating the interruption, curtailment or reduction of
SERVICE and, if able, furnish the reasons therefor and the extent and
duration thereof. In the event of such an interruption, curtailment or
reduction, PSE&G shall be obligated to resume SERVICE to O'BRIEN if, but
only if, O'BRIEN has corrected or remedied the Cause which necessitated the
interruption, curtailment or reduction.
In the event O'BRIEN fails to meet, satisfy or discharge its
obligations under the Articles specified in the first paragraph of this
Section B and, as a consequence, a condition arises, a practice exists or
an event occurs at the PROJECT which, although it does not create an
OPERATIONAL EMERGENCY, if permitted to continue or reoccur, may, in the
reasonable judgment of PSE&G, result in the creation of an OPERATIONAL
EMERGENCY, PSE&G shall notify O'BRIEN of the occurrence or existence
thereof and afford to O'BRIEN a right to correct or remedy the Cause prior
to effecting any interruption, curtailment or reduction of SERVICE.
O'BRIEN shall have thirty (30) days from receipt of PSE&G's notice: (i)
to correct or remedy the Cause; or (ii) in the event such Cause cannot be
identified and/or remedied and/or corrected within such thirty (30) days,
to submit to PSE&G, for its approval, a plan, and timetable for
implementation thereof, setting forth specific
<PAGE>
22
actions O'BRIEN will take to correct or remedy the Cause. In the event:
(I) the Cause cannot be identified and/or remedied and/or corrected within
such thirty (30) day period and O'BRIEN fails to submit a plan within such
period to correct or remedy the Cause; or (ii) a plan is submitted within
such period, and O'BRIEN fails to exercise best efforts thereafter to
implement such plan, PSE&G shall have the right thereafter, on reasonable
notice to O'BRIEN, to interrupt, curtail or reduce SERVICE to O'BRIEN.
However, if, during the pendency of any cure period afforded to O'BRIEN
pursuant to this Section B, the Cause creates an OPERATIONAL EMERGENCY,
PSE&G may thereafter interrupt, curtail or reduce SERVICE to O'BRIEN.
Any notice PSE&G is obligated to provide to O'BRIEN pursuant to the
provisions of the preceding paragraph of this Section B shall be in
writing. Likewise, any plan O'BRIEN is obligated to submit to PSE&G
pursuant to the provisions of the preceding paragraph of this Section B
shall also be in writing.
Regardless of the existence or potential for creation of an
OPERATIONAL EMERGENCY on the PUBLIC SERVICE SYSTEM, PSE&G may interrupt,
curtail or reduce SERVICE to O'BRIEN for and/or on account of O'BRIEN's
failure to met or discharge its obligations under Article XI to pay any
BILLING STATEMENT when due. In the event such a right to interrupt,
curtail or reduce SERVICE to O'BRIEN arises, PSE&G shall provide written
notice to O'BRIEN of its intention to interrupt, curtail or reduce SERVICE,
stating the reasons therefor, prior to affecting any
<PAGE>
23
interruption, curtailment or reduction. O'BRIEN shall have thirty (30)
days from the date of the notice to cure the precipitating cause. In the
event O'BRIEN fails to cure the precipitating cause within such thirty (30)
day period, PSE&G may thereafter interrupt SERVICE to O'BRIEN.
Except as otherwise provided in this Section B, in the event PSE&G
interrupts SERVICE to O'BRIEN for any reason specified in paragraphs three
and give of this Section B, PSE&G shall be obligated to resume SERVICE to
O'BRIEN if, but only if O'BRIEN has, as applicable, either corrected or
remedied the precipitating cause of or the event, practice or condition
which necessitated the interruption, curtailment or reduction of SERVICE or
demonstrates to PSE&G that O'BRIEN has identified the precipitating cause
of the event, practice or condition which necessitated the interruption,
curtailment or reduction and immediately thereafter commences a bona fide
effort, pursuant to a plan, to remedy or correct same; provided however, if
the interruption was triggered as a consequence of O'BRIEN's failure to
meet or discharge its obligation under Article XI, PSE&G shall have no
obligation to resume SERVICE to O'BRIEN unless and until such failure is
corrected or remedied.
Section C
Service Conditions
PSE&G shall not be obligated at any time to receive at the RECEIPT
POINT a level of NET ELECTRICAL POWER OUTPUT in excess
<PAGE>
24
of the level of SERVICE PSE&G is obligated to provide to O'BRIEN pursuant
to and in accordance with the terms and conditions of this AGREEMENT. In
the event O'BRIEN supplies to the RECEIPT POINT, at any time, a level of
NET ELECTRICAL POWER OUTPUT in excess of the level of SERVICE PSE&G is
obligated to provide under this AGREEMENT, PSE&G shall have the right to
request O'BRIEN, and if so requested, O'BRIEN shall have the obligation to
reduce as soon as practicable after any such request the supply of NET
ELECTRICAL POWER OUTPUT to PSE&G at the RECEIPT POINT to a level consistent
with the level of SERVICE PSE&G is obligated to provide to O'BRIEN under
this AGREEMENT. In the event O'BRIEN is supplying to PSE&G at the RECEIPT
POINT a level of NET ELECTRICAL POWER OUTPUT in excess of the level of
SERVICE PSE&G is obligated to provide to O'BRIEN pursuant to this AGREEMENT
and O'BRIEN fails to reduce the supply of NET ELECTRICAL POWER OUTPUT to
the level of SERVICE PSE&G is obligated to provide. PSE&G shall have the
right to interrupt, curtail or reduce SERVICE to O'BRIEN. In the event
PSE&G interrupts, curtails or reduces SERVICE to O'BRIEN pursuant to the
provisions of this Section C, PSE&G shall be obligated to resume SERVICE to
O'BRIEN if, but only if, O'BRIEN commits to use best efforts thereafter to
control its supply to the RECEIPT POINT consistent with the level of
SERVICE PSE&G is then obligated or then willing to provide to O'BRIEN.
<PAGE>
25
ARTICLE VI
OPERATIONS COORDINATION
Effective with the DATE OF INITIAL OPERATION and during any term of
this AGREEMENT, O'BRIEN shall use best efforts to coordinate the operation
of the PROJECT with the operation of the PUBLIC SERVICE SYSTEM. To
discharge its best efforts obligation to coordinate operation of the
PROJECT with the PUBLIC SERVICE SYSTEM, O'BRIEN shall: (i) use SERVICE
with due regard for the safety, security and reliability of the PUBLIC
SERVICE SYSTEM; (ii) maintain a power factor at or as near unity as
practicable at the point of connection of the PROJECT with and to the
PUBLIC SERVICE SYSTEM, unless requested otherwise by PSE&G; (iii) control
its voltage and speed to values acceptable to PSE&G consistent with sound
utility practice; (iv) coordinate its relaying and fusing so as to conform
with PSE&G's system protection practices, in effect from time to time; (v)
maintain the PROJECT in a safe and reliable operating condition; (vi)
submit to PSE&G the monthly schedules and estimates required by this
Article; and (vii) perform such other actions as may be reasonably
requested by PSE&G, to enable PSE&G to (a) operate the PUBLIC SERVICE
SYSTEM in a safe and reliable manner and (b) operate the PUBLIC SERVICE
SYSTEM so as to discharge PSE&G's statutory obligations to provide safe,
adequate and proper service to its retail and sale-for-resale customers.
As of the DATE OF COMMERCIAL OPERATION, O'BRIEN shall provide to PSE&G
by the first (1st) day of each MONTH the
<PAGE>
26
following: (i) an hourly schedule of the estimated NET ELECTRICAL POWER
OUTPUT O'BRIEN plans to supply to the RECEIPT POINT for receipt by PSE&G in
the succeeding MONTH; (ii) an estimate of the generation of NET ELECTRICAL
ENERGY which O'BRIEN plans to supply to the RECEIPT POINT for receipt by
PSE&G in the succeeding MONTH; (iii) an estimate of the generation of NET
ELECTRICAL ENERGY which O'BRIEN plans to supply to the RECEIPT POINT for
receipt by PSE&G for the succeeding twelve (12) MONTHs; (iv) the name and
telephone number of responsible management level employees for contact by
PSE&G personnel at any time during the succeeding MONTH relative to any
matter arising out of, relating to, or resulting from PSE&G's obligation to
provide SERVICE to O'BRIEN under this AGREEMENT. In addition, O'BRIEN
shall furnish to PSE&G, on an annual basis, a schedule of planned
maintenance and/or repair activities for the succeeding twelve (12) months.
O'BRIEN shall use best efforts to conduct its operations in accordance
with the data and information submitted to PSE&G as required in the
preceding paragraph, provided however any deviation(s) in the COGENERATION
FACILITY's operations necessitated by and as a consequence of unanticipated
occurrences, conditions or events will not constitute a breach of this
AGREEMENT; provided further however, O'BRIEN will provide to PSE&G, where
and when able, advance notice, in a timely manner, of any such deviation(s)
of a material nature in
<PAGE>
27
the COGENERATION FACILITY's operations, and if requested, the reasons
therefor.
Pursuant to and consistent with O'BRIEN's obligation to coordinate
operation of the PROJECT with the operation of the PUBLIC SERVICE SYSTEM,
O'BRIEN shall install and maintain, at its expense during any term of this
AGREEMENT a telephone line reserved for communication by and between PSE&G
operating personnel and O'BRIEN operating personnel.
PSE&G may request, and, when requested, O'BRIEN shall use best
efforts, consistent with O'BRIEN's obligation to meet Newark Boxboard
Inc.'s steam requirements, to provide reactive power, leading or lagging,
from the COGENERATION FACILITY up to the operating limits of the
COGENERATION FACILITY up to the operating limits of the COGENERATION
FACILITY to the extent that it does not require a reduction in NET
ELECTRICAL POWER OUTPUT and further, in the event of an OPERATIONAL
EMERGENCY, PSE&G may request and, if PSE&G makes such a request, O'BRIEN
shall use best efforts, consistent with O'BRIEN's obligation to meet Newark
Boxboard Inc.'s steam requirements, to provide same up to the operating
limits of the COGENERATION FACILITY, whether or not same requires a
reduction in NET ELECTRICAL POWER OUTPUT.
PSE&G shall use best efforts to coordinate with and provide to O'BRIEN
advance notice of any maintenance, repair, rearrangement, relocation,
removal or reinforcement activities which might interfere with or impair
the operation of the COGENERATION FACILITY so as to minimize any
interruption, curtailment or reduction of SERVICE to O'BRIEN; provided
<PAGE>
28
however, that the scheduling, implementation and conduct of such activities
shall remain within the sole discretion of PSE&G.
ARTICLE VII
NET ELECTRICAL POWER OUTPUT SPECIFICATIONS
The NET ELECTRICAL POWER OUTPUT supplied by O'BRIEN to the RECEIPT
POINT for receipt by PSE&G during the term of this AGREEMENT shall be at a
nominal voltage of 26,400-volts, 60 Hertz, balanced three-phase alternating
current produced by a synchronous generator(s) equipped with automatic
voltage regulation and automatic speed control. The NET ELECTRICAL POWER
OUTPUT shall be free from harmonics which would interfere with PSE&G's
metering accuracy, the PUBLIC SERVICE SYSTEM, or the quality of PSE&G's
service to its retail and sale-for-resale customer loads. In no event
shall the operation of the COGENERATION FACILITY result in total harmonic
distortion, as defined by the IEEE Standard 519 - 1981 as revised, greater
than five percent (5%) of the fundamental component measured at the POINT
OF INTERCONNECTION.
ARTICLE VIII
TERM
PSE&G shall provide SERVICE to O'BRIEN for a term of twenty-five (25)
years (hereinafter referred to as the Primary Term). The Primary Term
shall commence on the DATE OF COMMERCIAL OPERATION.
<PAGE>
29
O'BRIEN shall have the right to renew this AGREEMENT pursuant to the
charges and under the terms and conditions of this AGREEMENT, as may be
modified in accordance with Article XXXI, for a six (6) year term
immediately succeeding the Primary Term (herein referred to as the
Subsequent Term).
This AGREEMENT and each party's obligation(s) hereunder shall
automatically terminate twenty-five (25) years from the DATE OF COMMERCIAL
OPERATION unless this AGREEMENT is renewed pursuant to and in accordance
with the provisions of the preceding paragraph. In the event of such a
renewal, this AGREEMENT and each party's obligations hereunder shall
automatically terminate thirty-one (31) years from the DATE OF COMMERCIAL
OPERATION.
ARTICLE IX
EFFECTIVENESS AND ENFORCEABILITY
This AGREEMENT represents a negotiated agreement between the parties,
and the charges and terms and conditions contained herein are acceptable to
each. It is understood by the parties that this AGREEMENT must be filed at
and accepted for filing by the FERC. Notwithstanding the requirement for
FERC review and acceptance for filing, this AGREEMENT shall become
effective and enforceable, as between the parties, upon execution and
pending
<PAGE>
30
a filing at and review by the FERC, provided however, that the provisions
relative to transmission service shall become effective and enforceable
only after FERC acceptance for filing without condition or modification
thereof deemed to be material by either party hereto. In the event the
FERC accepts this AGREEMENT for filing subject to refund, such FERC
acceptance shall not be deemed as a condition or modification for the
purposes of effectiveness of this AGREEMENT under this Article.
In connection with any FERC review of this AGREEMENT as initially
filed, in the event the FERC modifies any material term or condition,
alters any charge(s) contained in this AGREEMENT or in any way conditions
its approval of this AGREEMENT or in any way conditions its approval of
this AGREEMENT, and any party determines that it is adversely affected in a
material way by such FERC action and/or decision the parties hereby agree
to promptly resume negotiations, in good faith, in an effort to reach
agreement on a charge for SERVICE, or on terms and conditions mutually
agreeable to the parties relative to the subject matter of this AGREEMENT.
If no agreement is reached within thirty (30) days of such FERC action
and/or decision the party so affected shall have the right to terminate or
cancel this AGREEMENT by filing written notice of cancellation or
termination (hereinafter referred to as Notice of Cancellation) with the
FERC and serving a copy thereof on the other party. Any such Notice of
Cancellation may be filed after such thirty (30) day period but no later
than forty-five (45) days after such FERC decision is final and not subject
to any
<PAGE>
31
further administrative or judicial review; provided however, neither party
shall be obligated to seek rehearing and/or judicial review of any FERC
decision. In the event any party files a Notice of Cancellation, the
parties hereto agree that the cancellation or termination shall become
effective and the parties' obligations under this AGREEMENT shall terminate
sixty (60) days after the filing of the Notice of Cancellation or, at such
earlier date, as otherwise ordered by the FERC.
PSE&G shall use best efforts to file this AGREEMENT with the FERC
within thirty (30) days of final execution of this AGREEMENT and after
filing same the parties hereto agree to take such action, as may be
appropriate, to expedite FERC approval thereof.
ARTICLE X
TRANSMISSION SERVICE CHARGES
Section A
Except as otherwise specifically provided in this AGREEMENT, effective
with the DATE OF COMMERCIAL OPERATION, O'BRIEN shall be obligated to pay to
PSE&G the sum of the charges contained in Subparagraphs A, B, and C below,
in accordance with the billing and payment procedures set forth in Article
XI:
A. a monthly demand charge equal to seventy-five cents ($0.75)
per kilowatt times the level of kilowatts of BASIC
<PAGE>
32
SERVICE PSE&G was obligated to provide to O'BRIEN during the
MONTH for which the billing is being made; and
B. a monthly demand charge of seventy-five cents ($.075) per
kilowatt times the greater of the following number of
kilowatts:
(i) the number of kilowatts of EXCESS SERVICE, if any,
which PSE&G committed to provide to O'BRIEN during the
MONTH for which the billing is being made pursuant to
and consistent with Article III; or
(ii) the greatest average number of kilowatts of NET
ELECTRICAL POWER OUTPUT, if any, in excess of the level
of kilowatts of BASIC SERVICE PSE&G was obligated to
provide to O'BRIEN during the MONTH for which the
billing is being made, received by PSE&G at the RECEIPT
POINT during any fifteen (15) minute interval in such
preceding MONTH; and
<PAGE>
33
C. point twenty-nine mills ($.00029) per kilowatt hour times
the number of kilowatt hours of NET ELECTRICAL ENERGY
received by PSE&G at the RECEIPT POINT during the MONTH for
which the billing is being made.
If, as a result of an event of Force Majeure as defined in Article
XXII, any electric generation unit at the PROJECT is out of operation for
at least thirty (30) consecutive days (hereinafter referred to as
Qualifying Outage), O'BRIEN's demand charge payment for any MONTH which
includes any portion of such Qualifying Outage shall be adjusted, if
necessary, and the amount of such payment shall be the sum of the amounts
determined as follows: (i) during the period of any MONTH when no
Qualifying Outage exists, the demand charge payment for such period shall
be determined by multiplying the sum of the charges contained in
subparagraphs A and B of this Article X, as applicable, by a fraction, the
numerator of which is the number of hours during which there was no
Qualifying Outage and the denominator of which is the number of hours in
the MONTH; and (ii) during the period of any MONTH when a Qualifying Outage
exists, the demand charge payment for such period shall be determined by
multiplying the demand charge specified in this Article X by the greatest
average number of kilowatts of NET ELECTRICAL POWER OUTPUT during any
fifteen (15) minute interval registered on PSE&G's electricity recording
meter during such
<PAGE>
34
Qualifying Outage, and multiplying that result by a fraction, the numerator
of which is the number of hours during which the Qualifying Outage exists
and the denominator is the number of hours in the MONTH. PSE&G shall make
any demand charge adjustment due O'BRIEN for a Qualifying Outage required
by application of the provisions of this paragraph in the BILLING STATEMENT
for the MONTH(s) following the MONTH in which the entitlement to such
adjustment matures.
In the event SERVICE is interrupted, curtailed or reduced by PSE&G
during any MONTH for any reason, other than for any of the reasons
specified in Sections B and C of Article V, the demand charge O'BRIEN was
obligated to pay for such MONTH pursuant to this Section A will be abated
by multiplying the demand charge by the quantity one (1) minus a fraction,
the numerator of which is the number of kilowatts by which the level of
SERVICE was reduced, times the number of hours during which SERVICE was
reduced and the denominator of which is the level of SERVICE committed to
by PSE&G, times the number of hours in the MONTH.
The charges specified in subparagraphs A, B and C of this Section A
shall be subject to change as specified in Article XXXI.
Section B
Effective with the DATE OF INITIAL OPERATION, and solely during the
Phase-In Period, O'BRIEN shall pay to PSE&G for any
<PAGE>
35
MONTH one point three-two mills ($.00132) times the number of kilowatt
hours of NET ELECTRICAL ENERGY received by PSE&G at the RECEIPT POINT.
However, if as a result of an event of Force Majeure, as defined in Article
XXII, the DATE OF COMMERCIAL OPERATION does not occur on or by six (6)
months of the DATE OF INITIAL OPERATION, the Phase-In period and the charge
methodology described in this subsection B shall remain in effect for a
period not to exceed the period of incapacity caused by the event of Force
Majeure provided that during such period of incapacity so caused that
O'BRIEN uses best efforts to remedy the incapacity so caused.
Unless the Phase-In Period is extended as a result of an event of
Force Majeure as specified in the first paragraph of this Section B, six
(6) months after the DATE OF INITIAL OPERATION, O'BRIEN shall be obligated
to pay to PSE&G each MONTH an amount for SERVICE calculated pursuant to and
in accordance with the methodology specified in Subsection A of this
Article X.
ARTICLE XI
BILLING AND PAYMENT
After the DATE OF INITIAL OPERATION, PSE&G shall read its electricity
recording meter(s) at the SUBSTATION FACILITY monthly in connection with
making a determination of the charges to be billed to O'BRIEN for any MONTH
in accordance with the provision of Article X and shall thereafter prepare
and present
<PAGE>
36
to O'BRIEN, on or before the tenth (10th) day of the MONTH, a BILLING
STATEMENT for payment. O'BRIEN shall pay each BILLING STATEMENT within
thirty (30) days from the date of receipt but not later than the tenth
(10th) day of the succeeding MONTH. If presentation of a BILLING STATEMENT
is delayed by PSE&G and/or is received by O'BRIEN after the tenth (10th)
day of the MONTH, then the time for payment shall be extended for a period
of time equivalent to the delay, provided however, O'BRIEN shall be
obligated to establish any delay in the receipt of any BILLING STATEMENT by
appropriate documentation. The BILLING STATEMENT shall contain a breakdown
of the applicable charge components billed to O'BRIEN in accordance with
the provisions of Article X. O'BRIEN shall remit payment to PSE&G for any
BILLING STATEMENT to the PSE&G department designated on the BILLING
STATEMENT.
In the event O'BRIEN fails to pay the entire amount of any BILLING
STATEMENT when such is due, interest shall accrue on the unpaid portion of
such BILLING STATEMENT, from the due date to the date of payment, which
interest shall accrue at a rate per annum equal to three percent (3%) above
the prime rate of the Chase Manhattan Bank, N.A. or its successor in effect
as of the payment due date. O'BRIEN shall pay the interest charge on any
such unpaid BILLING STATEMENT or unpaid portion thereof when and as billed
by PSE&G.
PSE&G shall provide to O'BRIEN, upon a timely request therefor,
documentation and/or data available to PSE&G to enable
<PAGE>
37
O'BRIEN to verify the accuracy of any BILLING STATEMENT. However, any such
request by O'BRIEN shall not extend the due date of or extend, postpone or
otherwise affect O'BRIEN's obligation to pay the associated BILLING
STATEMENT.
In the event O'BRIEN disputes any BILLING STATEMENT, O'BRIEN shall pay
to PSE&G the entire amount thereof, when due, and shall together with the
payment thereof identify and present the dispute in writing and submit
documentation substantiating any claim made relative to the dispute
identified. Upon receipt of notice of the dispute and the supporting
documentation, PSE&G shall have thirty (30) days (Period) from receipt of
such notice to resolve such dispute with O'BRIEN. In the event the dispute
is not resolved within the Period, either party may submit the matter to
arbitration for resolution in accordance with Article XXIX. The amount of
any BILLING STATEMENT disputed by O'BRIEN, in accordance with the
provisions of this paragraph, which is ultimately determined to be due and
owing by PSE&G to O'BRIEN: (i) which is not refunded to O'BRIEN on or
prior to the expiration of the Period shall, until payment, thereafter
accrue interest, as of the last day of such Period, at a rate per annum
equal to three percent (3%) above the prime rate of the Chase Manhattan
Bank, N.A., or its successor in effect as of that date; and (ii) shall be
refunded to O'BRIEN, together with all interest accrued and owing thereon,
within ten (10) days of the date of such determination.
<PAGE>
38
ARTICLE XII
METERING/RECORDS
PSE&G shall install, own, operate and maintain an electricity
recording meter at the SUBSTATION FACILITY which, in the judgment of PSE&G,
is required or necessary to enable PSE&G to make an accurate measurement of
the quantity of NET ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL
ENERGY received at the RECEIPT POINT from the COGENERATION FACILITY. The
electricity recording meter shall be of a type suitable for interconnection
billing purposes. The electricity recording meter, as installed, shall
have full load and light load "as left" accuracies that do not deviate more
than + 0.3% from 100%. The lag load "as left" accuracy shall be within
0.5% of the full load accuracy. PSE&G shall operate and maintain such
electricity recording meter so as to assure, to the maximum extent
practicable, that such meter provides an accurate record of the quantities
supplied to and received by PSE&G at the RECEIPT POINT from the
COGENERATION FACILITY.
PSE&G shall designate, select and specify all associated electricity
recording equipment (associated equipment) required by PSE&G to make
measurement of NET ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL
ENERGY supplied by O'BRIEN to the RECEIPT POINT, including but not limited
to current transformers, potential transformers, conduits, cables and
accessories. PSE&G shall purchase and arrange for the delivery of such
associated equipment to O'BRIEN at the PROJECT for
<PAGE>
39
installation by O'BRIEN at O'BRIEN's expense. PSE&G shall own, operate and
maintain such associated equipment
The costs of the metering and associated equipment described in the
preceding two paragraphs shall be paid by O'BRIEN as a cost associated with
the design, construction and installation of the INTERCONNECTION as
provided in and in accordance with Article XIII.
PSE&G shall have the right to secure and safeguard the electricity
recording meter and associated equipment installed and maintained at the
SUBSTATION FACILITY. Neither O'BRIEN nor any person other than PSE&G shall
be permitted to operate, maintain, repair, alter, remove, replace,
rearrange, reconstruct, relocate, tamper or interfere with any said meter
or associated equipment.
Unless otherwise agreed to by PSE&G and/or except as otherwise
provided in this AGREEMENT, PSE&G's electricity recording meter shall be
utilized for the determination of the monthly charges reflected in any
BILLING STATEMENT submitted to O'BRIEN for payment under this AGREEMENT.
O'BRIEN and/or JCP&L may install, own, operate and maintain, at their
own expense, electricity recording meter(s) and associated equipment at the
SUBSTATION FACILITY for measurement and recording of the quantity of NET
ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL ENERGY received by
PSE&G at the RECEIPT POINT from the COGENERATION FACILITY; provided that
the installation, operation and/or maintenance of such equipment
<PAGE>
40
does not utilize or connect to PSE&G's electricity recording meter or
associated equipment and does not interfere, in any way, with the operation
of such equipment.
Unless otherwise agreed to by PSE&G and/or except as otherwise
provided in this AGREEMENT, the electricity recording meter installed and
maintained by O'BRIEN and/or JCP&L at the SUBSTATION FACILITY shall not be
utilized for any determination of the charges to be included in any BILLING
STATEMENT submitted to O'BRIEN for payment by PSE&G under this AGREEMENT.
The accuracy of PSE&G's electricity recording meter shall be verified
by PSE&G by testing once each year. Such accuracy test shall be conducted
in accordance with the standards set forth in the American national
Standard Code for Electricity Metering. Notice of such accuracy test(s)
shall be given by PSE&G to O'BRIEN. O'BRIEN and/or JCP&L representatives
may attend any such accuracy test. In the event O'BRIEN's and/or JCP&L
representatives elect to be present at any accuracy test, the test and any
necessary adjustment to the electricity recording equipment shall be made
in the presence of and observed by O'BRIEN and/or JCP&L representatives.
O'BRIEN and/or JCP&L may, for good cause, request PSE&G to conduct an
accuracy test of PSE&G's electricity recording equipment. In the event
good cause is shown, PSE&G shall conduct an accuracy test at O'BRIEN's
and/or JCP&L's request. Any cost or expense associated with any accuracy
test performed by PSE&G on PSE&G's electricity recording meter shall be
billed to and paid by
<PAGE>
41
O'BRIEN; provided however, in the event an accuracy test is conducted in
connection with a billing dispute and PSE&G's electricity recording meter
is determined as a result of such test to be registering inaccurately in
excess of one percent (1%), PSE&G shall pay the costs of such accuracy
test.
The accuracy of any electricity recording meter maintained by O'BRIEN
at the SUBSTATION FACILITY shall be verified by test at least once each
year. Such accuracy test shall be conducted in accordance with the
standards set forth in the American National Standard Code for Electricity
Metering. O'BRIEN shall establish, at the time of installation, and
maintain the accuracy of such equipment in accordance with the standard of
accuracy set forth in the American national Standard Code for Electricity
Metering. Notice of such accuracy test(s) shall be given by O'BRIEN to
PSE&G. PSE&G may attend any such accuracy test(s). PSE&G may, for good
cause, request O'BRIEN to conduct or have conducted an accuracy test(s) of
O'BRIEN electricity recording meter. In the event good cause is shown,
O'BRIEN shall conduct or have conducted an accuracy test of O'BRIEN's
electricity recording meter. Any cost or expense associated with any
accuracy test(s) shall be paid by O'BRIEN, except where such test(s) was
conducted at PSE&G's request.
In the event PSE&G's electricity recording meter is out of service or
is registering inaccurately, the amount of inaccuracy shall be determined
and such meter shall be repaired, replaced and/or adjusted to register
accurately. Any meter reading(s)
<PAGE>
42
and BILLING STATEMENT(S) for the period of the inaccuracy shall be adjusted
so as to reflect any correction of such inaccuracy as far as such
inaccuracy can be reasonably ascertained; provided however, no adjustment
shall be made in any meter reading(s) nor shall any BILLING STATEMENT be
adjusted for or on account of a registration inaccuracy of one percent (1%)
or less.
In the event a registration inaccuracy of greater than one percent
(1%) is found on PSE&G's electricity recording meter, a billing adjustments
shall be made. The billing adjustment shall be made for the period of
inaccuracy, if ascertainable or in the event the period of the inaccuracy
cannot be reasonably ascertained, the period of inaccuracy shall be deemed
to have encompassed one-half (1/2) of the time period since the last
accuracy test of the meter (hereinafter referred to as the Surrogate
Period). The quantities delivered for the period of inaccuracy, if
ascertainable, or, if not ascertainable, the Surrogate period, shall be
determined and adjustments made for billing purposes by determining or
estimating the quantity received by PSE&G during the period of inaccuracy
from the best available source/data, which source/data may include but not
be limited to: (I) registration data obtained from the electricity
recording meter maintained by O'BRIEN at the SUBSTATION FACILITY; and/or
(ii) receipts by PSE&G during an equivalent or similar period when such
equipment was registering accurately; and/or (iii) correction of the error,
if the percentage of error
<PAGE>
43
is ascertainable, by calibration, test or mathematical calculation;
provided however, in the event O'BRIEN/JCP&L's metering equipment meets
applicable PSE&G standards and PSE&G determines that such equipment has
been installed, operated and maintained in accordance with applicable PSE&G
standards/ practices/procedures, the period of inaccuracy and the
quantities delivered for such period shall be determined and the
adjustment(s) made for billing purposes solely by reference to
O'BRIEN/JCP&L's electricity recording equipment.
PSE&G and O'BRIEN shall retain the records each prepares and maintains
in the ordinary course of business relative to the amount of NET ELECTRICAL
POWER OUTPUT and associated NET ELECTRICAL ENERGY produced by the
COGENERATION FACILITY and supplied to and received by PSE&G at the RECEIPT
POINT and any records each prepares and maintains relative to any
maintenance, repair or testing of any electricity recording meter
maintained at the SUBSTATION FACILITY. The records possessed by one party
shall be made available for inspection by the other party upon reasonable
notice or request therefor. All such records shall be maintained for a
period of six (6) years.
O'BRIEN shall install equipment at the SUBSTATION FACILITY to enable a
measurement of the following electrical quantities: (I) gross active
electrical power output of each COGENERATION FACILITY generator; (ii) gross
reactive electrical power output of each COGENERATION FACILITY generator;
(iii) terminal voltage of each COGENERATION FACILITY generator; (iv)
voltage at the
<PAGE>
44
POINT OF INTERCONNECTION; (v) active power flow on the INTERCONNECTION at
the POINT OF INTERCONNECTION; (vi) reactive power flow on the
INTERCONNECTION at the POINT OF INTERCONNECTION; and (vii) kilowatt-hours
of NET ELECTRICAL ENERGY received by PSE&G at the POINT OF INTERCONNECTION.
PSE&G shall designate, select and specify the equipment to be installed at
the SUBSTATION FACILITY to enable a measurement of the aforementioned
electrical quantities. PSE&G shall purchase and arrange for the delivery
of such equipment to O'BRIEN at the PROJECT for installation by O'BRIEN at
O'BRIEN's expense. The costs of such equipment shall be paid by O'BRIEN as
a cost associated with the design, construction and installation of the
INTERCONNECTION as provided in and in accordance with Article XIII of this
AGREEMENT. PSE&G shall own, operate and maintain the equipment installed
to measure the electrical quantities specified in this paragraph. O'BRIEN
shall pay PSE&G for any costs associated with the operation and maintenance
and/or repair of such equipment. O'BRIEN shall pay any billing for
operation and maintenance of such equipment within thirty (30) days of the
date of the billing.
PSE&G shall energize the SUBSTATION FACILITY if but only if the
equipment PSE&G has directed O'BRIEN to install, pursuant to the preceding
paragraph, has been installed, has been inspected by PSE&G, and pursuant to
such inspection, such installation is determined by PSE&G to meet
applicable standards for operation. PSE&G shall conduct and complete the
inspection of such
<PAGE>
45
installation within fifteen (15) working days of receipt of notice from
O'BRIEN that the installation of the equipment has been completed and is
available for inspection. In the event PSE&G determines, as a result of
its inspection of the installation, that such installation does not met
applicable standards for operation, PSE&G shall, as soon thereafter as is
practicable, furnish written notice to O'BRIEN of such fact setting forth
the basis for the determination and any corrective actions O'BRIEN will be
required to take to make the installation acceptable to PSE&G.
Additionally, O'BRIEN shall: (I) lease, at its expense, a telephone
circuit or otherwise establish a telecommunications link(s) to permit
telemetering by means of both digital data links and analog signals, of the
measurements of the electric quantities specified on pages 43 and 44 of
this AGREEMENT at PSE&G's Electric System Operations Center in Newark, New
Jersey; (ii) pay the costs associated with the installation by PSE&G of
equipment required (a) to provide an indication at PSE&G's Electric System
Operations Center of the status of circuit breakers at the COGENERATION
FACILITY and SUBSTATION FACILITY and (b) to provide an alarm indication of
hard lockout relays; and (iii) pay the costs associated with integrating
any telemetered information into PSE&G's Electric System Operations Center,
including the cost of equipment necessary to receive, display, record and
process such telemetered information.
<PAGE>
46
The costs described in Subparagraphs (ii) and (iii) in the preceding
paragraph shall be paid by O'BRIEN as a cost associated with the design,
construction and installation of the INTERCONNECTION as provided in and in
accordance with Article XIII of this AGREEMENT. Such equipment shall be
owned, operated and maintained by PSE&G.
ARTICLE XIII
INTERCONNECTION
Section A
Design, Construction and Installation of Interconnection
PSE&G shall design, construct and install the INTERCONNECTION to
interconnect the PROJECT with the PUBLIC SERVICE SYSTEM in order to provide
SERVICE to O'BRIEN pursuant to and in accordance with the terms and
conditions of this AGREEMENT. However, PSE&G shall not initiate any
activity in connection with the design, construction or installation of the
INTERCONNECTION until receipt of the RELEASE NOTICE. Within thirty (30)
days of receipt of the RELEASE NOTICE, PSE&G shall notify O'BRIEN as to
when: (I) the Payment Schedule set forth in Section B of this Article XIII
shall commence; and (ii) the CREDIT required by Section C of this Article
XIII must be established. As soon as practicable after the receipt of the
RELEASE NOTICE, PSE&G will establish an estimated completion date
(Estimated Completion Date) and furnish to O'BRIEN a construction schedule
to complete the INTERCONNECTION on or by the Estimated Completion Date.
PSE&G estimates that the
<PAGE>
47
INTERCONNECTION can be completed within twenty-four (24) MONTHS of
commencement of construction thereof.
On or about the first day of the first MONTH of the Construction
Schedule, PSE&G shall: (i) initiate the tasks required to obtain any
REQUIRED PERMIT or easement(s), license(s), rental(s) or right(s)-of-way
for the construction and installation of the INTERCONNECTION; and (ii)
commence the design, construction and installation of the INTERCONNECTION.
PSE&G shall use best efforts to complete the INTERCONNECTION on or by the
Estimated Completion Date, provided however, it is expressly understood and
agreed that PSE&G's best efforts to complete the INTERCONNECTION on or by
the Estimated Completion Date shall be subordinate and subject to and
construed in light of and consistent with PSE&G's primary obligation to
provide and maintain safe, adequate and proper service to its retail and
sale-for-resale customers and to operate and maintain its plant, property
and equipment in such condition as to enable it to do so.
PSE&G shall advise O'BRIEN when the INTERCONNECTION is completed.
Thereafter, and subject to and in accordance with the provisions of Article
XX, PSE&G shall energize the SUBSTATION FACILITY and permit O'BRIEN to
synchronize its electric generation units with the PUBLIC SERVICE SYSTEM.
PSE&G shall not be liable to O'BRIEN for any direct or indirect
cost(s), expense(s), loss(es), liability(ies) or damage(s) which O'BRIEN
may incur or sustain, which cost,
<PAGE>
48
expense, loss, liability or damage arises out of, relates to or results
from any delay in the completion of the INTERCONNECTION, except where the
delay in the completion of the INTERCONNECTION results from PSE&G's failure
to use best efforts, as defined herein.
O'BRIEN shall indemnify and hold harmless PSE&G and each and every of
its officers, agents, servants and employees, its successors and assigns,
from and against, any and all claims, demands, suits, actions and/or
liabilities, damages, and/or judgments, as well as against any fees, costs,
charges or expenses which PSE&G, its officers, agents, servants and
employees, its successors and assigns incur in the defense of any such
claims, suits, actions or similar such demands, made or filed by any third
party with whom O'BRIEN is in privity of contract, to the extent such
claims, suits, actions or similar such demands arise out of, relate to, or
result from PSE&G's failure to complete the INTERCONNECTION in a timely
manner as herein provided, except where such failure results from PSE&G's
failure to use best efforts, as defined in this Section A, to complete the
INTERCONNECTION. In effecting and implementing any right of or obligation
to indemnify pursuant to and in accordance with the provisions of this
paragraph, the procedural provisions set forth in Article XXIV of this
AGREEMENT shall be applicable.
<PAGE>
49
The INTERCONNECTION shall be constructed and installed reasonably in
accordance with the Proposed Plan (Exhibit 1). It is understood that
change(s) in the Proposed Plan may be necessary from time to time prior to
and/or during construction, provided however, any such change shall not
alter the character of SERVICE PSE&G has agreed to provide pursuant to this
AGREEMENT. PSE&G shall have the right and the authority to make any
change(s) in the Proposed Plan or in the route of the INTERCONNECTION where
PSE&G, in its reasonable judgment, determines such change(s) is necessary
or appropriate; provided however, in the event any change in the Proposed
Plan which PSE&G determines is necessary or appropriate will result in a
substantial increase in the estimated cost for same, PSE&G shall not be
permitted to make such change(s) without O'BRIEN's consent unless such
change(s) is necessary to enable the PROJECT to operate with the PUBLIC
SERVICE SYSTEM in a safe and reliable manner. O'BRIEN shall not
unreasonably delay or withhold any consent for any such change(s) which may
be required by the provisions of this paragraph. Changes in the Proposed
Plan shall not require any amendment to this AGREEMENT.
Section B
Interconnection Costs
Subject to the provisions of this Section B, O'BRIEN shall be liable
to PSE&G for and shall pay to PSE&G the costs PSE&G
<PAGE>
50
incurs in the design, construction and installation of the INTERCONNECTION
as well as all other costs which PSE&G incurs in affecting the
interconnection of the PROJECT with the PUBLIC SERVICE SYSTEM (herein
collectively referred to as costs associated with or costs incurred in
connection with the design, construction and installation of the
INTERCONNECTION).
PSE&G's estimates that the total cost associated with the design,
construction and installation of the INTERCONNECTION will be one million
six hundred ninety-two thousand four hundred eighty dollars ($1,692,480).
This estimate shall not diminish, change or affect in any way O'BRIEN's
responsibility for and obligation to pay PSE&G its allocable share, as
determined in this Section B, of the costs which PSE&G actually incurs in
connection with the design, construction and installation of the
INTERCONNECTION.
For purpose of allocating to O'BRIEN its share of the costs associated
with the design, construction and installation of the INTERCONNECTION, the
cost estimate specified in the preceding paragraph is broken into the
following classifications:
Switching Station Costs $375,900
Cable Costs $363,760
Manhole and Conduit Costs $952,820
O'BRIEN shall be obligated to pay PSE&G one hundred percent (100%) of all
costs classified as cable and switching station costs.
<PAGE>
51
The cost estimate assigned to the manhole and conduit classification
constitutes an estimate for a nine (9) duct installation. PSE&G plans to
install a nine (9) duct installation. However, interconnecting the PROJECT
with the PUBLIC SERVICE SYSTEM will only require a six (6) duct
installation, the cost for which is estimated at eight hundred fourteen
thousand four hundred and ninety dollars ($814,490). As such, the cost
estimate for the INTERCONNECTION has been adjusted to reflect the cost
differential and O'BRIEN's Payment Schedule, as specified in this Section B
of this Article XIII, has been structured to reflect that adjustment.
O'BRIEN's allocable share of the actual costs classified as manhole and
conduit costs shall be determined by application of the following formula:
Estimated costs associated with
six (6) duct installation x Actual Manhole
Estimated cost associated with and Conduit Costs
nine (9) duct installation
O'BRIEN responsibility for and obligation to pay to PSE&G its
allocable share of the estimated costs associated with the design,
construction and installation of the INTERCONNECTION shall be discharged as
follows: commencing on or prior to the last day of the MONTH specified in
the notice to be furnished to O'BRIEN pursuant to and in accordance with
Section A of this Article XIII (MONTH 1) and thereafter on or prior to the
last day of each of the successive 23 MONTHS (MONTH 2 through and
<PAGE>
52
including MONTH 24), O'BRIEN shall remit to PSE&G the payment specified in
the following Payment Schedule:
PAYMENT SCHEDULE
Amount of
Payment Due Date Payment Obligation
Last day of MONTH 1 $ 4,200
Last day of MONTH 2 4,000
Last day of MONTH 3 3,400
Last day of MONTH 5 4,000
Last day of MONTH 6 4,000
Last day of MONTH 7 4,000
Last day of MONTH 8 4,000
Last day of MONTH 9 164,000
Last day of MONTH 10 164,000
Last day of MONTH 11 164,000
Last day of MONTH 12 164,000
Last day of MONTH 13 20,090
Last day of MONTH 14 156,000
Last day of MONTH 15 161,000
Last day of MONTH 16 19,000
Last day of MONTH 17 19,000
Last day of MONTH 18 19,000
Last day of MONTH 19 19,000
Last day of MONTH 20 28,400
Last day of MONTH 21 108,000
Last day of MONTH 22 50,560
Last day of MONTH 23 55,000
Last day of MONTH 24 51,500
TOTAL OF PAYMENTS FOR ESTIMATED COSTS $ 1,554,150
In the event O'BRIEN fails to remit any payment specified in the
Payment Schedule above, on or by the Payment Due Date, PSE&G may, in
addition to any other remedy or right PSE&G may have under this AGREEMENT,
immediately suspend performance of its obligations under Section A of this
Article XIII. PSE&G shall provide O'BRIEN with written notice of any such
suspension (hereinafter referred to as Notice of Suspension).
<PAGE>
53
In such event, and in addition to any other right or remedy it may
have under this AGREEMENT, PSE&G shall have the right to make demand for
and receive payment from ISSUER under the CREDIT for: (i) any costs
associated with the design, construction and installation of the
INTERCONNECTION which PSE&G has incurred, as of the date of suspension, and
for which O'BRIEN has failed to make payment on or by such date; and/or
(ii) any costs associated with the design, construction and installation of
the INTERCONNECTION which PSE&G incurs thereafter as a consequence of a
commitment made or liability incurred by PSE&G prior to the date of
suspension in connection with performance of its obligations under Section
A of this Article XIII.
Within ninety (90) days of completion of the INTERCONNECTION PSE&G
shall furnish to O'BRIEN a Final Reconciliation. The Final Reconciliation
shall contain a statement setting forth the nature and amount of costs
actually incurred by PSE&G in connection with the design, construction and
installation of the INTERCONNECTION, as well as a reconciliation between
the total payments made by O'BRIEN, in accordance with the provisions of
this Article XIII, and the amount of costs actually incurred in connection
with the design, construction and installation of the INTERCONNECTION.
In the event that the total costs actually incurred in connection with
the design, construction and installation of the INTERCONNECTION exceed the
total payments made by O'BRIEN, in
<PAGE>
54
accordance with the provisions of this Article XIII, O'BRIEN shall be
responsible for and shall make payment to PSE&G of any differential
resulting from such reconciliation. O'BRIEN shall make payment for any
such differential within thirty (30) days of the date of the delivery to
O'BRIEN of the Final Reconciliation. In such event, the Final
Reconciliation shall constitute PSE&G's bill to O'BRIEN for payment of any
such differential.
In the event the total of the payments made by O'BRIEN to PSE&G, in
accordance with the provisions of this Article XIII, exceeds the costs
actually incurred in connection with the design, construction and
installation of the INTERCONNECTION, PSE&G shall remit to O'BRIEN with the
Final Reconciliation a payment to reimburse O'BRIEN for any such
overpayment.
In connection with affecting the Final Reconciliation, O'BRIEN shall
he the right to review, after a timely request therefor, any documentation
or data available to PSE&G to enable O'BRIEN to verify the accuracy of the
Final Reconciliation. However, such review shall not extend the due date
of, or extend or postpone O'BRIEN's obligation to pay in a timely manner
any payment due, as specified in the Final Reconciliation.
Section C
Letter of Credit for Interconnection Costs
In connection with, and for the purposes of, securing performance by
O'BRIEN of its obligation to pay PSE&G for the
<PAGE>
55
costs which PSE&G incurs in connection with the design, construction and
installation of the INTERCONNECTION, O'BRIEN shall establish for, and have
issued to PSE&G, as beneficiary, an irrevocable Letter of Credit (CREDIT).
The CREDIT shall be established at and made payable by a commercial bank
(ISSUER) acceptable to PSE&G on terms and conditions acceptable to PSE&G;
provided however, PSE&G shall not unreasonably withhold approval of any
CREDIT. The CREDIT shall be established for and structured so as to permit
PSE&G to make a demand(s) for and receive payment from ISSUER and shall
require the ISSUER to honor on sight any written demand(s) for payment as
specified in and in accordance with the provisions of Sections B and D of
this Article XIII. The CREDIT shall be established to be effective not
later than the date specified by PSE&G in the notice issued to O'BRIEN
pursuant to and in accordance with the provisions of Section A of this
Article XIII and shall have an Expiry Date coincident with the date of the
payment for MONTH 24 specified in the Payment Schedule to be provided by
PSE&G to O'BRIEN (which period is hereinafter referred to as the Effective
Period). The amount of the CREDIT shall be established and maintained
during the Effective Period in the amount of Three Hundred Thousand Dollars
($300,000).
In the event O'BRIEN fails to have established for and have issued to
PSE&G, as beneficiary, the CREDIT in accordance with the provisions of this
Article XIII, PSE&G may, in addition to
<PAGE>
56
any other remedy it may have under this AGREEMENT, suspend performance of
its obligations under Section A of this Article XIII.
Section D
Cancellation Costs
In order to complete the design, construction and installation of the
INTERCONNECTION, PSE&G shall be required to enter into contractual
arrangements with, inter alia, equipment/material suppliers and third-party
contractors. Upon occurrence of any Event of Termination, as specified in
Article XXVII, during the construction period, PSE&G shall have the right
to cancel or terminate any supplier and/or contractor agreement(s) entered
into in connection with discharging its obligations to design, construct
and install the INTERCONNECTION. In the event PSE&G exercises any right
pursuant to and in accordance with this Section D to cancel or terminate
any supplier and/or contractor agreements/orders. PSE&G may incur
CANCELLATION COSTS. In such event, O'BRIEN shall be liable for and make
payment to PSE&G for all CANCELLATION COSTS which PSE&G incurs.
Additionally, upon occurrence of an Event of Termination, as defined
in Article XXVII, during the construction period, PSE&G may be required to
remove and/or complete the construction work in progress in order to
maintain the integrity, safety and
<PAGE>
57
reliability of the PUBLIC SERVICE SYSTEM. In such event, PSE&G may also
incur CANCELLATION COSTS. In such event, O'BRIEN shall be liable for and
make payment to PSE&G for all such CANCELLATION COSTS which PSE&G incurs.
In the event PSE&G incurs an CANCELLATION COSTS, PSE&G shall have the
right to demand payment for and receive payment from ISSUER under the
CREDIT for all such costs, provided however, in the event the CREDIT is
insufficient, PSE&G retains the right to demand payment from O'BRIEN for
any such deficiency, and in such event, O'BRIEN shall be obligated to make
payment to PSE&G for such CANCELLATION COSTS not paid under the CREDIT.
In connection with determining the amount of any liability of O'BRIEN
for CANCELLATION COSTS incurred, PSE&G shall give O'BRIEN a dollar credit
for the value to PSE&G of any facilities or equipment received by and which
are thereafter useful to PSE&G.
In the event PSE&G terminates or cancels any supplier and/or
contractor agreements/ orders as permitted in this Section D, PSE&G shall
have complete discretion relative to the manner of resolving any claim
and/or demand by any contractor and/or supplier in connection therewith and
further, PSE&G shall be the sole judge of the acceptability of any
compromise in settlement or resolution of any such claim or demand.
Additionally, PSE&G shall be the sole judge as to what is necessary to
maintain the safety, integrity or reliability of the PUBLIC SERVICE SYSTEM
<PAGE>
58
relative to any removal or completion of the construction work in progress.
PSE&G shall exercise reasonable care in resolving contractor/supplier
claim(s)/demand(s) and in affecting any required removal or completion of
the construction work in progress so as to mitigate the dollar amount paid
in affecting the resolution of such claim(s)/demand(s) or in the dollar
amount expanded in completing such removal or completion tasks; provided
however, that PSE&G shall have no liability to O'BRIEN for or on Account of
the dollar amount(s) paid in affecting the resolution of any such
claim(s)/demand(s) or in affecting such removal/completion tasks, except
where the resolution of any such claim(s)/demand(s) or the completion of
such tasks were affected by PSE&G in a manner which was in willful
disregard of its obligation to mitigate, as defined in this paragraph.
ARTICLE XIV
MAINTENANCE OF PLANT
PSE&G shall have and maintain its entire plant at its own expense in
such condition as will enable it to furnish safe, proper and adequate
SERVICE to O'BRIEN pursuant to and in accordance with the terms and
conditions of this AGREEMENT.
ARTICLE XV
USE OF THE PUBLIC SERVICE SYSTEM
The nature and extent of and the terms and conditions relating to
O'BRIEN's use of the PUBLIC SERVICE SYSTEM are set
<PAGE>
59
forth in their entirety in this AGREEMENT. Except as otherwise provided in
and pursuant to the terms and conditions of any applicable PSE&G Tariff on
file with the NJBPU or the FERC, O'BRIEN shall not be permitted to use the
PUBLIC SERVICE SYSTEM nor shall PSE&G be obligated to provide any service
to O'BRIEN, other than as provided in this AGREEMENT. Any rights to or
interest in the PUBLIC SERVICE SYSTEM which O'BRIEN has or may claim as a
result of this AGREEMENT shall cease or expire upon termination of this
AGREEMENT.
ARTICLE XVI
EASEMENTS
Except as otherwise specifically provided in this Article XVI, PSE&G
shall acquire any permit(s), easement(s), license(s), rental(s) or right(s)-
of-way necessary to interconnect the PROJECT with the PUBLIC SERVICE
SYSTEM. Any costs associated with the acquisition of any such easement(s),
license(s), rental(s) or right(s)-of-way of a non-recurring nature shall be
billed to and paid by O'BRIEN as a cost associated with the design,
construction and installation of the INTERCONNECTION in accordance with
Article XIII of this AGREEMENT. Any costs associated with the acquisition
of any easement(s), license(s), rental(s) or right(s)-of-way of a recurring
nature shall be billed to O'BRIEN and paid by O'BRIEN within thirty (30)
days of receipt.
<PAGE>
60
In order to interconnect the PROJECT with the PUBLIC SERVICE SYSTEM,
PSE&G may be required to maintain certain facilities and equipment at the
PROJECT SITE. In such event and to enable PSE&G to operate, maintain,
repair, reinforce, replace, relocate or remove the facilities and equipment
necessary to offset, operate and maintain an interconnection between the
PROJECT and the PUBLIC SERVICE SYSTEM, O'BRIEN shall obtain for conveyance
to PSE&G an easement to the property at the PROJECT SITE for a term, i.e.,
a duration and in a form and on terms and conditions acceptable to and
approval by PSE&G. The easement, inter alia, shall permit PSE&G, its
agents, servants and employees, at any time upon reasonable notice, to have
access to the property conveyed so as to permit PSE&G, its agents, servants
and/or employees to perform any tasks associated with and incident to the
operation, maintenance, repair, reinforcement removal and/or relocation of
the facilities and equipment necessary to offset, operate and maintain the
interconnection of the PROJECT with the PUBLIC SERVICE SYSTEM.
ARTICLE XVII
PERMITS/APPROVALS
PSE&G shall obtain from appropriate governmental bodies any REQUIRED
PERMIT. PSE&G shall proceed with and use best efforts to obtain any
REQUIRED PERMIT. In the event a third party files
<PAGE>
61
any pleading with any regulatory or other governmental body or institutes a
suit at law or in equity challenging the right of PSE&G to receive or, in
the event any such body issues any REQUIRED PERMIT to PSE&G, challenges the
propriety of the issuance to PSE&G of any REQUIRED PERMIT, PSE&G shall not
be obligated to commence or, in the event construction has commenced, to
complete construction of the INTERCONNECTION until PSE&G obtains a final
and non-appealable order/judgment relative to the issuance of such REQUIRED
PERMIT or, in the event of a challenge to the issuance thereof, a final and
non-appealable order/judgment upholding the issuance of any REQUIRED
PERMIT. O'BRIEN agrees to cooperate fully with PSE&G to the extent PSE&G
deems such cooperation necessary to secure any REQUIRED PERMIT and/or, in
the event same is occurred, to defend the issuance of any REQUIRED PERMIT.
However, in the event the issuance to PSE&G of any REQUIRED PERMIT is
challenged by a third party and a final and non-appealable order/judgment
has not been issued in connection with such challenge, PSE&G shall be
obligated to commence or complete construction of the INTERCONNECTION,
despite the absence of a final and non-appealable order/judgment relative
to such challenge, if, but only if:
(i) O'BRIEN submits a request in writing to PSE&G requesting PSE&G to
commence or complete construction of the INTERCONNECTION; and
<PAGE>
62
(ii) O'BRIEN agrees in such writing to indemnify and hold harmless
PSE&G and each and every of its officers, agents, servants and
employees, its successors and assigns, from and against any and
all claims, demands, suits, actions and the liabilities, losses,
damages, and/or judgements, which may arise from the particular
action being challenged, as well as against any fees, costs,
charges or expenses which PSE&G, its officers, agents, servants
and employees, its successors and assigns incur in the defense of
any such claims, suits, actions or similar such demands made or
filed by any third-party which in any manner arise out of, relate
to, or result from PSE&G's actions which are being challenged.
PSE&G shall not be obligated to commence or complete construction of
the INTERCONNECTION in the event issuance of any REQUIRED PERMIT is denied
to PSE&G. Further, PSE&G shall not be obligated to commence or complete
construction in the event that any decision of any governmental body to
issue any REQUIRED PERMIT is overturned by any court or regulatory body or
any court or regulatory body has issued a stay, pending a final
<PAGE>
63
adjudication of a challenge, prohibiting construction activity under any
REQUIRED PERMIT issued to PSE&G.
Any cost(s) and/or expense(s) associated with obtaining such REQUIRED
PERMIT and/or any cost(s) and/or expense(s) associated with defending the
issuance of any such REQUIRED PERMIT shall be paid by O'BRIEN as a
cost/expense associated with the design, construction and installation of
the INTERCONNECTION as provided in and in accordance with Article XIII of
this AGREEMENT.
ARTICLE XVIII
DEDICATION OF FACILITIES
No undertaking by PSE&G under any provision of this AGREEMENT shall
constitute the dedication to O'BRIEN or to the public of the PUBLIC SERVICE
SYSTEM.
ARTICLE XIX
REARRANGEMENT
PSE&G represents to O'BRIEN that it has no present plans or intention
to convert the PUBLIC SERVICE SYSTEM in the area of the PROJECT to a higher
voltage, based upon a projected ten (10) year electric load forecast.
However, in the event PSE&G should decide, for cause, at any time or from
time to time to convert the PUBLIC SERVICE SYSTEM at the point of
connection of the PROJECT to the PUBLIC SERVICE SYSTEM, or in the vicinity
thereof, to a different voltage PSE&G shall advise O'BRIEN in
<PAGE>
64
writing as soon as PSE&G shall make such decision, but at least three (3)
years in advance of making any such conversion. In such event, O'BRIEN
shall be responsible to install and pay for only the facilities at the
PROJECT which will be required to continue the interconnected operation of
the PUBLIC SERVICE SYSTEM and the COGENERATION FACILITY, provided however,
any PSE&G facilities at the SUBSTATION which will be required to be
modified as designated and specified by PSE&G to effect such conversion
shall be paid for and installed by O'BRIEN. Unless other billing and
payment arrangements are mutually agreed upon by PSE&G and O'BRIEN, O'BRIEN
shall be billed and shall pay any billing(s) for such costs, as such costs
are incurred by PSE&G, in accordance with the provisions of Article XI of
this AGREEMENT. Cause, as specified in this Article, shall include but not
be limited to obsolescence, changing patterns of demand and usage of
electric power and energy by retail and sale for resale customers or
physical destruction of plant, whether the result of deterioration or
casualty.
ARTICLE XX
COGENERATION FACILITY/SUBSTATION FACILITY
In view of PSE&G's statutory obligations to its retail and sale-for-
resale customers, PSE&G has adopted general requirements relative to the
construction of generation and substation facilities by others. These
requirements have been adopted by PSE&G to ensure that any facilities a
party plans to
<PAGE>
65
construct for connection to the PUBLIC SERVICE SYSTEM are designed,
constructed and installed so as to be compatible with the PUBLIC SERVICE
SYSTEM and to ensue that operation of these facilities does not adversely
affect the integrity, reliability and/or safe operation of any
interconnection facility and/or the PUBLIC SERVICE SYSTEM. In connection
with the construction of such facilities, PSE&G requires that the plans and
specifications for such generation and substation facilities be submitted
to PSE&G for review prior to the design, construction and installation of
these facilities solely to enable PSE&G to determine, and thus ensure, that
the contemplated design, construction and installation of such facilities
comport with the aforementioned requirements.
O'BRIEN shall, at its own expense, design, construct, install,
own/lease, operate and maintain the COGENERATION FACILITY and SUBSTATION
FACILITY. O'BRIEN shall, upon execution of this AGREEMENT, use best
efforts to: (i) initiate the task required to obtain any required permit,
easement(s), license(s), rental(s) or right(s)-of-way for the construction
and installation of the PROJECT; and (ii) complete the design, construction
and installation of the PROJECT.
Prior to or in connection with execution of this AGREEMENT, a copy of
"Interconnection Protection and Safety Requirements and Standards for
Customer-Owned Generating Facilities" (Exhibit 2) has been furnished to
O'BRIEN. O'BRIEN shall design, construct and install the COGENERATION
FACILITY consistent with
<PAGE>
66
the requirements set forth in Exhibit 2. In exercising any right of
acceptance with respect to the COGENERATION FACILITY, as specified by this
Article XX, PSE&G's acceptance shall be limited to making a determination
as to whether the design of the COGENERATION FACILITY is consistent with
the requirements contained in Exhibit 2. Deviations from the requirements
set forth in Exhibit 2, relative to the design, construction and
installation of the COGENERATION FACILITY may be permitted with the consent
of PSE&G, which consent shall not be unreasonably withheld.
As soon as practicable after execution of this AGREEMENT, O'BRIEN
shall furnish to PSE&G the following:
A. Plans and specifications for the COGENERATION FACILITY and
SUBSTATION FACILITY.
B. Single line diagram and details of the proposed protection
schemes.
C. Instruction manuals for all protective components.
D. Component specifications and internal wiring diagrams of
protection components if not provided in instruction manuals.
E. All protective equipment ratings if not provided in instruction
manuals.
F. Generator data required to analyze fault contributions and load
flows, including, but not limited to, equivalent impedances and time
constants.
Subsequent to submission to and review by PSE&G of Items A through F
enumerated above, PSE&G shall prepare and submit to O'BRIEN "General
Requirements and Specifications for a 26,000-Volt Customer's Outdoor
Substation" (hereinafter referred
<PAGE>
67
to as Requirements). O'BRIEN shall design, construct and install the
SUBSTATION FACILITY consistent with the requirements set forth in
Requirements. After preparation of the plans and specifications for the
SUBSTATION FACILITY, O'BRIEN shall submit same to PSE&G for its review and
acceptance. The plans and specifications for same may deviate from the
requirements set forth in Requirements provided however, any deviation
therefrom must be submitted to and be acceptable to PSE&G. O'BRIEN shall
construct and install the SUBSTATION FACILITY pursuant to and consistent
with the plans and specifications relating to the design of the SUBSTATION
FACILITY which have been submitted to and found acceptable by PSE&G.
PSE&G shall use best efforts to complete any review of any submissions
made to PSE&G by O'BRIEN pursuant to and in accordance with the provisions
of this Article XX within thirty (30) days of receipt of any such
submissions.
Prior to the DATE OF START-UP, PSE&G will perform the functional tests
required by PSE&G on the relays located in the SUBSTATION FACILITY. PSE&G
will specify and effect the settings of such relays. During the term of
this AGREEMENT, PSE&G shall have access to and the right to inspect and
perform scheduled maintenance on such relays as well as the right to
readjust the settings of such relays as required.
PSE&G shall notify O'BRIEN upon completion of the INTERCONNECTION and
shall thereafter, at O'BRIEN's request, be obligated to energize the
SUBSTATION FACILITY, if but only if,
<PAGE>
68
PSE&G, after inspection, has determined that the SUBSTATION FACILITY has
been completed in accordance with the final plans and specifications for
such facility. In the event such a determination is made, PSE&G shall
energize the SUBSTATION FACILITY and commence the supply of electric energy
to the PROJECT to permit O'BRIEN to conduct pre-operation testing of
PROJECT equipment and facilities. Electric energy will be supplied to the
PROJECT by PSE&G during the test period pursuant to PSE&G's Tariff for
Cogenerator Standby Service.
Thereafter, O'BRIEN shall notify PSE&G when O'BRIEN decides to place
its electric generation unit into INITIAL OPERATION. At that time, O'BRIEN
shall permit PSE&G to examine the electric generation unit to enable PSE&G
to determine whether such electric generation unit satisfies the
requirements contained in Exhibit 2. PSE&G shall be obligated to permit
O'BRIEN to synchronize its electric generation unit with the PUBLIC SERVICE
SYSTEM and receive electric power and energy from the COGENERATION FACILITY
at the RECEIPT POINT if but only if: (I) PSE&G has examined and pursuant
to such examination determined that the PROJECT's electric generation unit
satisfies the requirements contained in Exhibit 2; and, (ii) O'BRIEN has
the installation inspected and approved by an electrical inspection
authority approved by the NJBPU and receives and furnishes satisfactory
evidence to PSE&G of issuance of a Certificate of Approval relative to the
inspection. Thereafter, PSE&G shall permit synchronization of the
PROJECT's electric generation unit
<PAGE>
69
with the PUBLIC SERVICE SYSTEM and shall be obligated, at O'BRIEN's
request, to commence receipt of electric power and energy supplied to the
RECEIPT POINT.
O'BRIEN shall not synchronize its electric generation unit with the
PUBLIC SERVICE SYSTEM at any time without notification to and without
obtaining the consent of PSE&G, which consent shall not be withheld except
pursuant to and in accordance with the provisions of Article V and this
Article XX.
Upon appropriate notification by O'BRIEN, PSE&G shall use best efforts
to conduct and complete any examination of the COGENERATION FACILITY and/or
SUBSTATION FACILITY required under the provisions of this Article within
fifteen (15) working days. PSE&G shall not unreasonably delay any such
examination nor unreasonably withhold any acceptance required to trigger
the DATE OF START-UP.
After the DATE OF START-UP, O'BRIEN shall not rearrange, reconfigure,
modify, alter or change in a material way the SUBSTATION FACILITY and,
after the DATE OF INITIAL OPERATION, O'BRIEN shall not rearrange,
reconfigure, modify, alter or change in any material way any electric
generation unit(s) without notice to and the acceptance by PSE&G of such
rearrangement, reconfiguration, modification, alteration or change. PSE&G
shall not unreasonably delay or unreasonably withhold any such acceptance.
Any review made by PSE&G of the Plans and Specifications of the
COGENERATION FACILITY or SUBSTATION FACILITY, any
<PAGE>
70
examination made by PSE&G of the actual design, construction and/or
installation of the COGENERATION FACILITY or SUBSTATION FACILITY and/or any
determination made by PSE&G in connection with any such review or
examination will be solely for the purpose of permitting PSE&G, consistent
with its statutory obligations to its retail and sale-for-resale customers,
to: (i) determine whether the design, construction and installation of
such facilities are compatible with the PUBLIC SERVICE SYSTEM; and (ii)
ensure that operation of the COGENERATION FACILITY and SUBSTATION FACILITY
will not adversely affect the integrity, reliability or safe operation of
the PUBLIC SERVICE SYSTEM.
PSE&G's review or examination, and any determination made in
connection therewith, is not intended to be, nor will same be made by PSE&G
for the purpose of, nor should same be interpreted, construed and/or relied
upon by O'BRIEN, or any other person or entity, as an endorsement,
approval, confirmation and/or warranty of or by PSE&G relative to any
aspect of the design, construction or installation of O'BRIEN's facilities,
their safety, reliability, economic and/or technical feasibility,
performance and/or operational capability and/or the suitability of same
for their intended purpose(s). O'BRIEN shall not represent to any third
party that PSE&G's review was undertaken for any reason other than the
reasons expressly stated in this Article.
<PAGE>
71
O'BRIEN shall permit PSE&G, its officers, agents, servants and
employees, its successors and assigns, when and as requested, access to,
egress and ingress, from and over the PROJECT SITE at any time and upon
reasonable notice, as same may be necessary or required by PSE&G, to permit
PSE&G, its officers, agents, servants and employees, its successors and
assigns, to gain access to the SUBSTATION FACILITY to take any action
necessary to discharge its obligations or to exercise its rights under this
AGREEMENT, including but not limited to access to: (i) permit PSE&G to
examine, inspect, test, operate, maintain, repair and replace its
electricity recording equipment and associated electricity measuring
equipment; (ii) permit PSE&G to perform switching operations on switch gear
located in the SUBSTATION FACILITY; and (iii) permit PSE&G to examine,
inspect, test and set protective relays as required by PSE&G. O'BRIEN
shall not deny, refuse or delay PSE&G's access to the PROJECT, provided
that while at the PROJECT such PSE&G representative shall observe such
reasonable safety precautions as may be required by O'BRIEN and shall
conduct themselves in a manner that will not unnecessarily impair O'BRIEN's
operation of the COGENERATION FACILITY.
ARTICLE XXI
LIABILITY
Neither party nor its officers, directors, partners, agents, servants,
employees, affiliates, parent, subsidiaries or
<PAGE>
72
respective successors or assigns shall be liable to the other party for
claims for incidental, special, direct, indirect or consequential damages
(Damages) whether such Damages claim is based on a cause of action based in
warranty, negligence, strict liability, contract, operation of law or
otherwise except where such claim for Damages arises out, relates to or
results from the gross negligence of such party or the willful disregard by
a party of its obligations under this AGREEMENT, provided however, each
party shall have the right to recover from the other party direct damages
upon the occurrence of a breach of this AGREEMENT as defined in and which
has been established pursuant to and in accordance with Article XXVIII of
this AGREEMENT.
ARTICLE XXII
FORCE MAJEUR
An event of "Force Majeure" as used herein means an event beyond the
reasonable control of and which occurs without the fault or negligence of
the party claiming Force Majeure and is one which such party is (was)
unable to prevent or overcome which events may include but are not limited
to: acts of God; strikes, lockouts or other similar such industrial
disturbances; acts of the public enemy, wars, civil disturbances,
blockades, military action, insurrections or riots; landslides, floods,
washouts, lightning, earthquakes, tornadoes, hurricanes, blizzards or other
storms or storm warnings; explosions, fires, sabotage or vandalism;
mandates, directives, orders or restraints of any
<PAGE>
73
governmental, regulatory or judicial body or agency; breakage, defects,
malfunctioning, or accident to machinery, equipment, materials or lines of
pipe or wires; freezing of machinery, equipment, materials or lines of pipe
or wires; inability or delay in the obtaining of materials or equipment;
inability to obtain or utilize any permit, approval, easement, license or
right-of-way. The settlement of strikes, lockouts or other similar such
industrial disturbances shall be entirely within the discretion of the
party directly affected. The requirement herein that any event of Force
Majeure shall be remedied with all reasonable dispatch shall not require
the settlement of strikes, lockouts or other similar such industrial
disturbances by acceding to the demands of the opposing party when such
course is, in the opinion of the party directly affected, inadvisable.
In the event PSE&G is rendered unable, wholly or in part, by an event
of Force Majeure, to perform any obligation it has under this AGREEMENT, it
is agreed that, on PSE&G giving notice and full particulars of such event
of Force Majeure to O'BRIEN, as soon thereafter as practicable, the
obligations of PSE&G, so far as they are affected by such event of Force
Majeure, shall be suspended during the continuance of any inability or
incapacity so caused, but for no longer period. PSE&G shall use best
efforts to remedy the cause of such inability or incapacity.
<PAGE>
74
PSE&G shall not be liable to O'BRIEN for any claim(s), lease(s),
damage(s), liability(ies) or expense(s) sustained or incurred by O'BRIEN,
arising out of, relating to, or resulting from PSE&G's inability or
incapacity to perform its obligations under this AGREEMENT due to any event
of Force Majeure, as herein defined.
ARTICLE XXIII
PROTECTIVE DEVICES
O'BRIEN has been advised and acknowledges that actions, conditions,
and/or events on the PUBLIC SERVICE SYSTEM (PSE&G System Condition(s)) may
adversely impair PROJECT operations and/or the condition of PROJECT
facilities and equipment. As such, O'BRIEN agrees to: (i) install,
operate and maintain protective devices at the PROJECT and institute and
maintain procedures at the PROJECT so as to minimize any potential damage
to PROJECT equipment and facilities; and (ii) minimize any interruption in
the production and supply of steam to Newark Boxboard Inc., arising as a
result of the occurrence of any such PSE&G System Condition(s).
ARTICLE XXIV
INDEMNIFICATION
O'BRIEN shall indemnify and hold harmless PSE&G and each and every of
its officers, agents, servants and employees, its successors and assigns
of, from and against any and all claims,
<PAGE>
75
demands, suits, actions and liabilities, losses, damages, and/or judgments,
which may arise therefrom, as well as against any fees, costs, charges or
expenses which PSE&G, its officers, agents, servants and employees, its
successors and assigns, incur in the defense of any such claims, suits,
actions or similar such demands made or filed by any third-party, which in
any manner arise out of, relate to, or result from PSE&G's failure, for any
reason, to provide SERVICE to O'BRIEN under this AGREEMENT, except where
such failure results from the gross negligence of PSE&G or willful
disregard by PSE&G of its obligations under this AGREEMENT.
O'BRIEN shall indemnify and hold harmless PSE&G and each and every of
its officers, agents, servants and employees, its successors and assigns,
from and against any and all claims, demands, suits, actions and
liabilities, losses, damages, and/or judgments, which may arise therefrom,
as well as against any fees, costs, charges or expenses which PSE&G, its
officers, agents, servants and employees, its successors and assigns incur
in the defense of any such claims, suits, actions or similar such demands
made or filed by any third party, to the extent such claim, suit, action or
similar demand arises out of, relates to, or results from the design,
construction, installation, operation, maintenance, repair, replacement,
supervision, inspection, testing, protection, reinforcement,
reconstruction, decommissioning, removal, use, control or ownership of the
PROJECT, except to the extent such liability,
<PAGE>
76
loss, damage and/or judgment results from the gross negligence of PSE&G or
willful disregard by PSE&G of its obligations under this AGREEMENT.
In case a claim is asserted or action brought against PSE&G as to
which PSE&G believes it is entitled to indemnification under this Article,
PSE&G shall promptly notify O'BRIEN in writing of such claim or action.
Prompt notice of any action shall mean such notice as would be required to
enable O'BRIEN to assert and prosecute appropriate defenses in any such
action. If PSE&G fails to give O'BRIEN prompt notice under this paragraph,
O'BRIEN shall have no obligation to indemnify PSE&G under this Article.
Upon receipt of such notice, O'BRIEN shall promptly make a determination of
whether it believes it is required to indemnify PSE&G and shall promptly
notify PSE&G in writing of that determination. If O'BRIEN determines that
it is required, pursuant to this Article XXIV to indemnify PSE&G, O'BRIEN
shall assume the defense thereof, including the employment of counsel, and
shall upon receipt thereof promptly assume the payment of all costs and
expenses with respect thereto. PSE&G shall cooperate in all reasonable
respects with O'BRIEN in the defense of such claim or action. PSE&G shall
have the right, at its own expense, to employ separate counsel in any such
action and to participate in the defense thereof. O'BRIEN shall not be
liable for any settlement of any such claim or action affected without its
consent. Before settling any claim or action, O'BRIEN shall demonstrate to
PSE&G that O'BRIEN has sufficient financial means or has made adequate
arrangements to make all payments under any such settlement as and when
due.
<PAGE>
77
ARTICLE XXV
INSURANCE
O'BRIEN shall obtain and maintain in force and effect for the PROJECT:
1. A policy of comprehensive general liability insurance in a
minimum amount of three million dollars ($3,000,000) for each
occurrence for bodily injury, including death, and property
damage.
2. A workmen's compensation or employer's liability insurance
policy in accordance with applicable New Jersey statutory
requirements.
The policy amount stated in subparagraph 1 above is a minimum level which
O'BRIEN shall be obligated to maintain in force and effect. However, and
regardless of such minimum level requirement, O'BRIEN shall be obligated to
maintain in force and effect insurance coverage in such amount and against
such risks as shall be consistent with prudent practice in its industry.
Satisfactory evidence of the existence of insurance coverage consistent
with the requirements of this Article shall be furnished by O'BRIEN to
PSE&G on or prior to the DATE OF INITIAL OPERATION and thereafter on or
before January 1 of each year until this AGREEMENT is terminated.
Any policy of insurance obtained by O'BRIEN, as required by this
Article, shall not be materially altered, cancelled or terminated, without
furnishing PSE&G notice thereof thirty (30)
<PAGE>
days prior to the effective date of such alteration, cancellation, or
termination.
ARTICLE XXVI
WARRANTIES
O'BRIEN warrants that it will at the time NET ELECTRICAL POWER OUTPUT
and associated NET ELECTRICAL ENERGY is supplied to the RECEIPT POINT have
good title to or the good right to deliver all power and energy so made
available. O'BRIEN agrees to indemnify and hold harmless PSE&G against any
and all claims, demands, suits, actions, costs, and liabilities, damages,
losses and/or judgments arising out of, relating to or resulting from any
adverse claim to NET ELECTRICAL POWER OUTPUT and associated NET ELECTRICAL
ENERGY received by PSE&G at the RECEIPT POINT, as well as against any fees,
costs, charges or expenses which PSE&G might incur in the defense of any
such claim, suit, action or similar such demand made or filed by such
person, its successors or assigns, asserting such adverse claim. In
effecting the right of or obligation to indemnify pursuant to and in
accordance with the provisions of this paragraph the procedural provisions
set forth in Article XXIV of this AGREEMENT shall govern.
ARTICLE XXVII
EVENTS OF TERMINATION
Either party may terminate this AGREEMENT upon the occurrence of any
of the following events (Events of
<PAGE>
79
Termination): (i) O'BRIEN's failure to have the PROJECT placed into
COMMERCIAL OPERATION on or before October 1, 1990; provided however, in the
event the PROJECT has not been placed in COMMERCIAL OPERATION on or before
October 1, 1990, but the PROJECT has been, is at the time and continues
thereafter, to be under a bona fide program of continuous construction the
October 1, 1990 data shall be extended until October 1, 1991; (ii) a final
and non-appealable order/judgment that the PROJECT fails to meet the
requirements of a qualifying facility established as of the effective date
of this AGREEMENT in accordance with Title 18, Code of Federal Regulations,
Part 292, Subpart B, Section 292.203 through 292.207, inclusive; provided
however, that any such determination shall not constitute an Event of
Termination pursuant to this Article XXVII if thereafter O'BRIEN uses
reasonable efforts to resume thermal energy production and sales to regain
qualifying facility status; (iii) termination, for any reason, of the Long
Term Power Purchase of Cogeneration and Small Power Production Located
Outside JCP&L Service Territory between O'BRIEN and JCP&L dated March 10,
1986; provided however, in the event said termination is contested,
termination of this AGREEMENT is subject to entry of a final and non-
appealable order/judgment terminating the Agreement of Purchase; (iv)
termination of the site lease for the PROJECT SITE; (v) O'BRIEN's decision
to abandon or cancel the PROJECT; or (vi) O'BRIEN's failure, after the DATE
OF COMMERCIAL OPERATION, for a period of 365 consecutive days to supply to
<PAGE>
80
PSE&G at the RECEIPT POINT NET ELECTRICAL POWER OUTPUT and associated NET
ELECTRICAL ENERGY except where such failure results from an event of Force
Majeure as defined in Article XXII, provided however, that O'BRIEN has used
during such 365 day period and continues thereafter to use best efforts to
resume the supply of NET ELECTRICAL POWER OUTPUT and associated NET
ELECTRICAL ENERGY to PSE&G at the RECEIPT POINT.
If any Event of Termination occurs and either party elects to exercise
its right, as provided in the preceding paragraph, to terminate this
AGREEMENT, such party shall provide the other party with written notice of
termination of this AGREEMENT (hereinafter referred to as Notice of
Termination). The Notice of Termination shall specify the basis for such
termination. This AGREEMENT and the parties' obligations hereunder shall
terminate effective thirty (30) days after receipt by the other party of
such Notice of Termination.
The occurrence of any Event of Termination shall not give rise to a
right by PSE&G to terminate this AGREEMENT if within five (5) business days
of the receipt of any Notice of Termination O'BRIEN requests PSE&G in
writing to stay the termination for a specified period up to but not
exceeding eighteen (18) months and thereafter makes payment to PSE&G of the
monthly demand charge calculated in accordance with the provisions of
Section A of Article X, which calculation shall be based on the level of
SERVICE established as of the date of execution of this AGREEMENT.
<PAGE>
81
Termination of this AGREEMENT for and on account of any Event of
Termination specified in this Article XXVII shall not relieve O'BRIEN from
any obligation under this AGREEMENT to pay PSE&G for any unpaid costs
associated with the design, construction and installation of the
INTERCONNECTION, CANCELLATION COSTS, or any other unpaid bill or BILLING
STATEMENT.
ARTICLE XXVIII
BREACH OF CONTRACT
A breach of this AGREEMENT may occur upon the happening of any of the
following:
A. failure of O'BRIEN to make payment of any billing submitted by
PSE&G to O'BRIEN pursuant to this AGREEMENT, which failure
continues for a period of thirty (30) days after the due date as
determined pursuant to and in accordance with Article XI of this
AGREEMENT;
B. failure of a party to perform any obligation under this
AGREEMENT, which failure continues for a period of fifteen (15)
days after written notice of such nonperformance is received by
such party. Any notice of nonperformance (hereinafter referred
to as Notice of Nonperformance)
<PAGE>
82
In the event a party claims that a breach of this AGREEMENT has
occurred, such party shall provide the other party with written notice
thereof (hereinafter referred to as Notice of Breach). The Notice of
Breach shall state the basis for such claim and any remedy sought. The
parties shall have thirty (30) day period after service of the Notice of
Breach the parties are unable to resolve their differences by negotiation
the party alleging the breach shall have the right to submit the dispute
for resolution to arbitration or to any regulatory body having
jurisdiction.
The nature and extent of any damage incurred or sustained by the non-
breaching party, as a result of any breach, shall be determined and
calculated as of the date the breaching party's failure to perform
commenced.
Except as otherwise provided in Article V and Article XIII of this
AGREEMENT, neither party shall refuse to make, suspend or delay any
payment(s) required to be made under this AGREEMENT or otherwise carry out
any of its obligations under this AGREEMENT for or on account of or as a
result of an alleged breach of this AGREEMENT.
<PAGE>
83
Any waiver by a party of any breach shall be deemed to extend only to
the particular breach waived and shall not limit or otherwise affect any
right(s) that such party may have with respect to any other or future
breach, whether of a similar or different nature.
ARTICLE XXIX
ARBITRATION
Any controversy, dispute or claim between the parties to this
AGREEMENT, which the parties are unable to resolve by negotiation, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules
of the American Arbitration Association (AAA), then in effect, and the
provisions of this Article. No suit at law which seeks to resolve any
controversy, dispute or claim between the parties shall be instituted by
either party hereto, except where such suit is instituted to confirm an
arbitration award received pursuant to this Article. However, nothing
contained herein shall deprive either party of any right to: (i) obtain
injunctive or other equitable relief in any court in the State of New
Jersey, on an interim basis, pending disposition of the arbitration of any
controversy, dispute or claim in accordance with article XXX or otherwise;
and/or (ii) institute a suit for specific performance; and/or (iii) assert
any crossclaim or third-party claim in any suit at law instituted by a
third-party; and/or (iv) file and prosecute any complaint at and with the
FERC or make and prosecute any
<PAGE>
84
claim or position in any filing made at the FERC by either party or some
third-party, provided however, that nothing herein shall prevent either
party from seeking FERC review of any proposed change of the charges set
forth in Article X of this AGREEMENT.
Any controversy, dispute or claim submitted to arbitration shall be
settled by arbitration in Newark, New Jersey in accordance with the laws of
the State of New Jersey. Any award entered pursuant to such arbitration
shall be binding on both parties and judgment upon the award rendered or
received may be entered in the Superior Court of the State of New Jersey
pursuant to N.J.S.A. 2A:24-1 et seq.
Exclusive jurisdiction relative to the entry of judgment on any
arbitration award relative to any controversy or claim between the parties
shall be in any court of appropriate subject matter jurisdiction located in
New Jersey, and the parties to this AGREEMENT, expressly subject themselves
hereby to the personal jurisdiction for entry of any such judgment and for
the resolution of any dispute, action, or suit arising in connection with
the entry of such judgment.
The controversy or claim to be arbitrated shall be referred to three
(3) arbitrators, one to be selected by each party and the third to be
selected by the AAA. The selections to be made by the parties shall be
made from the list of the National Panel of Arbitrators maintained by the
AAA. The arbitrator to be selected by the AAA shall be an attorney-at-law
of the State of New Jersey. All decisions and awards shall be made by a
<PAGE>
85
majority of the arbitrators, except for decisions relating to discovery as
set forth herein.
In the event any arbitrator dies, or refuses to act, or becomes
incapable, incompetent or unfit to act before hearings have been completed
and/or before in award has been rendered, a successor arbitrator may be
selected by the party who originally made the selection. The selection of
the successor arbitrator shall be made consistent with the selection
procedure set forth in the preceding paragraph.
The arbitrators selected pursuant to this AGREEMENT shall be governed
by and apply the laws of the State of New Jersey and federal law, as
applicable, in conducting any arbitration proceeding and/or in making any
award.
Notice of a demand for arbitration (hereinafter to as Demand for
Arbitration) of any controversy or dispute between the parties shall be
filed in writing with the AAA by the party seeking arbitration and a copy
of same shall be served contemporaneously with such filing on the other
party. The notice shall state, with specificity, the nature of the dispute
and the remedy sought. After such notice has been filed, the parties may
make discovery of any matter relevant to such dispute before the hearing,
to the extent and in the manner provided by the Rules Governing Civil
Practice in the Superior Court contained in the Rules Governing Civil
Practice in the Superior Court contained in the Rules Governing the Courts
of the State of New Jersey. Any question that may arise with respect to
the obligations of the parties relative to discovery and/or relative
<PAGE>
86
to the protection of the discovery material shall be referred solely to the
arbitrator selected by the AAA. His determination shall be final and
conclusive. Discovery shall be completed not later than ninety (90) days
after filing of the notice of arbitration unless such period for discovery
is extended by the arbitrator selected by the AAA, upon a showing of good
cause by either party to the arbitration.
The arbitrators may consider any material which is relevant to the
subject matter of any such controversy even if such material might also be
relevant to an issue or issues not subject to arbitration hereunder. A
stenographic record shall be made of any arbitration hearing.
Arbitration may not be utilized and the arbitrators selected in
accordance with this Article shall not possess the authority or power to
alter, amend or modify any of the terms or conditions or charges set forth
in this AGREEMENT, and further, the arbitrators may not enter any award
which alters, amends or modifies such terms, conditions or charges in any
form or manner.
ARTICLE XXX
SPECIFIC PERFORMANCE
Without regard to the requirements or provisions of Article XXIX and
Article XXVIII, in addition to any of the rights and/or remedies referred
to in this AGREEMENT, either party shall have the right to institute an
action against the other party in a
<PAGE>
87
court of equity in the State of New Jersey or at the FERC to obtain
specific performance by such other party of any of such other party's
obligations under this AGREEMENT.
ARTICLE XXXI
MODIFICATIONS
The terms and conditions under which SERVICE shall be provided, and
the charges applicable thereto, are as herein set forth. This AGREEMENT is
subject to modification from time to time, by mutual agreement of the
parties, reduced to writing and signed by both parties.
Either party shall have the right, from time to time, without
limitation or reservation, through filings with the FERC or any successor
agency, to request authorization to change the charges provided for in
Article X of this AGREEMENT; provided however, PSE&G's right to file for
authorization for a change in the charges shall be limited to filings to
modify the transmission service charge to reflect change sin the
transmission related costs in PSE&G's most recent approved rates then in
effect. Any party intending to file with FERC under this paragraph shall
give the other party written notice of such intent as well as a copy of the
proposed filing at least fifteen (15) days prior to such filing. If
requested, the party intending to make such filing will meet with the other
party to discuss the content of such filing.
<PAGE>
88
However, in the event the obligations of PSE&G under this AGREEMENT
are adversely affected in a material way at any time during any term of
this AGREEMENT as a result of any governmental, legislative and/or
regulatory action(s), which specifically deals with this type of
transaction, the SERVICE under this AGREEMENT and/or the terms and
conditions thereof, PSE&G shall have the right to make a filing with the
FERC to request authority to alter, amend or change any charge or term or
condition of this AGREEMENT, other than the Term as specified in Article
VIII, which PSE&G asserts has been affected by such action(s).
Any party shall have the right to oppose any filing made by the other
party under this Article to the extent that such other party is legally
permitted to do so.
ARTICLE XXXII
ASSIGNMENT/TRANSFER
O'BRIEN may and is expressly permitted at any time and from time to
time during the term of this AGREEMENT, to assign its rights in this
AGREEMENT to FINANCIER. PSE&G shall, at O'BRIEN's request, execute a
Consent to Assignment provided that the terms and conditions of same are
acceptable to PSE&G and, in connection with any such request, O'BRIEN
submits to PSE&G for review any relevant documents requested by PSE&G,
which documents shall be treated by PSE&G as confidential, and not
disclosed to any third-party without the written consent of
<PAGE>
89
O'BRIEN. Upon written notice to PSE&G, O'BRIEN may transfer its rights and
obligation sunder this AGREEMENT to any entity controlling, controlled by
or under common control with O'BRIEN. Except as otherwise provided herein
with respect to FINANCIER or any entity controlling, controlled by or under
common control with O'BRIEN, O'BRIEN may not assign its rights and/or
transfer its rights and obligations in this AGREEMENT without the prior
written consent of PSE&G, which consent shall not be unreasonably withheld.
Nothing contained herein shall prevent O'BRIEN from pledging or mortgaging
all or any part of the property of the PROJECT in connection with financing
the PROJECT.
Except with respect to any entity controlling, controlled by or under
common control with O'BRIEN, no assignee, transferee, pledgee or mortgagee
and/or any person designated by such assignee, transferee, pledgee or
mortgagee may operate the PROJECT, pursuant to any rights such party may
have under any mortgage, assignment, transfer, or security agreement,
unless such entity or person has been approved and authorized by PSE&G to
operate the PROJECT, and in connection with seeking to obtain such approval
and authorization, agrees to be bound by, subject to and to comply with the
terms and conditions of this AGREEMENT while operating the PROJECT. PSE&G
shall not unreasonably delay or withhold any such approval or
authorization.
PSE&G may, on notice to O'BRIEN, assign and transfer its rights and
obligations under this AGREEMENT to any entity
<PAGE>
90
controlling, controlled by or under common control with PSE&G.
Additionally, PSE&G may, on notice to and with the approval of O'BRIEN,
assign its rights and/or transfer its rights and obligations under this
AGREEMENT. O'BRIEN shall not unreasonably delay or withhold any approval
of an assignment or assignment/transfer by PSE&G provided that the assignee
or assignee/transferee agrees to be bound by, subject to and to comply with
the terms and conditions of this AGREEMENT.
ARTICLE XXXIII
CURE BY FINANCIER
Within thirty (30) days of execution of this AGREEMENT, O'BRIEN shall
furnish to PSE&G a list containing the names and addresses of the
FINANCIERS O'BRIEN will or intends to utilize in connection with placing
the COGENERATION FACILITY into COMMERCIAL OPERATION. During any term of
this AGREEMENT, O'BRIEN shall update the list as changes are made thereto.
For so long as O'BRIEN shall have outstanding and unpaid any financing
liabilities, PSE&G agrees to promptly furnish to all FINANCIERS, then known
to PSE&G, a copy of any Notice 3 of Cancellation, Notice of Nonperformance,
Notice of Suspension, Notice of Breach, Demand for Arbitration or Notice of
Termination given to O'BRIEN. Additionally, PSE&G shall not terminate this
AGREEMENT unless any written notice of such termination or breach, as the
case may be, and the reasons therefor have been given to and received by
each FINANCIER then
<PAGE>
91
known to PSE&G thirty (30) days prior to the effective date of the
termination. PSE&G shall not terminate this AGREEMENT if, after notice
thereof, and prior to any effective date of termination FINANCIER has:
(i) cured the condition precipitating the notice of Breach under
Article XXVIII or Notice of Termination under Article XXVII; or
(ii) if the condition precipitating such Notice of Breach or such
Notice of Termination is not capable of being cured prior to the date
of termination, commenced in a diligent manner to cure the condition
precipitating the Notice of Breach or Notice of Termination and for so
long as the FINANCIER diligently continues such efforts; or
(iii) if the condition precipitating the Notice of Breach or
Notice of Termination is not capable of being cured prior to the date
of termination, caused the initiation of and is diligently prosecuting
efforts to gain possession of the PROJECT and for so long as the
FINANCIER diligently continues such efforts.
<PAGE>
92
As indicated herein, in the event the condition precipitating the Notice of
Breach or Notice of Termination is not capable of being cured prior to the
date of termination, PSE&G shall not terminate this AGREEMENT where
FINANCIER is diligently prosecuting efforts to cure the condition
precipitating the Notice of Termination or Notice of Breach or to gain
possession of the PROJECT, provided however, in the event the FINANCIER
does not so cure or gain possession of the PROJECT within ninety (90) days
of the date of the notice PSE&G served on FINANCIER, and FINANCIER intends
to continue its efforts, FINANCIER shall be obligated thereafter to
commence payment of the applicable monthly demand charge specified in
Article X.
In the event FINANCIER gains possession of the PROJECT, FINANCIER
shall promptly designate a person to operate the PROJECT. The name and
credentials of the person designated shall be promptly submitted thereafter
to and such person so designated must be approved and authorized by PSE&G
to operate the PROJECT. Any approval of the person so designated shall not
be unreasonably delayed or withheld by PSE&G. In the event PSE&G approves
the person so designated, PSE&G shall not be obligated to give
authorization to the person so designated to actually operate the PROJECT
unless and until the person so designated agrees in writing to be bound by,
subject to and to comply with the terms and conditions of this AGREEMENT
for the period during which the person so designated intends to operate the
PROJECT. Upon execution of the aforesaid instrument, the
<PAGE>
93
person so designated shall thereafter, inter alia, be responsible for and
commence the payment of the charges set forth in Article X. However,
FINANCIER, and the person so designated, shall have no responsibility
whatsoever for any obligation of O'BRIEN incurred prior to the date on
which FINANCIER takes possession of the PROJECT.
In the event of a foreclosure and a resultant sale or transfer of the
PROJECT to a new entity, any obligation of PSE&G to perform its obligations
under the AGREEMENT shall be conditioned upon: (i) the approval of PSE&G
of any new operator of the PROJECT, which approval shall not be
unreasonably withheld or delayed; (ii) agreement by the new entity to
comply with the rules and regulations of the NJBPU, the FERC, and any other
agency having jurisdiction over the PROJECT relative to the sale or
transfer of same; (iii) receipt by such new entity of any license(s),
permit(s) and approval(s) as may be required in connection with the sale or
transfer of the PROJECT; and (iv) the execution and delivery of a written
assumption agreement, in form satisfactory to PSE&G, pursuant to which the
new entity and/or operator agree to assume all obligations under and agree
therein to be bound by, subject to and to comply with the terms and
conditions of this AGREEMENT.
Notwithstanding any rights which FINANCIER may have, in the event
PSE&G interrupts SERVICE to the PROJECT in connection with the occurrence
of the condition or event which precipitated the Notice of Termination or
Notice of Breach, PSE&G shall not be
<PAGE>
94
obligated to resume SERVICE to the PROJECT unless the condition or event or
cause thereof which precipitated the Notice of Termination or Notice of
Breach is or has been remedied in accordance with the provisions of this
AGREEMENT. Prior to PSE&G being obligated to resume SERVICE to the
PROJECT, PSE&G shall have the right to require FINANCIER to provide
adequate assurance to PSE&G that the condition or event precipitating the
Notice of Termination or Notice of Breach will not reoccur.
ARTICLE XXXIV
FINANCIER SECURITY AGREEMENTS
As indicated in Article XXXII, O'BRIEN may assign any rights in this
AGREEMENT to FINANCIER and may pledge or mortgage any or all of the
property of the PROJECT. In the event FINANCIER alleges that a breach or
an event of default has occurred under any operative agreement between
FINANCIER and O'BRIEN and FINANCIER thereafter elects to exercise any
right(s) under any applicable security, mortgage, assignment or other
agreement then in effect between FINANCIER and O'BRIEN, it is agreed that,
upon receipt of such notice from FINANCIER, PSE&G shall provide notice to
O'BRIEN and thereafter PSE&G shall accept the instructions of FINANCIER in
accordance with the terms of any applicable security, mortgage or
assignment agreement. In such event, O'BRIEN shall have no claim against
PSE&G for, and hereby agrees to release PSE&G from, any liability for any
cost, expense, loss, damage or liability
<PAGE>
95
O'BRIEN may incur or sustain arising out of. Relating to or resulting from
any action(s) which PSE&G determines it is obligated to take pursuant to
any operative agreement between O'BRIEN and FINANCIER.
ARTICLE XXXV
DETERMINATION OF PSE&G COSTS
The costs for any work done or service performed by PSE&G personnel,
as required by this AGREEMENT, which costs are to be billed to and to be
paid by O'BRIEN pursuant to this AGREEMENT shall be determined by PSE&G in
accordance with PSE&G's "Procedures for Work Done at the Expense of
Others," then in effect.
ARTICLE XXXVI
STANDARD FOR PERFORMANCE
Unless otherwise expressly provided for in this AGREEMENT, PSE&G shall
undertake and discharge any obligation it has in this AGREEMENT to, inter
alia, design, construct, install, separate, maintain, repair, replace,
reinforce, rearrange, purchase, select, examine, review, inspect or accept
any facility or equipment, pursuant to and in accordance with any
applicable PSE&G practice(s), standard(s) and/or procedure(s). PSE&G shall
use the same care and diligence in controlling the costs of such
activity(ies) O'BRIEN is required to make payment for under this AGREEMENT
as if the work were being performed by
<PAGE>
96
and for PSE&G's own account in accordance with PSE&G's practices, standards
and/or procedures.
ARTICLE XXXVII
STANDBY ELECTRIC SERVICE
In the event O'BRIEN requires standby electric service to the
COGENERATION FACILITY same shall be furnished by PSE&G pursuant to an
applicable tariff on file with the NJBPU. In such event, pursuant to and
in accordance with the provisions of The Order of the NJBPU in "In the
Matter of the Consideration and Determination of Cogeneration and Small
Power production Standards Pursuant to the Public Utility Regulatory
Policies Act of 1978, Docket No. 8010-687," PSE&G will establish a credit
(Credit) for O'BRIEN in an amount determined in accordance with the
following:
Estimated Cost of Standby Facility X Actual Cost for = Credit
Estimated Cost for INTERCONNECTION INTERCONNECTION
PSE&G estimates the Estimated Cost of Standby Facility will be eight
thousand three hundred and thirty dollars ($8,330).
This Credit may be refunded to O'BRIEN without interest, in whole or
in part, in annual payments over the ten (10) year period following the
DATE OF COMMERCIAL OPERATION. The amount of refund for each annual period
will be calculated as follows:
Total of payments made for electric
service supplied by PSE&G under
the applicable prevailing rate X 10% = Amount of Refund
schedule during the preceding
annual period
<PAGE>
97
The total refund during such ten (10) year period shall not exceed the
amount of the Credit determined pursuant to and in accordance with the
provisions of this paragraph. If after such ten (10) year period O'BRIEN
has not received, based on its annual payment for electric service, a total
refund of the Credit O'BRIEN shall forfeit any further entitlement to the
balance of the Credit remaining at the end of such ten (10) year period.
ARTICLE XXXVIII
ENTIRE AGREEMENT
This AGREEMENT constitutes the entire agreement and understanding of
the parties relating to the subject matter of this AGREEMENT and each party
confirms that it is not relying upon any representation, assumption,
understanding or warranty, except as specifically set forth herein.
ARTICLE XXXIX
SUCCESSORS AND ASSIGNS
This AGREEMENT shall be binding upon and shall inure to the benefit
of, or may be performed by, the successors and assigns of the parties,
except that no assignment, pledge or other transfer of this AGREEMENT by
any party shall operate to release the assignor, pledgor or transferor from
any of its obligations under this AGREEMENT, unless consent to the release
is given in writing by the other party, which consent shall not be
<PAGE>
98
unreasonably delayed or withheld, or unless such transfer is incident to a
reorganization or merger or consolidation with or transfer of all or
substantially all of the assets of the transferor to another person or
business entity which person or entity shall, as part of such succession,
assume all the obligations of the transferor under this AGREEMENT.
ARTICLE XL
CHOICE OF LAW
This AGREEMENT shall be interpreted, construed, governed by, performed
and enforced in accordance with the laws of the State of New Jersey and
federal law, where applicable. All questions concerning the validity,
construction and enforceability of the AGREEMENT as well as questions
concerning the sufficiency of other aspects of performance under the
AGREEMENT shall be determined under the laws of the State of New Jersey.
ARTICLE XLI
CAPTIONS
The subject headings of the Articles of this AGREEMENT are inserted
solely for the purpose of convenient reference and are not intended to, nor
shall same affect the meaning of any provision of this AGREEMENT.
<PAGE>
99
ARTICLE XLII
COUNTERPARTS
This AGREEMENT may be executed in counterparts. Each shall be deemed
an original but together shall constitute one and the same instrument.
ARTICLE XLIII
SURVIVAL OF OBLIGATIONS
Termination of this AGREEMENT for any reason shall not relieve PSE&G
or O'BRIEN of any obligation accruing or arising prior to such termination.
ARTICLE XLIV
FURTHER ASSURANCES
After execution of this AGREEMENT, O'BRIEN shall, upon execution of
the Site Lease, immediately forward a copy of said Site Lease to PSE&G.
Additionally, if either Party reasonably determines or is reasonably
advised that any further instruments or any other things are necessary to
carry out the terms of this AGREEMENT, the other Party shall execute and/or
deliver all such instruments and assurances and do all things reasonably
necessary and proper to carry out the terms of this AGREEMENT.
<PAGE>
100
ARTICLE XLV
MISCELLANEOUS
In case of conflict between any provisions hereof and any applicable
law, regulation or regulatory order, such applicable law, regulation or
regulatory order shall govern.
All terms defined in this AGREEMENT shall have the same defined
meanings when used in any notice, correspondence, report or other document
made or delivered pursuant to or in connection with this AGREEMENT, unless
the context shall otherwise require.
Each reference herein to O'BRIEN and PSE&G shall be deemed to include
their respective successors and assigns.
All of the covenants, warranties, undertakings and agreements of
O'BRIEN and PSE&G shall bind the respective parties, their successors and
assigns.
ARTICLE XLVI
NOTICE OF AMENDMENTS TO PJM OR MID-ATLANTIC AGREEMENTS
In the event that application is made for approval of any amendment to
the PJM Agreement, the Mid-Atlantic Area Coordination Group Agreement, or
any other agreement to which PSE&G is a party, which amendment, if allowed
to take affect, would impair the SERVICE being provided to O'BRIEN under
this AGREEMENT, PSE&G shall provide timely notice to O'BRIEN of such
application.
<PAGE>
101
ARTICLE XLVII
RESERVATIONS
No party shall be prejudiced or bound, except as otherwise
specifically provided herein, nor shall any party be deemed to have
approved, accepted, agreed or consented to any concept, theory or principle
underlying or supposed to underlie any of the matters contained herein,
including but not limited to any concept, theory, principle or method used
to calculate the rates provided for herein.
All parties further understand and agree that the provisions of this
AGREEMENT relate only to the specific matter referred to herein and no
party or person waives any claim or right which it may otherwise have with
respect to any matter not expressly provided for herein.
ARTICLE XLVIII
NOTICES
Any notice, request, demand, or statement which either PSE&G or
O'BRIEN may desire to give to the other shall be in writing and shall be
considered as duly delivered when mailed by certified mail addressed to
said party as follows:
(a) If to PUBLIC SERVICE ELECTRIC AND GAS COMPANY:
Public Service Electric and Gas Company
80 Park Plaza - Mail Code T14A
P.O. Box 570
Newark, New Jersey 07101-0570
ATTENTION: GENERAL MANAGER
SYSTEM PLANNING AND INTERCONNECTIONS
<PAGE>
102
(b) If to O'BRIEN ENERGY SYSTEMS, INC.:
O'Brien Energy Systems, Inc.
225 South Eighth Street
Philadelphia, Pennsylvania 19106
ATTENTION: JEFFERY D. BARNES
Routine communications, including monthly BILLING STATEMENTS and
payments, shall be considered as duly delivered when mailed by either
certified or ordinary mail:
(a) If to PUBLIC SERVICE ELECTRIC AND GAS COMPANY:
Public Service Electric and Gas Company
80 Park Plaza - Mail Code T14A
P.O. Box 570
Newark, New Jersey 07101-0570
ATTENTION: GENERAL MANAGER
SYSTEM PLANNING AND INTERCONNECTIONS
(b) If to O'BRIEN ENERGY SYSTEMS, INC.:
O'Brien Energy Systems, Inc.
225 South Eighth Street
Philadelphia, Pennsylvania 19106
ATTENTION: JEFFERY D. BARNES
IN WITNESS WHEREOF, this AGREEMENT has been executed and delivered as
of the date and year first above written.
O'BRIEN ENERGY SYSTEMS, INC.
/s/ Jeffrey Barnes
Jeffery U. Barnes
Executive Vice President
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
/s/ S. A. Mallard
Stephen A. Mallard
Senior Vice President
<PAGE>
26-KV INTERCONNECTION
O'BRIEN ENERGY SYSTEMS
COGENERATION PROJECT
EXHIBIT 1
ESSEX
SWITCHING O'BRIEN ENERGY SYSTEMS
STATION COGENERATION PROJECT
(Drawing)
<PAGE>
EXHIBIT 2 (Pg. 1 of 4)
INTERCONNECTION, PROTECTION AND SAFETY REQUIREMENTS
AND STANDARDS FOR CUSTOMER-OWNED GENERATING FACILITIES
The following requirements and standards for connection of customer-owned
generating facilities to the utility system, shall be met to assure the
integrity and safety operation of the utility system with no deterioration
to the quality and reliability of service to other customers.
1. All small power producers or cogenerators shall make application to
the utility for approval to interconnect their facilities with the
utility system.
2. The utility may require the following as part of the application.
A. Plans and specifications of the proposed installation.
B. Single line diagram and details of the proposed protection
schemes.
C. Instruction manuals for all protective components.
D. Component specifications and internal wiring diagrams of
protective components if not provided in instruction manuals.
E. All protective equipment's ratings if not provided in instruction
manuals.
F. Generator data required to analyze fault contributions and load
current flows including, but not limited to, equivalent
impedances and time constants.
3. The utility shall within thirty (30) days from the receipt of all
required data from the applicant either approve or reject the
application for connection to the utility system. Connection to the
utility system will be permitted only upon obtaining the formal
approval of the utility. The utility may require the execution of a
formal application form and/or interconnection agreement by the
customer.
<PAGE>
EXHIBIT 2 (Pg. 2 of 4)
4. The installation of the customer's facilities must be in compliance
with the requirements of the National Electrical Code and all
applicable local, state and federal codes or regulations. The
installation shall be done in a workman-like manner, and shall meet or
exceed industry acceptance standards of good practice. The provisions
of the National Electrical Safety Code and the standards of the
Institute of Electrical and Electronics Engineers, National Electrical
Manufacturers Association and the American National Standards
Institute shall be observed to the extent that they are applicable.
Prior to connection, the utility must be provided with evidence of the
satisfactory electrical inspection by an authorized inspection agency.
5. The customer's facility shall have the following characteristics:
A. Output voltage shall be compatible and consistent with the
utility system to which the customer's facility is to be
connected.
B. The customer's facility shall produce 60 Hertz sinusoidal output
compatible with the utility system to which the facility is to be
connected.
C. The customer's facility must provide and maintain automatic
synchronization with the utility system to which it is to be
connected.
D. The break point between customers' facilities producing single-
phase or three-phase output shall be in accordance with existing
utility motor specifications or as otherwise specified by the
utility.
E. At no time shall the operation of the customer's facility result
in excessive harmonic distortion of the utility waveform. Total
harmonic distortion greater than 5% shall be deemed excessive and
shall result in disconnection of the facility from the utility
system.
F. The installation of power factor correction (PFC) capacitors on
the customer's facility may be required under conditions to be
determined by the utility when necessary to assure the quality
and reliability of service to other customers. The cost of such
capacitors shall be borne by the customer.
<PAGE>
EXHIBIT 2 (Pg. 3 of 4)
G. The cost of supplying and installing any special facilities or
devices occasioned by the customer's installation which the
utility may deem necessary on its system shall be borne by the
customer.
6. Automatic disconnecting devices with appropriate control devices which
will isolate the customer's facility from the utility system within a
time period specified by the utility for, but not necessarily limited
to, the following conditions, shall be provided by the customer:
A. A fault on the customer's equipment.
B. A fault on the utility system.
C. A deenergized utility line to which the customer is
connected.
D. An abnormal operating voltage or frequency.
E. Failure of automatic synchronization with the utility
system.
F. Loss of a phase or improper phase sequence.
G. Total harmonic content in excess of 5%
H. Abnormal power factor.
The devices shall be so designed and constructed to prevent reconnection of
the customer's facility to the utility system until the cause of
disconnection is corrected.
7. The utility shall reserve the right to specify settings of all
isolation devices which are part of the customer's system.
8. The utility may require initial inspection and testing as well as
subsequent inspection and testing of the customer's isolation and
fault protection systems at the customer's expense. Maintenance of
these systems must be performed and documented by the customer at
specified intervals to the satisfaction of the utility. The utility
shall reserve the right to disconnect the customer from the utility
system for failure to comply with these inspections, testing and
maintenance requirement.
<PAGE>
EXHIBIT 2 (Pg. 4 of 4)
9. The customer is solely responsible for providing adequate protection
for the equipment located on the customer's side of the
interconnection system. This protection shall include, but not be
limited to, negative phase sequence voltage on three-phase systems.
10. The customer shall provide a utility controlled disconnecting device
on the utility side of the interconnection system. The utility may
require that this device accept a utility provided padlock. The
utility may also require manual operation of the device when required.
11. The customer shall agree to grant access to the utility's authorized
representative during any reasonable hours to install, inspect and
maintain the utility's metering equipment.
12. The customer must satisfy, and shall be subject to, all terms and
conditions of the utility's tariff for electric services.
13. No wind generator, tower structure or device shall be installed at a
location where, in the event of failure, it can fall in such a manner
as to contact, land upon, or interfere with any utility lines or
equipment.
14. The customer shall maintain the generator and its associated
structure, wiring and devices in a safe and proper operating condition
so that the installation continues to meet all the requirements
contained herein.
15. By installation and connection of a generator and/or appurtenant
facilities, devices and equipment with the utility system, the
customer agrees to indemnify and hold the utility harmless from any
and all liability or claim therefore for damage to property, including
property of the utility and injury or death to persons resulting from
or caused by the presence, operation, maintenance of removal of such
customer's installation.
<PAGE>
O'BRIEN (NEWARK) COGENERATION, INC.
MONTHLY OPERATING CONDITIONS - 1993
(CONT'D)
2/21/94
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JAN FEB MARCH APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC YEAR
OPERATING INCOME 0.0 19.8 368.1 624.5 691.9 741.5 2445.8
% HOURS ON GAS 100.0% 100.0% 100.0% 100.0% 100.0% 84.0% 0.951
HOURS ON GAS 0.0 19.8 368.1 624.5 691.9 622.9 2327.2
MMBUT/HR 0.0 1279.0 568.6 552.3 526.5 539.7 550.0
MMBUT 0 25330 209310 344926 364265 336194 1280025
GAS PRICE($ PER MMBTU) 0 2.917 3.091 2.898 3.010 3.152 3.048
GAS COST 0 73887 653103 1005770 1102501 1065793 3901055
HOURS ON EXTENDED SERVICE 0.0 0.0 0.0 0.0 0.0 118.6 118.6
MMBTU/HR 0.0 0.0 0.0 0.0 0.0 539.7 539.7
MMBTU 0 0 0 0 0 64030 64030
PRICE (PER MMBTU) 0.000 0.000 0.000 0.000 0.000 7.400 7.400
EXTENDED GAS SERVICE COST 0 0 0 0 0 473821 473821
HOURS ON KEROSENE 0.0 0.0 0.0 0.0 0.0 0.0 0.0
MMBTU/HR 0.0 0.0 0.0 0.0 0.0 0.0
MMBTU 0 0 0 0 0 0 0.0
PRICE ($ PER MMBTU) 0.000 0.000 0.000 0.000 0.000 0.000 0.000
KEROSENE COST 0 0 0 0 0 0 0
GAS COST 0 73887 653103 1005770 1102501 1065793 3901055
HEDGING (GAIN)/LOSS 0 0 0 0 0 0 0
EXTENDED GAS SERVICE COST 0 0 0 0 0 473821 473821
KEROSENE 0 0 0 0 0 0 0
AUX BOILER FUEL 0 49423 32691 10128 0 0
TOTAL FUEL COST 0 123310 685794 1015899 1102501 1539614 4467118
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PERM FURNISHINGS AND EQUIP Initial Mar-94 Apr-94 May-94 Jun-94 TOTAL
Offices - Plant Manager/Asst. PM Note 1 6,000 6,000
Admin Asst. - Reception Area Note 1 3,000 3,000
Conference Room Note 1 3,000 3,000
Other Furnish Note 1 1,500 1,500
Technical Library 15,000 15,000
Typewriter Note 1 300 300
Facsimile Machine Note 1 1,500 1,500
Photocopier Note 1 2,600 2,600
(4) Computers/cabling/etc. (486 Note 1 9,500 9,500
systems)
Telephone System (if not in EPC Note 1 0
scope)
Audio/Visual Training Equip. 3,500 3,500
(4) Sets of Computer Software 2,200 2,200
Preventative Maintenance Software 9,000 9,000
(2) Printers 1,800 1,800
Drawing & Display Boards 600 600
TOTAL PERM FURN AND EQUIP 32,100 27,400 0 0 0 59,500
TOTAL MATERIALS AND SERVICES COSTS
36,200 107,400 50,075 24,900 8,550 229,125
HANDLING CHARGE 0% 0 0 0 0 0 0
OPERATOR'S FEE 0 0 0 0 0 0
TOTAL MOBILIZATION COST/MONTH
$96,200 $144,100 $85,175 $42,900 $25,550 $393,925
</TABLE>
Notes: 1) If Items do not exist or are not in a reasonably
satisfactory condition as determined by the Parties
2) Items to be shared between Newark and Parlin included in
Parlin Mobilization schedule)
<PAGE>
Exhibit 10.15.1
STEAM PURCHASE AGREEMENT
BETWEEN
O'BRIEN COGENERATION IV,. INC.
AND
NEWARK BOXBOARD CO.
<PAGE>
INDEX
Page
ARTICLE 1 DEFINITIONS 2
ARTICLE 2 REPRESENTATIONS AND WARRANTIES; COVENANTS 7
2.1. Representations and Warranties of Buyer. 7
2.2. Representations and Warranties of Seller;
Covenants of Seller 8
ARTICLE 3 PURCHASE AND SALE 10
3.1 Purchase and Sale of Steam 10
3.2 Maximum Output of Cogeneration Facility 10
3.3 Purchase of Steam from Alternative Sources. 10
ARTICLE 4 RESPECTIVE RIGHTS AND OBLIGATIONS 12
4.1 Rights and Obligations of Seller. 12
4.2 Rights and Obligations of Buyer. 16
ARTICLE 5 TERM OF AGREEMENT 19
5.1 Effective Date and Term. 19
5.2 Buyer's Right to Purchase Cogeneration
Facility and Site.
23
5.3 Completion of Cogeneration Facility. 25
5.4 Conditions Precedent. 25
ARTICLE 6 PAYMENT CALCULATIONS 26
6.1 Steam Price. 26
6.2 Reimbursement of Power. 27
ARTICLE 7 MEASUREMENT AND METERING 27
7.1 Measuring Equipment. 27
7.2 Testing 28
7.3 Corrections 29
7.4 Estimates 29
<PAGE>
ARTICLE 8 BILLING AND PAYMENTS 30
8.1 Billing. 30
8.2 Payment. 31
8.3 Interest. 31
8.4 Disputes 31
ARTICLE 9 LEASE OF SITE AND LAND RIGHTS 31
9.1 Lease of Site 31
9.2 Alternate Site. 32
9.3 Land Rights. 33
ARTICLE 10 WATER SUPPLY; CONDENSATE RETURN 33
10.1 Water Supply. 33
10.2 Condensate Return. 34
ARTICLE 11 QUALIFYING FACILITY 34
11.1 Maintenance of Qualifying Facility Status. 34
11.2 Modifications in Plant's Steam Requirements.34
ARTICLE 12 TAXES 35
12.1 Obligations of Seller 35
12.2 Obligations of Buyer. 36
12.3 Joint Obligations. 36
ARTICLE 13 FORCE MAJEURE 36
ARTICLE 14 INSURANCE 38
ARTICLE 15 LIABILITY AND INDEMNIFICATION 38
15.1 Survival of Representations and Warranties 38
15.2 Indemnification. 39
<PAGE>
ARTICLE 16 EVENTS OF DEFAULT AND REMEDIES 40
16.1 Events of Default by Buyer. 40
16.2 Events of Default by Seller. 42
16.3 Remedies Upon Default by Buyer. 43
16.4 Remedies Upon Default by Seller. 44
16.5 Remedies. 45
16.6 Fair Market Value. 46
ARTICLE 17 SELLER'S FINANCING 46
ARTICLE 18 ARBITRATION 47
ARTICLE 19 ASSIGNABILITY 47
ARTICLE 20 NOTICE 48
ARTICLE 21 WAIVER AND MODIFICATION 49
21.1 Waiver 49
21.2 Modification 49
ARTICLE 22 SEVERABILITY AND RENEGOTIATION 49
22.1 Severability 49
22.2 Renegotiation 49
ARTICLE 23 SEVERAL OBLIGATIONS 50
ARTICLE 24 GOVERNING LAW 50
ARTICLE 25 ENTIRE AGREEMENT; COUNTERPARTS 50
ARTICLE 26 CAPTIONS 51
ARTICLE 27 EMPLOYEE DISPLACEMENT 51
ARTICLE 28 GUARANTEE BY O'BRIEN ENERGY SYSTEMS 51
<PAGE>
STEAM PURCHASE AGREEMENT
This Agreement is entered into as of the 3rd day of October, 1986
between O'BRIEN COGENERATION IV. INC., a Delaware corporation ("Seller")1
and NEWARK BOXBOARD CO., a New Jersey corporation ("Buyer").
WITNESSETH:
WHEREAS, Buyer owns and operates a paperboard plant (the "Plant")
located at 17 Blanchard Street, Newark, New Jersey which Plant utilizes
steam in substantial volumes during the course of its manufacture; and
WHEREAS, Seller plans to construct, operate, manage and maintain a
facility for the cogeneration of steam and electricity (the "Cogeneration
Facility") that will be designed to meet Buyer's Steam requirements, based
upon Buyer's current and anticipated future usage, all as set forth in
Appendix A which is attached hereto and hereby made a part of this
Agreement; and
WHEREAS, Buyer desires to purchase, on the terms and conditions
specified herein, certain steam requirements for the operation of its Plant
from the Cogeneration Facility; and
WHEREAS, the Parties desire to set forth in writing their respective
rights and obligations for the sale of steam by Seller to Buyer after
construction of the Cogeneration Facility;
NOW, THEREFORE, in consideration of the promises and mutual agreements
herein set forth, Seller and Buyer do hereby mutually agree as follows:
<PAGE>
ARTICLE 1
DEFINITIONS
The following terms, when used herein, shall have the following
meanings, unless a different meaning is expressly stated or is apparent
from the context:
"Agreement" means this contract, including all Appendices and
amendments hereto.
"BTU" means British Thermal Unit.
"Buyer" means Newark Boxboard Co.
"Cogeneration Facility" means the boiler, turbine, generator, back up
system described in Section 4.1, (excluding boiler and associated equipment
owned by Buyer) and all appurtenant structures. equipment, piping. wiring,
switch controls, Steam Interconnection Facilities and all additions and
replacements thereto, and real property interests owned or leased and
operated by Seller for the purpose of cogenerating steam and electricity.
"Condensate" means condensate meeting the specifications therefor Set
forth then Appendix D hereto.
"FERC" means the Federal Energy Regulatory Commission.
"Force Majeure" means to the extent that it prevents the production,
delivery, acceptance or use of steam pursuant hereto, flood; earthquake;
storm; lightning; fire; explosion; war; riot; civil disturbances; strikes;
sabotage; restraint by Governmental Authority (other than any delay or
failure by a Governmental Authority to issue any necessary permit or
license described in Section. 5.4 hereof); major equipment breakdown if,
and only if, not due to the negligence of Seller nor the failure of Seller
to perform periodic preventative maintenance and
2
<PAGE>
routine scheduled maintenance on all of its equipment in accordance with
reasonable business practice; inability to obtain necessary labor or
unforeseen shortages in materials or manufacturing facilities; delays in
delivery of materials or work from subcontractors beyond a Party's
reasonable control; and any ether events beyond the reasonable control of a
Party. Changes in the prices of any item or items shall not in and of
themselves give rise to the occurrence of a Force Majeure. Seller agrees
that it shall maintain an adequate stock of spare parts in accordance with
the original equipment manufacturer's recommendations, as updated from time
to time, for each piece of equipment to accomplish foreseeable repairs on
the facilities in the Cogeneration Facility (including replacement
components for turbines, generators, pumps and controls therefor). A Force
Majeure with respect to the main generating facility in the Cogeneration
Facility shall not excuse performance hereunder If Seller would have been
able to perform had it maintained the spare parts required to be kept
hereunder unless failure to maintain such stock of spare parts was itself
excused by reason of Force Majeure.
"Governmental Authority" means any federal, state, municipal, or local
legislature, administrative body, court or other person or body authorized
to make or enforce laws or regulations.
"Initial Delivery Date" means the date on which Seller has accepted
the Cogeneration Facility under the construction contract and Seller
actually delivers or is capable and offers to
3
<PAGE>
deliver steam Buyer. Seller shall notify Buyer in writing of the Initial
Delivery Date at least one month prior thereto. Prior to the Initial
Delivery Date, the back-up system (after installation of any necessary
interconnections, pursuant to Article 4.1(A)) described in Section 4.1
shall be operated for at least three (3) consecutive 24-hour periods and
shall be producing steam at full capacity. The Cogeneration. Facility
shall be operated it full capacity for at least ten (10) consecutive 24-
hour periods prior to the Initial Delivery Date and shall be producing
steam at full capacity during said period. If Buyer elects to take steam
from Seller during this testing time period, it shall pay for the steam on
the same terms and conditions as set out in Article 6 herein. The back-up
system shall be kept sufficiently "hot" and "pressurized" during the 10-day
testing period of the Cogeneration Facility so that it may be put into
service immediately if the main facilities experience problems during any
testing period.
"KWH" means kilowatt hours.
"Laws" means all statutes, regulations, orders, decrees or rulings by
an Governmental Authority having jurisdiction over the matter in question.
"Party" or "Parties" means the signatories to this Agreement and their
permitted successors and assigns.
"Plant" is the paperboard plant in Newark, New Jersey, owned by Buyer
including any improvements, expansions or modifications thereto and, for
purposes of Section 5.1, the land owned by Buyer associated therewith.
"Points of Return" means the points where Seller's pipe system connects to
Buyer's steam or Condensate returning pipe-
4
<PAGE>
lines as described in Appendix B attached hereto.
"PURPA" means the Public Utilities Regulatory Policies Act of 1978, as
amended from time to time.
"Qualifying Facility" or "Facility" means a cogeneration facility
which meets those criteria promulgated by FERC pursuant to PURPA and set
forth at 18 CFR Sections 292 et seq.; as any of the foregoing, as well as,
any applicable state regulations, as may be amended from time to time.
"Regulations" mean the regulations promulgated by FERC pursuant to
PURPA and set forth at 18 CFR Section 292 et seq., as well as applicable
state regulations, as any of the foregoing may be amended from time to
time.
"Seller" means O'Brien Cogeneration IV, Inc., a subsidiary of O'Brien
Energy Systems, Inc., a Delaware corporation, and its successors and
permitted assigns.
"Site" means the location where the Cogeneration Facility will be
constructed. The Site may be sold or leased to Seller pursuant to the
provisions hereof.
"Specified Damages" means out-of-pocket expenses incurred by Buyer
including any amounts which Buyer would be due under Section 6.2, less the
amount that Buyer would have been required to pay to Seller pursuant to
Article 6 had Seller performed its obligations, as a result of the failure
of Seller to deliver (i) steam meeting the specifications therefor set
forth in Appendix A or (ii) a sufficient amount of steam (up to the maximum
amount specified in Appendix A) to Buyer, including expenses incurred by
Buyer in putting its boilers back into operation if it elects to do so,
repairing, operating or main-
5
<PAGE>
taining the same and/or leasing or purchasing replacement or substitute
boilers (including all labor, engineering, and installation costs
associated with any of the foregoing), utility costs, fuel charges, costs
of acquiring chemicals and other items necessary to generate steam, legal
fees and expenses incurred in negotiating and preparing any documents
relating to the lease or purchase of substitute or replacement boilers or
enforcing its rights hereunder and such other out-of-pocket expenses as
Buyer may prove to the reasonable satisfaction of Seller are related to any
of the foregoing or reasonably incurred by Buyer as a result of Seller's
failure to deliver steam in the amount or meeting the specifications
therefor set forth in Appendix A. In the event it becomes necessary to do
so, Buyer agrees to lease boilers on a month-to-month basis rather than
purchase them or lease them for a longer time period unless either (i)
Seller agrees otherwise or (ii) rental boilers are not available
immediately, in which event Buyer may enter into reasonable alternative
interim arrangements (including leases for more than a month) until rental
boilers are available immediately or (iii) Seller fails to pay Specified
Damages within 10 days of demand therefor.
"Steam Interconnection Facilities" means those facilities to be
installed in order for Seller to deliver steam to Steam Points of Delivery
and receive Condensate at the Points of Return, including service stop
valves, meter stops valves, primary and secondary service pressure reducing
valves, meter supports, protection devices, meter(s), pipe system(s),
pipeline(s) and other facilities necessary to connect the Cogeneration
Facility
6
<PAGE>
to Buyer's Plant.
"Steam Points of Delivery" means the physical locations identified in
Appendix B where the Steam Interconnection Facilities are connected to
Buyer's receiving pipelines.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES; COVENANTS
2.1. Representations and Warranties of Buyer; Covenants of Buyer.
Buyer hereby represents and warrants to Seller as follows:
A. Buyer is a corporation duly organized and existing in good
standing under the laws of the State of New Jersey.
B. Buyer possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated
herein;
C. Buyer's execution, delivery, and performance of this Agreement
have been duly authorized; this Agreement has been duly executed and
delivered; and constitute Buyer's legal, valid, and binding obligation,
enforceable against it in accordance with its terms; and Buyer's execution,
delivery and performance of this Agreement will not result in a breach or
violation of, or constitute a default under, any material agreement, lease,
or instrument to which it is a party or by which it or its properties may
be bound or affected, with the exception of the Fidelity financing referred
to Article 17.
D. No suit, action or arbitration, or legal, administrative or other
proceeding is pending, or has been threatened, against Buyer that would
affect the validity or enforceability
7
<PAGE>
of this Agreement or the ability of Buyer to fulfill its commitments
hereunder, or that could result in any material adverse change in the
business or financial condition of Buyer.
Buyer covenants and agrees that it will obtain and maintain all
necessary governmental authorizations, licenses, permits and franchises,
corporate or otherwise, for the operation of its Plant, and will assist in
obtaining all environmental construction and operation of the Cogeneration
Facility.
So long as it may operate the Plant profitably and subject to the
provisions of Section 5.1 hereof, Buyer covenants and agrees that it will
use its best efforts to continue the use and operation of its Plant at the
present location for a period of at least twenty-five (25) years from the
Initial Delivery Date, and such use and operation will include, during any
calendar year, steam requirements no less than the minimum purchase
requirements no less than the minimum purchase requirements, as set forth
in Appendix A, for the Cogeneration Facility. Based on currently available
information, Buyer believes that the useful life of the Plant equals or
exceeds twenty-five (25) years. Should Buyer, despite its best efforts,
conclude at any time during the term of this Agreement that it cannot
continue use and operation of its Plant at a profit, it agrees to give
Seller the options set out in Article 11.
2.2. Representations and Warranties of Seller; Covenants of Seller.
Seller hereby represents and warrants to Buyer as follows:
8
<PAGE>
A. Seller is a corporation duly organized and existing in good
standing under the laws of the State of Delaware and is qualified to do
business in the State of New Jersey.
B. Seller possesses all requisite power and authority to enter into
and perform this Agreement and to carry out the transactions contemplated
herein.
C. Seller's execution, delivery and performance of this Agreement
have been duly authorized; this Agreement has been duly executed and
delivered and constitutes Seller's legal, valid, and binding obligation,
enforceable against it in accordance with its terms; and Seller's
execution, delivery, and performance of this Agreement will not result in a
breach or violation of, or constitute a default under, any agreement,
lease, or instrument to which it is a part or by which it or its properties
may be bound or affected; and
D. No suit, action or arbitration, or legal, administrative or other
proceeding is pending, or has been threatened, against Seller that would
affect the validity or enforceability of this Agreement or the ability of
Seller to fulfill its commitments hereunder, or that could result in any
adverse change in the business or financial condition of Seller.
Seller covenants and agrees that it will obtain in a timely fashion
and maintain all necessary governmental authorization licenses, and permits
for the construction and operation of the Cogeneration Facility.
9
<PAGE>
ARTICLE 3
PURCHASE AND SALE
3.1 Purchase and Sale of Steam.
Subject to the terms and conditions of this Agreement, Seller agrees
to produce, deliver to the Steam Points of Delivery as and when required by
Buyer, and sell all of the steam which Buyer requires for use at the Plant,
subject to the maximum amount set forth in Appendix A, which steam shall
meet the specifications described in Appendix A hereto. Except as provided
in Section 3.3 hereof, Buyer agrees to purchase from Seller all of the
steam it requires at the Plant and use on the output of the Cogeneration
Facility to meet Buyer's steam requirement at Buyer's Plant. Seller's
obligation to produce and deliver sufficient steam to satisfy all of
Buyer's steam requirements at its Plant is limited to the amount specified
in Appendix ; provided, however, that if Seller delivers steam to Buyer in
an amount in excess of the amount so specified, the terms of this Agreement
shall govern the purchase by Buyer of any such excess amount.
3.2 Maximum Output of Cogeneration Facility.
The maximum required output of steam from the Cogeneration Facility is
set forth in Appendix A attached hereto. Seller is not obligated to
deliver amounts in excess of that amount.
3.3 Purchase of Steam from Alternative Sources.
Unless an event of Force Majeure excuses it from doing so, Buyer will
purchase the amount of steam which it requires at its Plant at the price
set forth in Article 6. If, for any reason, the Seller cannot produce all
of the steam required by
10
<PAGE>
Buyer (up to the maximum amount set forth in Appendix A), Buyer may,
without incurring any liability hereunder, use steam or alternate energy
from other sources to make up that portion of its requirements which Seller
fails to supply. If Buyer incurs any out-of-pocket expenses in connection
with obtaining steam or an alternative energy from another source or
sources (other than amounts of excess of the amount set forth in Appendix
A), as a result of Seller's inability to comply with this Agreement due to
the occurrence of an event of Force Majeure, then, Seller shall either, at
Seller's option, (i) pay Buyer's Specified Damages or (ii) give Buyer
reasonable advance notice of the date on which it will be able to resume
providing steam and not require Buyer to resume its purchase of steam
hereunder until a reasonable period of time (not to exceed 45 business
days) after receipt by Buyer of notice of anticipated resumption of service
(the reasonableness of the notice period being determined based on the
expenses incurred by Buyer in arranging for alternative source of supply of
steam or other (fuel). Buyer shall be entitled to rely on any notice
received from Seller.
The Parties further acknowledge that it may be necessary or prudent,
in light of the limited number of alternative sources of supply of steam
available, for Buyer to secure an alternative source of steam which has a
greater capacity than that which Buyer requires. Seller agrees to make
available to Buyer its employees who operate boilers to the extent it can
do so without impairing its ability to operate the Facility.
Nothing in this Agreement is intended or shall be
11
<PAGE>
construed as requiring Buyer (or any subsequent owner of the Plant) to use
steam rather than any other energy source (including, but not limited to,
electricity) in the operation of the Plant, other than as set forth in the
second to the last sentence Section 3.1. Nor is this Agreement intended to
impose on Buyer any obligation to purchase any minimum amount of steam at
any time other than that amount specified in Appendix A.
ARTICLE 4
RESPECTIVE RIGHTS AND OBLIGATIONS
4.1 Rights and Obligations of Seller.
Seller covenants and agrees that during the term of this Agreement it
shall:
A. Design, construct, start up, test and operate the Cogeneration
Facility at its expense in accordance with safe and sound engineering
practices and procedures in order that the Cogeneration Facility is able at
all times to deliver steam meeting the specifications set out in Appendix A
and in the quantities set forth in Appendix A. The Cogeneration Facility
shall utilize Buyer's existing boilers as a back-up system. Seller shall
have the right to use such boilers at not charge on the condition that:
(1) it pays for any fuel consumed as well as any associated operation and
maintenance costs; (2) it installs and pays for any necessary
interconnections with Seller's Cogeneration Facility and (3) it keeps such
boilers "hot", at Seller's expense, by circulating steam through them once
the Cogeneration Facility is operational. Should Seller determine at any
time during this Agreement that replacement of Buyer's boilers is
necessary, it shall bear the cost of such replacement and the new boiler(s)
shall become the property of Seller, and shall be added to the Cogeneration
Facility.
B. If Seller uses the original site (as opposed to Alternate Site),
design construct and maintain a "park and lock" parking garage on the Site
with sufficient spaces to replace those spaces eliminated by Seller on the
Site as a result of the construction of the Cogeneration Facility. Seller
shall
12
<PAGE>
guarantee continued access to this parking garage for Buyer's employees and
the right, at no cost, to use an equivalent number of spaces to those
eliminated by Seller. At the conclusion of this Agreement or at any time
when Buyer has the right to purchase the Cogeneration Facility Buyer shall
have the right to purchase the Cogeneration Facility. The price for the
garage shall be its fair market value, as determined by the American
Appraisal Company, the appraisal to be based on the assumption that the
garage sits on freehold property (rather than leased property), less the
value of the freehold. In other words, the value of the real property on
which the garage rests will be ignored in the appraisal.
C. Obtain those permits set forth in Appendix C hereto and any other
additional permits which may be required under then applicable and
regulations to operate the Facility during the term of this Agreement.
D. Provide to Buyer for its review all design drawings of the
Cogeneration Facility, the Parking Garage and Steam Interconnection
Facilities. Seller shall also give Buyer an opportunity to review its
construction plan prior to the commencement of construction in order that
Buyer can assure itself that construction of the Cogeneration Facility will
not interfere with Buyer's on-going operations. Buyer shall have the right
to approve such construction plan or any modifications thereto, such
approval not to b unreasonably withheld. Buyer shall use its best efforts
to review and approve such plans within 15 days
13
<PAGE>
of receipt from Seller. To insure coordination between Buyer and Seller
during construction, Buyer shall designate a single individual with whom
Seller may consult during construction of the Cogeneration Facility.
Seller shall also designate a single individual with whom Buyer may consult
during construction or operation of the Cogeneration Facility. Buyer's
review of the construction plan and design drawings shall not relieve
Seller of any of its obligations pursuant to Section 4.1A hereof;
E. Maintain the Cogeneration Facility in good operating condition,
in compliance with all applicable governmental requirements and in
accordance with reasonable business practice, and use its best efforts (i)
to ensure that interruptions of deliveries of steam to the Plant are made
at a time that is mutually agreeable to the Parties, (ii) to ensure that
any interruptions will be planned to coincide with the scheduled
maintenance outages of the Plant, notice of which shall be given to the
Chief Plan Engineer designated by Buyer promptly and shall comply with
Article 20 hereof, and (iii) to minimize the frequency and duration of any
periods of interruption of delivery of steam meeting the specifications set
forth in Appendix A hereof to Buyer's requirements therefor, up to the
maximum required output of the Cogeneration Facility set forth in Appendix
A.
F. Have the right to generate and sale steam or electricity or both
to any person other than Buyer on any terms and conditions, without
interference by Buyer, provided that Seller
14
<PAGE>
may do so without impairing its ability to fulfill its obligations under
this Agreement.
G. Furnish, operate and maintain, at its own expense, all Steam
Interconnection Facilities necessary for the delivery of steam from its
Cogeneration Facility to and including the Steam Point of Delivery, and the
receipt of Condensate into its Cogeneration Facility from and including the
Point of Return.
H. Operate and maintain all necessary electrical transmissions
facilities to deliver electricity from the Cogeneration Facility to its
electricity customers, in a safe manner without creating an unreasonable
risk of injury or damage to Buyer's personnel or property;
I. Operate the Cogeneration Facility in substantial compliance with
all applicable federal, state and local environmental standards, and all
other applicable laws, rules and regulations and make all necessary filings
with and send all required notices relating to the Facility to the
appropriate Governmental Authorities;
J. Designate a Cogeneration Facility Engineer to maintain
communications with Buyer's Chief Plant Engineer for coordination between
the Plant and the Cogeneration Facility during the term of this Agreement,
which Cogeneration Facility Engineer shall be available to meet with
buyer's Chief Plant Engineer; and
K. Give to Buyer prompt notice, either written or oral, of
Condensate which does not meet the standards of Condensate quality set
forth in Appendix D specifying how such
15
<PAGE>
standards are not met.
4.2 Rights and Obligations of Buyer.
Buyer covenants and agrees that during the term of this Agreement it
shall:
A. Provide Seller with (1) all plans and drawings within 120 days
from the date of execution of this Agreement) for relevant steam headers,
electrical switchgear, water lines, condensate lines and steam lines, etc.
required to permit Seller to interconnect the Cogeneration Facility to the
Plant; (ii) Condensate as returned to Buyer's existing steam generation
system; and (iii) a single location access for interconnection to the
existing condensate return system;
B. Use its best efforts to assist Seller in obtaining any other
local approvals as may be necessary. Buyer covenants and agrees to assist
Seller in obtaining all environmental permits licenses or authorizations
associated with the operation of the Cogeneration Facility including9 if
required by the New Jersey Department of Environmental Protection, the
right to use any environmental permit offsets available to Buyer solely to
the extent that they are transferable. Seller covenants and agrees to
return to Buyer any and all environmental permits, licenses or
authorization that have been transferred to Seller from Buyer at the end of
the term of this Agreement. In the event that Seller to unable to provide
Buyer with steam pursuant to this Agreement as a result of a Force Majeure,
Buyer shall have the right to receive back from Seller any transferred
permits and offsets and to use the same during the period of the Force
Majeure. Seller shall prepare any and all necessary
16
<PAGE>
applications for such permits, licenses and authorizations. Buyer shall
review the same (i) solely to the extent that applicable law shall require
that the application be made in the name of Buyer and (i) to the extent
that the information required to be disclosed therein relates directly to
Buyer and is available from the records of Buyer;
C. Have the right to operate its Plant without interference from
Seller;
D. Operate and maintain its Plant at all times in such condition
that Buyer's use of steam will be reasonably safe to persons and property,
and shall use its best efforts (i) to ensure that any interruptions of
purchases of steam from the Cogeneration Facility not caused by decreased
demand for Buyer's products are made it a time that is mutually agreeable
to the Parties, (ii) to ensure that any interruptions will be planned to
coincide with the scheduled maintenance outages of the Cogeneration
Facility, notice of which shall be given promptly to the Cogeneration
Facility Engineer and (iii) to minimize the frequency and duration of any
periods of interruption other than interruptions caused by decreased demand
for Buyer's products;
E. Maintain its Plant in good repair;
F. (i) Deliver Condensate having the qualities specified in Appendix
D from its Plant to Seller which Seller will take; (ii) allow Seller to
monitor the quality of the Condensate by meters to be acquired, installed,
and maintained by Seller, at its own expense, at a point outside the Plant
as
17
<PAGE>
described in Appendix B, and (iii) allow Seller to discharge within the
Plant at one location specified by Buyer such Condensate which does not
meet the standards of Condensate quality set forth in Appendix D;
G. Make reasonable and timely efforts to inform Seller of Condensate
impurities and other conditions known to Buyer relating to the steam supply
that Buyer knows may be deleterious to the maintenance and operation of the
Cogeneration Facility;
H. Furnish, own, operate and maintain, at its expense, all steam
facilities necessary for the receipt of steam from the Steam Point of
Delivery to its Plant and the delivery of Condensate from its Plant to the
Point(s) of Return;
I. Take all reasonable and necessary steps to carry out the intent
of this Agreement, including, but not limited to, (i) using its best
efforts in assisting Seller to obtain any and all approvals required in
connection with installation and operation and maintenance of the
Cogeneration Facility, (ii) furnishing to Seller necessary easements for
the term of this Agreement, and (iii) solely to the extent specified in
Section 4.2 using its best efforts in assisting Seller to obtain other
related approvals necessary to operate the Cogeneration Facility; provided,
however, the foregoing shall not require Buyer to incur any obligation to a
third party;
J. Not operate, maintain, move, remove, alter, change, or interfere
with the operation or maintenance of the Cogeneration Facility or any part
thereof without the prior written approval of Seller. Notwithstanding the
foregoing, Buyer may, but is not required to, take reasonable steps to
protect the
18
<PAGE>
Cogeneration Facility if, due to an emergency, it is not possible or
reasonable to notify Seller before taking such actions. Buyer shall have
no obligation to inspect any part of the Cogeneration Facility, not any
responsibility for the installation, repair, maintenance, replacement,
relocation, removal, or operation of any part of the Cogeneration Facility;
K. Designate a Chief Plant Engineer to maintain communication with
Seller's Cogeneration Facility Engineer for coordination between the Plant
and the Cogeneration Facility during the term of this Agreement;
L. Have the right to purchase or use steam from any source, other
than the Cogeneration Facility, only at those times when the Cogeneration
Facility is unable to produce and deliver, in a timely fashion, in
accordance with Section 3.1 hereof steam meeting the standards specified in
Appendix A hereof; and
M. Make timely payments on invoices rendered by Seller for steam
delivered.
ARTICLE 5
TERM OF AGREEMENT
5.1 Effective Date and Term.
A. Except as otherwise provided in Article 15 or 16, the term of
this Agreement shall begin upon the execution of this Agreement, and shall
terminate on December 31, 1997 unless the conditions precedent specified in
Section 5.4 are then satisfied or compliance therewith waived. Steam
supply and invoicing for steam delivered in accordance with this Agreement
shall begin on the Initial Delivery Date. If the conditions precedent set
forth
19
<PAGE>
in Section 5.4 hereof are satisfied in a timely manner or compliance
therewith waived, then, subject to the provisions of Section 5.3, (i) this
Agreement shall continue in effect for an initial term ending twenty-five
(25) years after the initial Delivery Date (the "Initial Termination Date")
and (ii) unless either Party gives to the other notice of termination at
least eighteen (18) months prior to the Initial Termination Date, this
Agreement will continue for successive additional terms of five (5) years
each (the "Extended Termination Date"); subject, however, to expiration at
the end of the then current term.
B. Notwithstanding the foregoing or any other provision in this
Agreement, Buyer may sell the Plant to an unrelated third party, and be
released from any and all liabilities and obligations hereunder (with the
exception of continuing the Site lease) arising on or after the sale date
if it complies with the following conditions:
(1) In negotiating any sale of the Plant to a purchaser who intends
to use the Plant as a manufacturing facility, Buyer agrees to include
Buyer's rights and liabilities hereunder as part of the Buyer's assets
being sold with the Plant and to require any purchaser of its Plant to
assume all of Buyer's obligations under this Agreement, except as otherwise
provided in the following sentence. The purchaser shall be obligated to
pay the purchase price for steam determined in accordance with Article 6
hereof (the "Contract Price") unless it presents to Seller a bona-fide,
written offer ("Offer") that it has received that is
20
<PAGE>
then valid to supply either steam or an alternative fuel source to the
purchaser in an amount not less than the amount specified in Appendix A
hereof (or, in the case of an alternative fuel source, the equivalent
amount of power). In the event that the purchaser submits written proof of
an Offer to Seller, then Seller covenants and agrees to enter into an
agreement with such purchaser amending the terms of this Agreement to meet
the terms of the Offer. Failure of Seller to agree to such an amendment
shall relieve Buyer of any and all obligations to include Buyer's rights
and liabilities hereunder as part of Buyer's rights assets being sold with
the Plant. However, in the event that Seller and the proposed purchaser of
the Plant cannot reach agreement, Buyer shall give Seller the first right
to purchase the Plant on the same terms and conditions as contained in the
proposal submitted by Buyer's prospective purchaser. If such proposal
calls for Buyer to take back any financing, Seller shall demonstrate that
it has similar financial capabilities to those of Buyer's prospective
purchaser or provide Buyer with additional security for the loan provided
by Buyer. Furthermore, if the purchase offer includes other assets owned
by Buyer at the same location, Seller shall also purchase these other
assets on the same terms, if it chooses to exercise this option. Finally,
if Seller does exercise this option, Buyer may also require it to purchase
the Site at fair market value, if such site is not already owned by Seller.
Seller shall have 10 days in which to meet such terms. If it fails to do
so, Buyer may proceed with the sale of the Plant pursuant to the terms of
this paragraph.
21
<PAGE>
(2) In the event that Buyer proposes to sell the Plant to a purchaser
who intends to either tear down the Plant or use it other than as a
manufacturing facility, then Buyer shall give Seller ninety (90) days'
prior written notice of the terms and conditions of the proposed sale. If
within ninety (90) days of receipt of the notice of intended sale, Seller
agrees in writing to purchase the plant on terms and conditions identical
to those specified in Buyer's notice to it, then Seller shall purchase the
Plant on said terms and this Agreement shall terminate on the date of sale.
If Seller does purchase the Plant, Buyer shall also have the right to
require Seller to purchase the Site at fair market value, if such Site is
not already owned by Seller. Furthermore, if the purchase offer includes
other assets owned by Buyer at the same location, Sellers shall also
purchase these other assets on the same terms, if it chooses to exercise
this option.
If Seller elects not to purchase the Plant after having received a
notice from Buyer of Buyer's intention to sell the Plant, then Seller shall
have the right, exercisable only in writing within ninety (90) days of
receipt of the notice of intended sale described in the preceding
paragraph, to purchase the Site for its then fair market value, as
determined by an appraisal of the American Appraisal Company (or similar
appraisal organization), if Seller does not then own the Site. The
arbitration provisions set forth in Article 18 shall be utilized to settle
any dispute as regards "fair market value".
If Seller does not elect on a timely basis to either purchase the
Plant or the site in accordance with this Section, then Buyer may sell the
Plant and the site (if then owned by Buyer) to the offerer whose offer was
described in the notice of intention to sell, and this Agreement shall
terminate on the date of sale unless the purchaser of the Plant assumes
Buyer's obliga-
22
<PAGE>
tions hereunder in accordance with Article 19.
(3) Should Buyer decide at any point during the term of this
Agreement to shut down its Plant, it will, in addition to the other options
given Seller under Article 11, give Seller the right to purchase, at a
purchase price mutually acceptable to both Parties, either the Plant or the
steam consuming equipment prior to such shut-down. If within ninety (90)
days of receipt of the notice of intended shut-down, Seller agrees in
writing either to purchase the Plant or the steam consuming equipment, then
Seller shall purchase said Plant for its then fair market value. If Seller
does purchase the Plant, Buyer shall also have the right to require Seller
to purchase the site at fair market value, if such Site is not already
owned by Seller.
If Seller elects not to purchase the Plant or Buyer's steam consuming
equipment, it shall have the right, exercisable only in writing within
ninety (90) days of receipt of notice of intended shutdown from Buyer, to
purchase the Site for its then fair market value, as determined by an
appraisal of the American appraisal Company (or similar appraisal
organization), if Seller does not then own the site. The arbitration
provisions set forth in Article 18 shall be utilized to settle any dispute
as regards "fair market value".
If Seller does not elect on a timely basis to either purchase the
Plant, the steam consuming equipment or the Site in accordance with the
provisions of this section, then (i) Seller shall have the right to remove
all of its equipment prior to the date of Plant shutdown, (ii) Buyer shall
have the right to require Seller to remove the Facility if Seller does not
own the Site and (iii) this Agreement shall terminate on the date of such
shutdown.
C. At the end of the term of this Agreement, any easements, permits
of other rights granted to Seller by Buyer shall terminate.
23
<PAGE>
5.2 Buyer's Right to Purchase Cogeneration Facility and Site.
Buyer shall have an option to purchase the Cogeneration Facility and
the Site (if then owned by Seller) from Seller at each of the following
times: (i) upon the expiration of this agreement or any subsequent
renewal; and (ii) to the extent specified in Section 16.4, upon the
occurrence of an Event of Default by Seller. Buyer will provide Seller six
(6) months' prior notice of its intention to exercise such option other
than if it elects to purchase the Facility, and the Site and upon the
occurrence of an Event of Default by Seller. To the extent permitted by
the pertinent contracts, Buyer shall assume all of Seller's obligations,
rights and duties under all contracts for the sale of electricity and for
the purchase of fuel for the Cogeneration Facility. Seller shall give
Buyer all relevant information on such contracts as well as information on
the operation of the Cogeneration Facility. If requested to do so by
Buyer, Seller covenants and agrees to use its best efforts to obtain any
consents which may be necessary in order for Buyer to assume any of
Seller's contracts relating to the Cogeneration Facility. Buyer will also
indemnify and save Seller harmless from all liability, loss, claims,
actions or suits, including costs and attorneys' fees, arising out of those
contracts solely to the extent that the liability arose subsequent to the
purchase by Buyer of the Cogeneration Facility.
Seller will indemnify and save buyer harmless form any and all
liability, loss, claims, actions, suits or liabilities, including costs and
attorneys' fees, arising out of either contracts acquired by Buyer or the
operation of the Cogeneration Facility, in either case prior to the
purchase by Buyer of the Cogeneration Facility.
24
<PAGE>
The purchase price for the Cogeneration Facility and the Site (if
applicable) will be their fair market value on the date of purchase as
determined by appraisal pursuant to Section 16.6 hereof. All documentation
for the purchase, assumption and indemnification will be subject to the
reasonable review by and approval of Seller and Buyer. In determining the
value of the Facility, the appraisers shall ignore the fact that the Site
is lease, and shall value the Cogeneration Facility as if it sat on
freehold property (i.e., with no time limit on its operation other than its
remaining useful life). In other words, the value of the real estate shall
be ignored.
5.3 Completion of Cogeneration Facility.
Subject to Force Majeure, within twenty-four (24) months from the
issuance of all required permits other than a certificate of occupancy for
the Cogeneration Facility, Seller will have (i) completed evaluation of
Buyer's thermal requirements for the Plant; (ii) procured equipment,
designed and constructed the Cogeneration Facility and installed all
equipment necessary for the Cogeneration Facility to operate; and (iii)
given Buyer notice of the Initial Delivery Date, which date shall also be
within thirty (30) months from the issuance of all required permits.
5.4 Conditions Precedent.
The Parties' respective obligations under this Agreement are
conditioned upon, and subject to the satisfaction of each of the following
conditions precedent on or prior to December 31, 1987: (i) Seller's
executing a contract, satisfactory to Seller,
25
<PAGE>
for the sale by 1 of electricity from the Cogeneration Facility; (ii)
Seller's obtaining a valid air quality permit from the New Jersey
Department of Environmental Protection and all other necessary permits,
authorizations and certifications (other than a certificate of occupancy);
(iii) the Facility's obtaining the status of Qualifying Facility from FERC;
(iv) Seller's obtaining financing that Seller, in its sole discretion,
deems acceptable; (v) Seller's entering into a turnkey contract, to design,
construct, start-up and test the Cogeneration Facility; and (vi) Seller
obtaining a long-term fuel supply.
Neither Party shall be liable to the other for any termination of this
Agreement pursuant to this Section 5.4 unless the Party failed to discharge
any obligation imposed on it pursuant to this Agreement with respect to its
taking action intended to result in satisfaction of the foregoing
conditions precedent.
ARTICLE 6
PAYMENT CALCULATIONS
6.1 Steam Price.
Calculations for steam delivered to Buyer will be made on a daily
basis and totaled at the end of each month. The price for the steam
delivered will be calculated as follows:
Buyer's avoided
Steam Price = fuel cost x (MMBTUs delivered - MMBTUs returned) x .5
Boiler efficiency
where:
Buyer's avoided fuel cost = The lesser of the price per million BTUs
which Seller pays for natural gas under
its Agreement with PSE&G or the price
per million
26
<PAGE>
BTUs which Buyer would have paid for #2
oil based on the average of 2 bids
received by Buyer for delivery of such
oil. Buyer shall not be required to
solicit such bids unless (i) it intends
to rely on the price of oil or (ii)
Seller requests it do so.
Boiler efficiency = .86, constant over the term of this Agreement
MMBTUs delivered = integrated steam flow x enthalpy of steam (as
Seller's meter)
MMBTUs returned = integrated uncontaminated Condensate flow x
enthalpy (at Seller's meter)
The pressure, temperature and flow of the steam as well as temperature and
flow of the Condensate shall be metered by Seller. The pressure and
temperature of the steam shall comply with the specifications therefor set
forth in Appendix A.
Should Buyer and Seller mutually agree on the Alternate Site pursuant
to the provisions of Section 9.2, Seller shall calculate the cost savings
resulting from not having to construct the parking garage described in
Section 4.1(B), which calculation shall be subject to the approval of
Buyer, which approval shall not be unreasonably withheld. These savings
shall be defined as the difference between (1) the cost of the parking
garage and (2) the cost of acquiring the Alternate Site from Buyer plus the
present value of any additional costs incurred by Seller as a result of its
use of the Alternate Site including, but not limited to, the cost of
running additional steam piping to Buyer's Plant, the cost of buying such
pipe where necessary, and any additional steam losses resulting from longer
pipe runs.
Any savings realized by Seller shall be allocated 75% to Buyer and 25%
to Seller. Buyer shall receive its portion of any savings pursuant to this
section through an appropriate additional discount in the price of steam
delivered to Buyer by Seller, such savings to be recovered by Buyer over a
period of 7 years. This additional discount shall be fixed by mutual
agreement between the parties once the savings have been determined by
Seller. Any dispute involving the calculations under this section shall be
settled by arbitration pursuant to Article 18.
6.2 Reimbursement of Power.
Seller will reimburse Buyer for 190 Kilowatts at Buyer's Public
Service Electric and Gas ("PSE&G") Rate, as the same may be in effect from
time to time. This reimbursement will be credited on a daily basis, only
while steam is being delivered to Buyer, and totaled at the end of each
month.
ARTICLE 7
MEASUREMENT AND METERING
7.1 Measuring Equipment.
Seller will install, maintain, and operate, at its expense,
instrumentation reasonably acceptable to Buyer for the measurement of steam
flow, Condensate return and any other data necessary for the sale of steam
to Buyer and the computation of an appropriate invoice. Buyer will have
access to this instrumentation at reasonable hours upon request, but all
instrument reading, calibrating and adjusting will be done only by Seller.
27
<PAGE>
The determination of the total quantity of steam delivered to Buyer shall
be made by Seller's instrumentation; however, Buyer may install its won
instruments for maintaining information on the quantity of steam being
delivered to it.
At its own expense, Buyer shall have the right from time to time to
have qualified employees of Buyer or qualified agents of Buyer (in the
presence of Seller) inspect Seller's instrumentation and shall indemnify
Seller from any loss of or damage to any instrumentation caused by Buyer's
employees or agents inspecting the instrumentation.
The charts and records from Seller's measuring equipment shall remain
the property of Seller and shall be kept by Seller on file for a period of
not less than four (4) years. At any time within such period Seller shall,
upon request of Buyer, permit Buyer to inspect and verify records and
charts from Seller's measuring equipment, together with calculations
therefrom.
7.2 Testing
Seller will maintain the accuracy of its instruments for measuring the
quantity of steam to within plus or minus one percent (1%). Instruments
will be tested periodically as necessary, but not less than every calendar
quarter. If Buyer requests that any meter be tested between Seller's
normal testing dates because Buyer believes that the meter may be
inaccurate, Seller will arrange for the meter to be promptly tested. All
instrument testing will be arranged by Seller and conducted by an
independent testing service satisfactory to Seller and Buyer.
28
<PAGE>
Seller shall arrange for the prompt repair, at its own expense, of any
equipment which is shown by any test to be necessary or desirable. Seller
will pay the expense of normal periodic tests; the expense of any test
requested by Buyer will be paid by Buyer unless the test shows that the
instruments are inaccurate by more than plus or minus one percent (1%), in
which case Seller shall pay the expense of testing. Seller will give Buyer
sufficient notice of any instrument test to enable Buyer or its
representative to witness the test.
7.3 Corrections
If any test reveals that Seller's instruments for measuring the
quantity of steam are inaccurate by more than one percent (1%), and
underpayment or overpayment occurs as a result thereof, the aggrieved Party
is entitled to a retroactive billing adjustment as provided in Section 7.4
hereof for the actual period during which inaccurate measurements were
made, if the period can be definitely determined or, if the period cannot
be definitely determined, one-half of the period from the date of the last
previous test of the meter but not to exceed sixty (60) days. Amounts
reflecting underpayments and overpayments shall be invoiced separately and
are payable immediately upon receipt of the payment invoice.
7.4 Estimates
Buyer may, at its option and expense, install and operate check
measuring equipment to check Seller's measuring equipment, but measurement
of Seller's steam and Buyer's Condensate for the purpose of this Agreement
shall be by Seller's measuring equipment only, except in cases hereinafter
specifi-
29
<PAGE>
cally provided to the contrary. Any check measuring equipment installed
shall be of a standard type and shall be subject at all reasonable times to
inspection or examination by Seller, but the reading, calibration and
adjustment thereof and changing of charts shall be done only by the
employees or agents of Buyer.
If, for any reason, any portion of the measuring equipment is out of
service or out for repair so that the quantity of Seller's steam or Buyer's
Condensate delivered cannot be ascertained or computed from the readings
thereof, Seller's steam or Buyer's Condensate delivered during the period
such measuring equipment was out of service or out for repair shall be
estimated and agreed upon by the parties hereto, using the first of the
following methods which is feasible:
(a) By using the registration of any check measuring
equipment if installed and accurately registering;
or
(b) By estimating the quantity of delivery by
averaging deliveries during the preceding periods
under similar conditions, considering the power
output of the Cogeneration Facility, when the
measuring equipment was registering accurately.
ARTICLE 8
BILLING AND PAYMENTS
8.1 Billing.
On the tenth (10) day of each calendar month, Seller will deliver to
Buyer an invoice for the sale of steam during the
30
<PAGE>
preceding calendar month. Each invoice will include all necessary
information for calculation of the payments pursuant to Article 6 of this
Agreement.
8.2 Payment.
All payments shown to be due on an invoice shall be due and payable
not later than fifteen (15) days after receipt.
8.3 Interest.
If Buyer fails to pay all or any portion of the disputed or undisputed
amounts invoiced within the time stated in Section 8.2, Buyer shall owe
interest on any unpaid portion of the invoice (other than an amount
determined not to be owing), which interest shall accrue at the prime rate
as set by Manufacturers Hanover Trust Company of New York from time to
time, plus two percent (2%), but in no event greater than the maximum
interest rate allowed by law, from the due date until paid. If interest is
collected on any portion of an invoice later determined to be not properly
owed, than interest shall be repaid to Seller promptly on demand therefor,
together with interest on such amount at the rate specified above.
8.4 Disputes
In the event that Buyer disputes an invoice, the undisputed portion of
the invoice shall be due and payable within the time stated in Section 8.2
and payment of the disputed portion shall be resolved in accordance with
the provisions of Article 18 regarding Arbitration of Disputes.
ARTICLE 9
LEASE OF SITE AND LAND RIGHTS
9.1 Lease of Site.
31
<PAGE>
Buyer agrees to lease to Seller, for a term expiring 120 days after
termination of this Agreement, the Site, as described in Appendix E
attached hereto, upon the timely satisfaction of all the conditions
precedent specified in Section 5.4, at an annual lease rate of $1.00 per
year. This lease shall be added to this Agreement as Appendix F once the
conditions precedent in Section 5.4 have been satisfied. The Site shall
consist of approximately 1.5 acres, as more fully described in Appendix E
attached hereto. In addition, Buyer shall provide all necessary easements,
with respect to property owned by Buyer for as long as Seller operates the
Facility, to permit the installation of the Steam Interconnection
Facilities; and to permit Seller to install and maintain such electrical
and steam transmission facilities as shall be necessary to deliver steam or
electricity or both from the Cogeneration Facility to any person other than
the Buyer so long as the same do not interfere with the operation of the
Plant.
9.2 Alternate Site.
Buyer has requested that Seller evaluate an Alternative Site for the
Cogeneration Facility. This location across Lockwood Street from the
Plant, will be evaluated by Seller in good faith to determine if it is
suitable for the Cogeneration Facility. Buyer recognized that Seller has a
limited amount of time in which to construct the Facility, and therefore,
cannot accept significant delays in obtaining approval for use of this
Alternate Site. Buyer agrees that either the original Site described in
Appendix E or the Alternate Site (if elected by Buyer) will be available to
Seller in any case and that the final selection of
32
<PAGE>
the Site will be made no later than February 1, 1987. Any regulatory,
zoning or other approvals needed to allow Seller to use the Alternate Site
will be Buyer's responsibility and must be in hand prior to February 1,
1987. If the Alternate Site is feasible in Seller's judgment, Seller
agrees to purchase such Alternate Site (approximately 1.5 acres) from Buyer
at the same price paid by Buyer.
9.3 Land Rights.
During the term of this Agreement, each Party grants to the other
Party a license for reasonable ingress and egress over the property owned
or controlled by such Party to the extent the other Party reasonably deems
such ingress or egress necessary in order to examine, test, calibrate or
maintain the Steam Interconnection Facilities and to read meters except
that (i) prior notice of such ingress or egress shall be given except in
the case of an emergency, and (ii) this license shall not be deemed to
establish in a Party any easement or servitude over the other Party's land,
and shall expire with the expiration of this Agreement.
ARTICLE 10
WATER SUPPLY; CONDENSATE RETURN
10.1 Water Supply.
Buyer shall provide Seller necessary easements expiring upon the
expiration of this Agreement to permit Seller to construct and operate (i)
water supply facilities capable of meeting Seller's requirements for raw
water (city water), and (ii) conduits, pipes and drain fixtures for the
disposal of any waste water. Buyer agrees to assist Seller, at Seller's
cost and
33
<PAGE>
expense, in obtaining any other necessary permits relating to water.
Seller will be responsible for the design, construction, operation and
maintenance of these water supply and waste water disposal facilities and
agrees to indemnify and save Buyer harmless from any loss, claims, actions
or suits, including costs and attorneys' fees, arising out of the
construction, operation or maintenance of said facilities.
10.2 Condensate Return.
Buyer will return to the Cogeneration Facility at the point designated
by Seller substantially all of the Plant's steam Condensate. Condensate
shall be returned by the Buyer to the Facility, as per Appendix D. Buyer
will be credited for Condensate return in accordance with Section 6.1
hereof. Buyer will construct at its own expense all pumps and pipes
required to deliver Condensate to Seller from the Plant.
ARTICLE 11
QUALIFYING FACILITY
11.1 Maintenance of Qualifying Facility Status.
Subject to Force Majeure, Buyer agrees in each calendar year to take
no less than that quantity of thermal energy from the Facility as is
specified on Appendix A hereto. Should Buyer not take such quantity of
thermal energy from the Facility so as to enable Seller to maintain its
minimum Qualifying Facility status under PURPA, and if Seller is unable to
obtain relief from regulatory authorities as regards its minimum Qualifying
status, seller may, at its option, take the following steps: (i) acquire
the Site at its then fair market value (if not previously
34
<PAGE>
purchased) and (ii) obtain from Buyer any addition, easements and rights of
ingress and egress over Buyer's property to conduct an affiliated thermal
consuming business on property acquired by Seller. Such easements and
rights of ingress and egress, however, shall be limited to those which will
not unreasonably interfere with Buyer's ongoing operations. In each case,
fair market value is to be determined without regard to the existence of
the Facility on the Site. The price shall be calculated for raw land
without improvements. Seller agrees that the foregoing options shall be
its sole remedy in the event that Buyer's requirements for steam fall below
the minimum annual take to ensure continued Qualifying Facility status.
11.2 Modifications in Plant's Steam Requirements.
Buyer will also notify Seller ninety (90) days in advance of the
installation or elimination of any major energy consuming or saving
equipment in the Plant and of any material changes in its steam
requirements as soon as possible (defined as more than a twenty percent
(20%) change in consumption of steam from that previous week which change
continues for more than fourteen (14) consecutive days).
ARTICLE 12
TAXES
12.1 Obligations of Seller.
Seller shall be solely responsible for any sales, use, property,
income or other taxes relating to the Cogeneration Facility and its
components or appurtenances or, except as otherwise provided by Section
12.3, the sale of energy produced
35
<PAGE>
therein.
12.2 Obligations of Buyer.
Buyer shall be solely responsible for any sales, use, property, income
or other taxes relating to the Plant, its components or appurtenances or
the sale of the products produced therein.
12.3 Joint Obligations.
Buyer and Seller shall each pay one-half of any taxes imposed on the
purchase or sale of steam delivered to the Plant from the Cogeneration
Facility and the return of Condensate from the Plant to the Cogeneration
Facility.
ARTICLE 13
FORCE MAJEURE
If either Party is rendered wholly or partly unable to perform its
obligations under this Agreement because of Force Majeure, then, except as
otherwise expressly provided herein, that Party shall be excused from
whatever performance is affected by the Force Majeure solely to the extent
so affected provided that:
A. The nonperforming Party will give notice of such Force Majeure
event as soon as possible after the occurrence, which notice may, if given
by Seller, be given orally to the manager of the Plant or other person
designated by Buyer in writing to receive such notice, if confirmed in
writing within two business days.
B. The suspension of performance shall be of no greater scope and of
no longer duration than is reasonably required by the Force Majeure. In
amplification and not in
36
<PAGE>
limitation of the foregoing, a Force Majeure with respect to Seller's
primary boilers and related equipment shall not excuse Seller's failure to
perform unless the Force Majeure also affects Seller's back-up facilities
for production of steam.
C. No obligation of either Party which arose before the occurrence
causing the suspension of performance shall be excused as a result of the
occurrence;
D. Buyer's obligation to pay Seller an amount determined pursuant to
Article 6, which obligation arose prior to the occurrence of a Force
Majeure, shall not be excused by Force Majeure claimed by Seller;
E. If any of Buyer's equipment, or any part of its system which is
necessary to allow Buyer to accept, transmit or distribute deliveries from
Seller's Cogeneration Facility is damaged because of Force Majeure, the
Force Majeure shall terminate at such time as Buyer is able to repair,
replace, or reconstruct that portion of Buyer's system, including, without
limitation, possession of all necessary materials, equipment, permits,
authorizations, and licenses;
F. If any of Seller's equipment, or any part of its system which is
necessary to allow Seller to accept, transmit or distribute deliveries from
Buyer's Plant or to enable Seller to transmit or deliver steam to Buyer, is
damaged because of Force Majeure, the Force Majeure shall terminate at such
time as Seller is able to repair, replace, or reconstruct that portion of
Seller's system, including, without limitation, possession of all necessary
materials, equipment, permits, authorizations, and
37
<PAGE>
licenses; and
G. Nothing herein shall be construed to require a Party to settle
any strike or labor dispute in which it may be involved. However, in the
event of a strike or labor dispute at either the Cogeneration Facility or
Buyer's Plant, the affected party shall use its best efforts to maintain
its operation by using management personnel when and where appropriate.
Seller shall notify Buyer in writing promptly after it learns of any
impending labor dispute or labor negotiations which might affect Seller's
ability to perform its obligations hereunder.
ARTICLE 14
INSURANCE
At all times during the term of this Agreement, each of the Parties
shall obtain and keep in force a comprehensive general liability insurance
policy in the amount of $5,000,000.
ARTICLE 15
LIABILITY AND INDEMNIFICATION
15.1 Survival of Representations and Warranties.
The representations, warranties, covenants and agreements of Buyer and
Seller contained in this Agreement and the respective obligations of the
Parties with respect thereto shall survive the execution of this Agreement
and any investigations made by or on behalf of the Parties and shall
continue in full force and effect until any claims or liabilities with
respect thereto shall be barred by the applicable statute of limitations or
any extensions thereof. Each of the Parties agrees to give notice to the
breaching Party of any breach of any such representation, warranty,
covenant or agreement, describing such
38
<PAGE>
breach in reasonable detail, as soon as practicable after the discovery
thereof; provided, however, that the failure to give such notice shall not
relieve the breaching Party from any liability in respect to such breach.
15.2 Indemnification.
A. By Seller.
Seller agrees to protect, indemnify and hold harmless Buyer and its
directors, officers, employees, agents and representatives against and from
any and all loss, claims, actions or suits, including costs and attorneys'
fees, for or on account of injury, bodily or otherwise, to, or death of,
persons, or for damage to, or destruction of property belonging to Buyer or
others, resulting from, or arising out of or connected with the maintenance
or operation of the Cogeneration Facility including but not limited to, the
delivery of steam to Buyer and the failure of any steam delivered to Buyer
to meet the specifications therefor set forth in Appendix A to this
Agreement, excepting only such injury or harm as may be caused solely by
the malfunction of the Plant or as may be caused solely by the fault or
negligence of Buyer, its directors, officers, employees, agents or
representatives. Seller shall, upon Buyer's request, defend, at its own
expense, any suit asserting a claim covered by this indemnity.
B. By Buyer.
Buyer agrees to protect, indemnify and hold harmless Seller and its
directors, officers, employees, agents and representatives against and from
any and all loss, claims, actions or
39
<PAGE>
suits, including costs and attorneys' fees, for or on account of injury,
bodily or otherwise, to, or death of, persons, or for damage to, or
destruction of property belonging to Seller, or others, resulting from or
arising out of or connected with the ownership, maintenance or operation of
the Plant, including, but not limited to, the delivery of Condensate to the
Point of Return and receipt of steam from the Steam Points of Delivery,
excepting only such injury or harm as may be caused solely by the fault or
negligence of Seller, its directors, officers, employees, agents or
representatives or as may be caused by the failure of the steam delivered
to Buyer to meet the specifications therefor set forth in Appendix A to
this Agreement, excepting only such injury or harm as may be caused solely
by the malfunction of the Plant or as may be caused solely by the fault or
negligence of Buyer, its directors, officers, employees, agents or
representatives. Seller shall, upon Buyer's request, defend, at its own
expense, any suit asserting a claim covered by this indemnity.
C. Survival.
The provisions of this Section 15.2 shall survive the expiration of
the otherwise applicable term of this Agreement.
ARTICLE 16
EVENTS OF DEFAULT AND REMEDIES
16.1 Events of Default by Buyer.
Buyer shall be in default under this Agreement upon the happening or
occurrence of any of the following events or conditions, each of which
shall be deemed to be an "Event of Default" for purposes of this Agreement:
(i) Buyer breaches or fails to observe or perform any of the
obligations, and covenants under this Agreement other than a failure to pay
any amount owed to Seller under Article 8,
40
<PAGE>
which failure continues for thirty (30) days after written notice from
Seller specifying the nature of such breach or failure and demanding that
it be cured, unless such failure cannot be completely cured within thirty
(30) days after said written notice, in which case an Event of Default
shall exist only if Buyer does not commence and diligently pursue to sure
said failure within thirty (30) days after receipt of said notice.
(ii) There is an assignment for the benefit of Buyer's creditors, or
Buyer is adjudged a bankrupt, or a petition is filed by or against Buyer
under the provisions of federal bankruptcy laws, or the business or
principal assets of Buyer are placed in the hands of a receiver, assignee
or trustee, or Buyer is dissolved, or Buyer's existence is terminated or
its business is discontinued in substantially all of the places in the
hands of a receiver, assignee or trustee, or Buyer is dissolved, or Buyer's
existence is terminated or its business is discontinued in substantially
all of the places is operates; provided, however, that the events described
in this paragraph (ii) shall not constitute an Event of Default or
otherwise affect the validity of this Agreement so long as (a) compensation
continues to be paid to Seller pursuant to Article 8 of this Agreement, (b)
the terms, covenants and conditions of this Agreement on the part of the
Buyer are performed, and (c) Buyer elects to have the Agreement remain in
effect, in which event this Agreement shall continue to remain in full
force in accordance with the terms herein contained.
(iii) Buyer fails to pay, when due, the compensation due Seller as
determined under Article 6 and in accordance with Article 8 of this
Agreement, and such failure continues for a
41
<PAGE>
period of thirty (30) days following receipt of Buyer of a notice from
Seller of such failure.
(iv) Any representation or warranty furnished by Buyer to Seller in
connection with this Agreement is false or misleading in any material
respect when made.
16.2 Events of Default by Seller.
Seller shall be in default under this Agreement upon the happening or
occurrence of any of the following events or conditions, each of which
shall be deemed to be an "Event of Default" for purposes of this Agreement:
(i) Seller fails to perform or observe any of its obligations under
Article 3 or Section 6.2 which failure continues for a period of more than
five (5) consecutive days or more than ten (10) days in any twenty (20) day
period following written notice of such failure from Buyer.
(ii) Seller fails to observe or perform any of its obligations under
this Agreement other than those covered by clause (i) above which failure
continues for thirty (30) days.
(iii) There is an assignment for the benefit of a Seller's
creditors, or Seller is adjudged a bankrupt, or a petition is filed by or
against Seller under the provisions of any state insolvency law or under
the provisions of federal bankruptcy laws, or the business or principal
assets of Seller are placed in the hands of a receiver, assignee or
trustee, or Seller is dissolved, or Seller's existence is terminated or its
business is discontinued; provided, however, that the events described in
this Paragraph (iii) shall not constitute an Event of Default or otherwise
affect the validity of this Agreement, so
42
<PAGE>
long as Seller continues to provide the services described herein, and so
long as the other terms, covenants and conditions of this Agreement on the
part of Seller are performed, and in such event, this Agreement shall
continue to remain in full force in accordance with the terms herein
contained.
(iv) Any writ, lien, levy, attachment, execution, or other similar
legal attachment or encumbrance attaches to the Cogeneration Facility and
is not discharged within the lesser of (a) sixty (60) days or (b) the time,
if any, permitted under law for discharge of such attachment or
encumbrance.
(v) Any representation or warranty furnished by Seller to Buyer in
connection with this Agreement is false or misleading in any material
respect when made.
16.3 Remedies Upon Default by Buyer.
Upon the occurrence of an Event of Default by Buyer, Seller may:
(i) Exercise all remedies available at law or at equity or through
other appropriate proceedings including bringing an action or actions from
time to time for recovery of amounts due and unpaid by Buyer, and/or for
damages and expenses resulting from the Event of Default, which shall
include all costs and expenses reasonably incurred in the exercise of its
remedies (including reasonable attorneys' fees), and/or specific
performance.
(ii) Pursue, concurrently or separately, other remedies existing at
law, in equity or in bankruptcy.
(iii) In the event a court orders Buyer to take
43
<PAGE>
one or more actions pursuant to this Agreement, and such action(s) is a
final order which cannot be appealed, and Buyer fails to take such
action(s) Seller, in addition to any other rights it may have, will have
the right to purchase Buyer's Plant as its then fair market value. If
Seller does exercise this option to purchase the Plant, Buyer shall have
the right to require Seller to also purchase the Site for fair market
value, if such Site is not then owned by Seller. Fair market value shall
be established by appraisal by the American Appraisal Company (or similar
organization). The provisions set forth in Article 18 shall be utilized to
settle any dispute as regards fair market value.
16.4 Remedies Upon Default by Seller.
Upon the occurrence of an Event of Default by Seller, Buyer may
exercise one or the other of the following options: (i) Exercise all
remedies available at law or at equity or through other appropriate private
proceedings including, but not limited to, bringing an action or actions
from time to time for recovery of amounts due and unpaid by Seller, and/or
for damages and expenses resulting from the Event of Default, which shall
include all costs and expenses reasonably incurred in the exercise of its
remedies (including reasonable attorneys' fees), and/or specific
performance, Seller acknowledges and agrees that a breach by Seller
hereunder is likely to result in the curtailment by Buyer of its production
at the Plant, which will result in the loss of income to Buyer if Buyer
would have operated at full capacity had Seller delivered the steam which
it is required to deliver pursuant hereto. Seller further acknowledges and
agrees that the damages which Buyer shall be entitled to recover pursuant
to
44
<PAGE>
this paragraph include but are not limited to any income which it lost as a
result of the occurrence of an Event of Default by Seller; or (ii) Collect
Specified Damages from Seller upon submission of reasonable documentation
with respect to their incurrence, without resorting to legal process.
Specified Damages owed to Buyer pursuant to this Section shall be paid by
Seller no later than ten (10) days after submission by Buyer to Seller of
reasonable documentation with respect to their incurrence. Seller's
failure to pay such damages to Buyer shall entitle Buyer to exercise any,
all or some of the remedies specified in clause (i) above.
In the event that either (a) Buyer elects option (i) above or (b)
elects option (ii) above but fails to collect Specified Damages with ten
(10) days demand therefor, buyer may purchase the Cogeneration Facility and
the Site (if not then owned by Buyer) at their then fair market value in
accordance with Section 5.2 hereof. In addition, in either such event,
Buyer shall enjoy a right of first refusal with respect to the Cogeneration
Facility, and the Site (if then owned by Seller) and Seller shall give
Buyer ninety (90) days' written notice of any offer which notice shall
specify the terms and conditions of the proposed sale. Buyer shall have
the right, exercisable within thirty (30) days of receipt of said notice,
but not the obligation, to purchase the Cogeneration Facility, and the Site
(if applicable) on the terms and conditions specified in the notice.
16.5 Remedies.
Except as specifically limited in this Agreement, each
45
<PAGE>
and every right, power and remedy of a Party, whether specifically stated
in this Agreement or otherwise existing, may be exercised from time to time
and so often and in such order as may be deemed expedient by the exercising
Party, and the exercise or the beginning of the exercise of any right,
power or remedy shall not be deemed a waiver of the right to exercise, at
the same time or thereafter, any other right, power or remedy. No delay or
omission of a Party in the exercise of any right, power or remedy shall
impair or operate as a waiver thereof or of any other right, power or
remedy then or thereafter existing.
16.6 Fair Market Value.
If Buyer exercises its option under Section 5.2, the fair market value
of the Cogeneration Facility and the Site (if applicable) shall be
determined as of the time immediately before the Event of Default or option
by appraisal of the American Appraisal Company (or similar appraisal
organization). The arbitration provisions set forth in Article 18 shall be
utilized to settle any dispute as regards "fair market value".
ARTICLE 17
SELLER'S FINANCING
Buyer recognizes that Seller will be obtaining financing to construct
the Cogeneration Facility from one or more financial institutions and
hereby agrees to provide Seller with any documents and records Seller may
reasonably request in connection with Seller's efforts to obtain financing.
Buyer agrees to provide financial statements to the extent that they are
available but shall not be required to provide copies of its tax returns.
46
<PAGE>
Seller recognizes that Buyer has granted mortgages on the Plant and
land associated therewith. Buyer covenants and agrees to use its best
efforts to obtain an amendment to such mortgage allowing it to lease the
Site to Seller pursuant to the terms hereof. In the event that Buyer fails
to _______ an amendment on the mortgage granted to First Fidelity Bank,
N.A., New Jersey, it shall be relieved from any and all liability
hereunder. Seller's rights to purchase the Plant pursuant to the terms of
this Agreement shall be subject to and subordinate to any rights granted to
mortgagees in such mortgages.
ARTICLE 18
ARBITRATION
Any controversy or claim arising out of or relating to this Agreement
or the breach thereof, shall be settled by arbitration in Philadelphia,
Pennsylvania, by a panel of three arbitrators in accordance with the Rules
of the American Arbitration Association, and judgment upon the award
rendered may be entered in any court having jurisdiction thereof. The
expenses of the arbitration shall be borne by the unsuccessful Party unless
the arbitration award shall otherwise provide.
ARTICLE 19
ASSIGNABILITY
Except as herein provided to the contrary, the rights and duties of
Buyer and Seller under this Agreement are not assignable or delegable by
either Party without the express written consent of the other, which
consent will not be unreasonably withheld. Buyer and Seller may each
mortgage, hypothecate,
47
<PAGE>
pledge or encumber its interest in this Agreement, and, in the case of the
Seller, in the Cogeneration Facility and Site if then owned by Seller, to
any financial institution lending funds for construction or improvement of
the Plant or the Cogeneration Facility.
This Agreement is binding on all of Buyer's and Seller's respective
successors and assignees.
ARTICLE 20
NOTICE
Unless otherwise specified, all notices required to be given under
this Agreement, unless otherwise specified will be in writing and delivered
or mailed by certified mail, return receipt requested, to the respective
parties at the following addressees or at any address designated by the
parties in writing:
If to Buyer: Newark Boxboard Co.
57 Freeman Street
Newark, New Jersey 07105
Attention: Edward K. Mullen
with a copy to:
Benedict M. Kohl, Esq.
` Lowenstein, Sandler, Brochin, Kohl,
Fisher & Boylan, P.C.
65 Livingston Avenue
Roseland, New Jersey 07058
If to Seller: O'Brien Cogeneration IV, Inc.
Green and Washington Streets
Downingtown, Pennsylvania 19335
Attention: Jeffrey D. Barnes,
Executive Vice President
with a copy to:
Robert J. Rauch, Esq.
10075 Tyler Place, #17
Ijamsville, Maryland 21754
48
<PAGE>
ARTICLE 21
WAIVER AND MODIFICATION
21.1 Waiver.
No Party will be deemed to have waived any of its rights under this
Agreement unless a waiver signed by an officer of the waiving Party is
delivered to the other Party. Any waiver of a right under this Agreement
will be narrowly construed and will be deemed to relate only to the
specific right and the specific instance set forth in the waiver notice.
21.2 Modification.
This Agreement may only be modified by a written instrument signed by
both Buyer and Seller.
ARTICLE 22
SEVERABILITY AND RENEGOTIATION
22.1 Severability.
Should any part of this Agreement, for any reason, be declared
invalid, such decision shall not affect the validity of the remaining
portions, which remaining portions shall remain in force and effect as if
this Agreement had been executed with the invalid portion thereof
eliminate, and it is hereby declared the intention of the Parties hereto
that they would have executed the remaining portion of the Agreement
without including therein any such part, parts or portion which may for any
reason be hereafter declared invalid.
22.2 Renegotiation.
Notwithstanding the provisions of Paragraph 22.1, should any term or
provision of this Agreement be found invalid by any court or regulatory
body having jurisdiction thereover,
49
<PAGE>
the Parties shall immediately renegotiate in good faith such term or
provision of the Agreement to eliminate such invalidity.
ARTICLE 23
SEVERAL OBLIGATIONS
Except where specifically stated in this Agreement to be otherwise,
the duties, obligations and liabilities of the Parties are intended to be
several and not joint or collective. Nothing contained in this Agreement
shall be construed to create an association, trust, partnership or joint
venture or impose a trust or partnership duty, obligation or liability or
agency relationship on or with regard to either Party. Each Party shall be
individually and severally liable for its own obligations under this
Agreement.
ARTICLE 24
GOVERNING LAW
This Agreement will be governed by and interpreted in accordance with
the laws of the Commonwealth of Pennsylvania.
ARTICLE 25
ENTIRE AGREEMENT; COUNTERPARTS
This Agreement, together with the attached Appendices, supersedes any
and all previous Agreements the Parties hereto may have had with respect to
any matters relating to the subject matter of this Agreement.
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same instrument.
50
<PAGE>
ARTICLE 26
CAPTIONS
All indices, titles, subject headings and similar items, are provided
for the purpose of reference and convenience only and are not intended to
affect the meaning, content or scope of this Agreement.
ARTICLE 27
EMPLOYEE DISPLACEMENT
In an effort to assist Buyer in minimizing employee layoffs or
discharges which may result from the Parties entering into this Agreement,
Seller shall make a good faith effort to employ those employees of Buyer
directly displaced due to Buyer's discontinuing its own steam production
where such employees have the requisite skills and experience to be
considered for available positions at the Cogeneration Facility.
ARTICLE 28
GUARANTEE BY O'BRIEN ENERGY SYSTEMS
O'Brien Energy Systems, Inc., will execute as Appendix F an
appropriate guarantee of Seller's obligations under this Agreement. This
guarantee will continue in full force and effect for the duration of this
Agreement, unless Buyer and Seller mutually agree to terminate it. If
Agreement is reached at some future time to release to guarantee, it will
have no further force or effect.
51
<PAGE>
IN WITNESS WHEREOF, the Parties have executed and delivered multiple
originals of this Agreement as of the date set forth below.
ATTEST: NEWARK BOXBOARD CO.
By: /s/ By: /s/ William D. Harper
Name: Name: William D. Harper
Title: Assistant Controller Title: Vice President
Date: Date: 10/7/86
ATTEST: O'BRIEN COGENERATION IV, INC.
By: /s/ Sanders D. Newman By: /s/ Jeffrey Barnes
Name: Sanders D. Newman Name: Jeffrey Barnes
Title: Secretary Title: Exec. V.P.
Date: 10/7/86 Date: 10/7/86
52
<PAGE>
APPENDIX A
STEAM REQUIREMENTS AND PRODUCTION PARAMETERS
Required Maximum Output of Steam: 60,000 pounds per hour.
Minimum Required Purchase of Steam Per Annum: 201,000,000 pounds.
All steam shall have a nominal temperature of between 327.8 degrees
Farenheit and 335 degrees Farenheit and shall be delivered at between 85
and 90 psig.
All properties of Steam and Condensate shall be as
defined by ASME Steam Tables (1967 edition) at the conditions
measured by Seller's meters.
53
<PAGE>
APPENDIX B
INTERCONNECTION POINTS OF DELIVERY AND RETURN
The location of Seller's steam and condensation meters will be outside
Buyer's Plant.
54
<PAGE>
APPENDIX C
PERMITS TO BE OBTAINED BY SELLER
Fuel Use Act Exemption
Air Quality Permit to Construct
Federal Energy Regulatory Commission Certification
Local Zoning Permits (subject to Section 9.2)
Local Siting Permits (subject to Section 9.2)
Construction Permits
55
<PAGE>
APPENDIX D
CONDENSATE QUALIFY STANDARDS
Within three (3) months of the signing of this Agreement, al minimum
of four (4) samples of process Condensate will be taken and analyzed. The
Condensate will be analyzed for the following properties and contents:
(1) conductivity
(2) hardness
(3) silica
(4) organics
(5) sodium
(6) iron
(7) total dissolved solids and
(8) total suspended solids
The average value yet to be determined of all samples taken will be
used as the basis for establishing contamination limits for Condensate
return. The samples will be as representative as possible of the
Condensate that will be returned to the Cogeneration Facility and will be
mutually agreed upon by Buyer and Seller. Also, the procedures for taking
and analyzing the samples as well as the laboratory used to test the
samples will be mutually agreed upon by Buyer and Seller. All reasonable
costs associated with these Condensate samples will be borne by Seller.
56
<PAGE>
APPENDIX E
DESCRIPTION OF SITE
See attached diagram. A metes and bounds description of the Site will
be prepared by the Parties upon completion of a survey of Buyer's property.
57
<PAGE>
[INSERT DIAGRAM]
58
<PAGE>
APPENDIX F
GUARANTY
In order to induce Newark Boxboard Co. ("Boxboard") to enter into a
Steam Purchase Agreement, dated October 3, 1986, ("Agreement") with its
wholly owned subsidiary O'Brien Cogeneration IV, Inc. ("Company"), the
undersigned ("Guarantor") guarantees to Boxboard the due and punctual
performance by the Company of all of its obligations pursuant to the
Agreement ("Obligations"). Capitalized terms defined in the Agreement and
not defined herein shall have the same meanings when used herein. In
addition, the undersigned covenants and agrees to cause the Company's
Tangible Net Worth (as herein defined), including any interest that the
Company may have now or at any time during the future in the Cogeneration
Facility and the Site net of its liabilities with respect thereto, to equal
or exceed Three Million Dollars ($3,000,000) at all times during the term
of the Agreement, including any extensions thereof (collectively, the
"Term).
For purposes of this Guaranty. "Tangible Net Worth" shall mean total
"assets" less total "liabilities" of the Company, except that there shall
be excluded therefrom all intangible assets including, without limitation,
organizational expenses, patents, trademarks, copyrights, goodwill,
covenants not to compete, research and development costs, training costs,
treasury stock, all unamortized debt discounts and deferred charges. For
purposes of this definition, "assets" and "liabilities" shall be determined
in accordance with generally accepted accounting principles, consistently
applied.
59
<PAGE>
Guarantor covenants and agrees that it will 1.) at all times during
the Term own 100% of the outstanding stock issued by the Company and 2.)
furnish to Boxboard within 90 days after the close of each fiscal year of
Company a financial statement of the Company for such fiscal year, prepared
in accordance with generally accepted accounting principles and certified
as to accuracy by the chief accounting officer of Guarantor.
Guarantor agrees further that this Guaranty and its liability
hereunder shall not be impaired or affected by any modification,
supplement, extension or amendment of the Agreement to which the parties
thereto may hereafter agree, nor by any modification release or other
alteration of any of the Obligations hereby guarantees, nor by any other
agreements or arrangements whatever with the Company or anyone else. The
liability of Guarantor hereunder is direct and unconditional and may be
enforced without requiring Boxboard first to resort to any other right,
remedy or security. Guarantor shall not have any right of subrogation,
reimbursement or indemnity whatsoever, unless and until all of said
Obligations have been paid or performed in full. This guaranty is a
continuing Guaranty which shall remain effective during the Term. Nothing
shall discharge or satisfy the liability of Guarantor hereunder except the
full performance of all of the Company's Obligations.
Guarantor also agrees to indemnify Boxboard and hold Boxboard harmless
against all obligations, demands and liabilities,
60
<PAGE>
by whomever asserted, and against all losses in any way suffered, incurred
or paid by Boxboard as a result of or in any way arising out of, or
following, or consequential to a breach by the Company of any of its
Obligations and to pay all costs and expenses, including reasonable
attorneys' fees, of any proceeding to enforce this Guaranty.
Guarantor waives: notice of acceptance hereof; the right to a jury
trial in any actin hereunder; presentment and protest of any instrument,
and notice thereof; notice of default; and all other notices to which such
Guarantor might otherwise be entitled.
Failure of Guarantor to pay any amount required to be paid by it to
Boxboard within thirty days of demand therefor shall constitute an Event of
Default hereunder. The occurrence of any of the following shall also
constitute an Event of Default hereunder (a "Guaranty Event of Default"):
There is an assignment for the benefit of creditors of Guarantor, or
Guarantor is adjudged a bankrupt or a petition is filed by or against
Guarantor under the provisions of any state insolvency law or under the
provisions of federal bankruptcy laws, or the business or principal assets
of Guarantor are placed in the hands of a receiver, assignee or trustee; or
Guarantor is dissolved.
61
<PAGE>
This Guaranty, all acts and transactions hereunder, and the rights and
obligations of the parties hereto shall be binding upon successors and
assigns of Guarantor, may not be changed or modified orally, and shall
inure to the benefit of Boxboard's successors and assigns.
ATTEST: O'BRIEN ENERGY SYSTEMS, INC.
/s/ Sanders D. Newman By: /s/ Jeffrey Barnes
Secretary 10/7/86 Title: Exec. V.P. 10/7/86
Dated: as of October 3, 1986.
62
<PAGE>
Exhibit 10.16.1
NRG GENERATING (NEWARK) COGENERATION INC./
STEWART & STEVENSON OPERATIONS, INC.
OPERATING AND MAINTENANCE AGREEMENT
This System Operating and Maintenance Agreement ("Agreement") is made as of
the 1st day of May 1996 between NRG Generating (Newark) Cogeneration Inc.,
a Delaware corporation ("Owner"), and Stewart & Stevenson Operations, Inc.,
a Delaware corporation ("Operator"), having its principal place of business
at Houston, Texas, whose obligations hereunder shall be fully guaranteed by
STEWART & STEVENSON SERVICES, INC. ("SSSI"), pursuant to a Guarantee in the
form of Appendix I.
Owner (formerly named "O'Brien (Newark) Cogeneration, Inc.") and Operator
entered into an Operation & Maintenance Contract dated as of April 1, 1994
with respect to the System (as defined below), a copy of which is attached
as Appendix II (the "Existing O&M Agreement").
In connection with the bankruptcy of Owner's parent, the existing
Electricity Purchase Agreement between Owner and Jersey Central Power Light
Company relating to the System has been amended with the Third Amendment to
the Power Purchase Agreement (as defined below).
Owner and Operator have renegotiated the terms and conditions of the
Existing O&M Agreement and desire to replace it with this Agreement
effective upon the Effective Date.
In consideration of the foregoing and the mutual covenants and benefits
contained herein, the parties hereby agree as follow:
I. DEFINITIONS
In this Agreement the following terms have the associated meaning:
1 . Affiliate - With reference to a specified person, any other person or
entity, directly or indirectly through one or more intermediaries,
which controls, is controlled by, or is under common control with,
such person. A person or entity is controlled by another person or
entity if the second person or entity holds a sufficient number of
securities in the first person or entity to elect a majority of the
directors of the first person or entity.
2. Agent - The agent for the lenders under the Financing Agreements.
3. Amended Power Purchase Agreement - The Amended Power Purchase
Agreement for Purchase and Sale of Electric Power, dated April 30,
1996, between Owner and Jersey Central Power & Light, a copy of which
Is attached as Appendix III hereto.
4. Annual Operating Plan and Budget - As set forth In Article VI, Section
6.
5. Bonus - As set forth in Exhibit A.
6. Change - Shall mean any of the following that are proposed by one
party to the other by a written notice to the other party: (i) a
change in the then current Annual Operating Plan and Budget: (ii) a
change in connection with the services to be provided by Operator
hereunder (iii) a change made necessary to avoid injury to persons or
property or to mitigate losses as a result of the occurrence of an
Emergency; and (iv) a change enabling Operator to accomplish or
contract for a Major System Repair.
7. Change Order - Shall mean the written approval of a proposed Change
and the related Change Order Budget Statement by Operator and Owner as
further provided for In Article VI, Section 7(b).
<PAGE>
8. Change Order Budget Statement - Shall mean the statement prepared by
Operator pursuant to Article VI, Section 7(b) with respect to a
proposed Change setting forth In reasonable detail: (i) the direct
cost or savings to Owner of the proposed Change; (ii) the indirect
costs or savings of the proposed Change, including without limitation,
any loss of electricity revenues or steam host revenues and any
increased insurance, operating. maintenance or other costs during or
following the implementation of the proposed Change; (iii) changes in
the operating efficiency of the System; and (iv) any other material
effect on the operation, maintenance, efficiency or profitability of
the System or the provision of the services hereunder.
9. Contract Year - As set forth in the Amended and Restated Power
Purchase Agreement.
10. Effective Date - May 1, 1996.
11. Emergency - Any event or occurrence which in the judgment of Operator
or Owner, as the case may be, requires immediate action and which
constitutes a serious hazard to the safety of persons or property or
may materially Interfere with the safe, economical, lawful or
environmentally sound operation of the System.
12. Event of Default - As set forth in Article XII.
13. Existing O&M Agreement - As set forth in the Recitals.
14. Expenses - As set forth in Article VI, Section 2.
15. Financing Agreements - Any loan, lease financing, security, of related
agreements entered into at any time by and among owner and the lending
institutions providing financing for the System.
16. Force Majeure - Unforeseeable causes beyond the reasonable control of
and without the fault or negligence of the party claiming Force
Majeure, including but not limited to acts of God, strike, flood,
earthquake, storm, fire. lightning. epidemic, war, riot, civil
disturbance, sabotage, change in low or applicable regulation
subsequent to the date thereof and action or inaction by any federal,
state or local legislative, executive, administrative or judicial
agency or body which, in any of the foregoing cases, by exercise of
due foresight such party could not reasonably have been expected to
avoid, and which by the exercise of due diligence, it is unable to
overcome.
17. Legal and Contractual Requirements - All:
a. Laws, permits, approvals, regulations or orders of governmental
authorities applicable to the Amended and Restated Power Purchase
Agreement, the System. Owner's obligations under this Agreement
as owner of the System and Operator's scope of work hereunder;
b. Provisions of the System Contracts;
c. Agreements, warranties and specifications of Operator's or
Owner's suppliers or vendors; and
d. Operating and maintenance manuals and procedures furnished
by Owner applicable to the System or the components thereof (such
operating manuals to reflect Sound Independent Power Industry
Practice).
2
<PAGE>
l8. Liquidated Damages -As set forth in Exhibit A.
19. Major System Repair
The inspection, overhaul, repair or replacement of any piece of
equipment needed to operate the System where such inspection,
overhaul, repair or replacement is the result of: (i) an unscheduled
breakdown, repair, or failure of such equipment or (ii) a scheduled
inspection, overhaul, repair or replacement of such equipment (union
the inspection, overhaul, repair or replacement has been incorporated
into the Annual Operating Plan and Budget) and further that such
inspection, overhaul, repair or replacement shall have a cost in
excess of $10,000, which includes labor and material costs, and shall
be adjusted each year by the increase or decrease in the Producer
Price Index. Equipment shall include the gas turbines, the
generators, boilers, heat steam recovery generators, chillers, load
gears, exhaust ducting, emissions equipment. water and waste water
treatment, fuel treatment facilities and interconnection facilities;
provided, however, that a Major System Repair shall not include the
replacement of accessories, equipment and consumables required in the
ordinary course of Routine Maintenance and preventative maintenance of
the System reflecting Sound Independent Power Industry Practice.
20. Operating Fee - As set forth in Article VI Section 1.
21. Owner's Plan of Operation - Owner's instructions to Operator as to the
desired electricity and/for thermal energy production schedule and
other operating and maintenance objectives.
22. Owner's Representative - As set forth in Article V. Section 1 (a).
23. Producer Price Index - The U.S. Producer Price Index for All Item, as
currently published in the United States Department of Labor Bureau of
Labor Statistic's monthly publication, PPI Detailed Report or any
successor publication of such information, or if such index is no
longer published or the method of computation thereof is substantially
modified, a mutually agreeable alternative index.
24. Proprietary Information - All financial, technical and operating
information which the parties, directly or indirectly, acquire from
each other, and any other information which a party expressly
designates in writing to be confidential. However, Proprietary
Information shall exclude information failing into any of the
following categories
a. Information that, at the time of disclosure thereof, is in the
public domain;
b. Information that, after disclosure thereof, enters the public
domain other than by breach of this Agreement;
c. Information that prior to disclosure thereof, was already in the
recipient's possession, either without limitation on disclosure
to others or subsequently becoming free of such limitation;
d. Information obtained by the recipient from a third party having
an independent right to disclose such information;
e. Information that is available by independent research without use
of or access to the Proprietary Information acquired from the
other party; and
3
<PAGE>
f. Information that a party is required by low or governmental
action to disclose, provided the disclosing party notifies the
party from whom the information originated in advance and gives
it the opportunity to resist the order.
25. Routine Maintenance - Those activities including the replacement of
accessories, equipment, and consumables required in the ordinary
course of routine and preventative maintenance of the System and
System site in accordance with Sound Independent Power Industry
Practice.
26. Sound Independent Power Industry Practice - Those prudent practices
and methods in effect at the time of performance that am customarily
followed by operators of similarly situated plants and equipment.
27. System - Owner's properties, plant and equipment located in Newark,
New Jersey, including a single gas turbine combined cycle generating
station with a nominal capacity of 52 megawatts, more fully defined in
Exhibit B.
28. System Contracts - Contracts and agreements to which Owner is a party
(including, without limitation, insurance policies) relating to the
operation and maintenance of the System, set forth an Exhibit C, which
Exhibit shall be amended by Owner to provide a more comprehensive list
on or before June 15, 1996.
II. ENGAGEMENT OF OPERATOR
1. Effective on the Effective Date, Owner engages Operator to operate and
maintain the System and perform certain duties, all as hereinafter set
forth in this Agreement, and Operator accepts such engagement to
operate and maintain the System and perform the duties specified in
this Agreement in accordance with its terms and conditions.
2. All operating and management personnel involved in the operation and
maintenance of the System shall be employees of Operator or its
Affiliates and shall not for any purposes be deemed employees of
Owner.
III. TERM
The term of this Agreement shall become effective upon the Effective Date
and expire on the sixth (6th) anniversary of the Effective Date, unless
terminated earlier in accordance with Article XII of this Agreement.
IV. OPERATING AND MAINTENANCE DUTIES OF OPERATOR
1. Subject to the terms of this Agreement Operator shall operate and
maintain the System and shall control the details and means of
performing its obligations hereunder.
2. For the period prior to and including the Effective Date, Operator
shall assist Owner in preparing the System for operation under the
Amended Power Purchase Agreement. These services will include but not
be limited to:
a. Preparing a plan and schedule to staff the System;
b. Recruiting and training the staff which will operate and maintain
the System;
c. Responding, in a timely manner, to Owners requests for
information;
4
<PAGE>
d. Procuring, as agent for Owner, replacement of stock of
consumables, spare parts, tools, and supplies in accordance with
the Annual Operating Plan and Budget;
e. Appointing a plant manager (subject to Owner's approval) who
shall supervise the performance of Operators employees at the
System site;
f. Reviewing plans, specifications and drawings of machinery and
equipment layouts and commenting to Owner thereon with regard to
matters affecting operation and maintenance;
g. Observing and receiving training and instructions from Owner,
such training and instructions to be in accordance with Sound
Independent Power Industry Practice;
h. Performing for Owner such other services as may from time to time
be reasonably requested or are reasonably necessary or
appropriate in connection with the operation and maintenance of
the System; and
i. Reporting to and consulting with Owner about the operation of the
System on a scheduled basis, as reasonably requested by Owner.
Such services shall be provided in a manner consistent with all Legal and
Contractual Requirements, Sound Independent Power Industry Practice and the
Annual Operating Plan and Budget.
3. All full time personnel whom Operator will provide for the operation
and maintenance of the System shall be at the site and available full
time for training and to perform services to support System operation
and maintenance as required by the staffing plan to be developed by
Operator and approved by Owner.
4. A written management program shall be developed by operator for
approval by Owner to ensure optimal performance, responsiveness, and
cost-effectiveness in the operation and maintenance of the System.
The program shall include provisions regarding:
a. Budget tracking, analysis and adjustments;
b. Personnel policies, including policies regarding payroll,
compensation, pensions and other benefits;
c. Training;
d. Purchasing and inventory control;
e. A System safety and health program which will include procedures
and a manual;
f. An employee job-site handbook for Operator's employees operating
and maintaining the System;
g. A maintenance planning and scheduling system; and
h. A system for maintaining an inventory of consumables, spare
parts, tools and supplies.
5
<PAGE>
5. Subsequent to the Effective Date, Operator shall provide all
operations and maintenance services necessary to efficiently operate
and maintain the System, including but not limited to performing the
following operating and maintenance services:
a. Operating and maintaining the System in compliance with all Legal
and Contractual Requirements, Sound Independent Power Industry
Practice and the Annual Operating Plan and Budget;
b. Obtaining and maintaining in effect all licenses and permits
required by law to be obtained and maintained in Operator's name
and assisting Owner in obtaining and renewing all licenses and
permits required by low to be obtained and maintained by Owner or
in Owners name;
c. Paying all employees of itself and its Affiliates, agents and
subcontractors promptly and filing all reports and remitting all
payments required under labor statutes to the appropriate
governmental authorities, as the obligations arise:
d. Conducting the operations and maintenance of the System
including, but not limited to. entering into contracts with third
parties as agent for Owner (subject to Owner's approval if not in
the ordinary course of business);
e. Employing, and ensuring adequate training of, Operator employees
and employees of its Affiliates (duly licensed where required by
statute or regulation) for the operation and maintenance of the
System consistent with Sound Independent Power Industry Practice,
and planning and administering all matters pertaining to employee
relations, salaries, wages, working conditions, hours of work,
termination of employment, employee benefits, employee staffing.
safety and related matters pertaining to such employees, and
maintaining records with respect to all such matters;
f. Monitoring, preparing and maintaining records of the operations
and maintenance aspects of the System (including records of
financial, business, and sales tax aspects of the System) in such
form and covering such matters as Owner may reasonably request,
consistent with Sound Independent Power Industry Practice,
generally accepted accounting principles, and applicable records
retention requirements; and making such records available for
inspection and/or audit by Owner and Owner's designees;
g. Implementing an inventory control system to identify, catalog,
and disburse spare parts for the maintenance of the System and
procuring, as agent for Owner, replacement spare parts and
refurbishing. where practical or economical, spare parts to allow
their reuse;
h. Operating and maintaining the System according to the operations
and maintenance programs prepared by Operator for Owner and, if
necessary, creating updates for such programs and creating new
programs as required for operation and maintenance of the System;
i. Operating and maintaining the System to maximize the continuous,
reliable, safe and efficient generation of electrical and/or
thermal energy by the System so as to conserve fuel and financial
resources and to minimize unscheduled outages, and providing
maintenance for the System in a cost-effective manner to prevent
deterioration beyond normal wear and tear provided, however, that
Owner acknowledges such efforts shall necessarily be limited by
the operating life, capacity and maintenance requirements of the
system and by Legal and Contractual Requirements;
6
<PAGE>
j. Using all reasonable care necessary to keep the System and the
System site clean, orderly, and free from debris, rubbish or
waste to the extent consistent with the operation of the System;
k. Taking necessary precautions and corrective actions in the event
of an Emergency;
l. Keeping the System and the System site free and clear of all
liens and encumbrances arising out of the acts, omissions, or
debts of Operator or its employees, agents or subcontractors
claiming by, through or under Operator (this subsection shall not
apply to mechanics liens and liens of any nature arising by
operation of law, provided such liens are promptly removed by the
payment of the debts they secure when due; in the event of a
dispute between Operator or its subcontractors and a lienholder,
Operator's obligation to Owner pursuant to this provision may be
satisfied by the posting of an appropriate bond to the extent
acceptable to the Agent);
m. Within 30 days of its receipt of Owner's Plan of Operation
submitted in accordance with Article V, Section 1 (c), preparing
and submitting to Owner for Owner's approval a written proposed
Annual Operating Plan and Budget which shall include all
anticipated Expenses of the System to be paid by Owner for each
succeeding calendar year, all as more fully described in Article
VI, Section 6 or required by the Agent;
n. Reporting to and consulting with Owner about the operation of the
System on a scheduled basis, as reasonably requested by Owner;
o. Using reasonable commercial efforts to secure from vendors,
suppliers and subcontractors the best indemnities, warranties and
guarantees as may be commercially available regarding supplies.
equipment and services purchased for the System, all of which
shall be assigned to Owner (Operator shall render reasonable
assistance to Owner for the purpose of enforcing such
indemnities, warranties or guarantees of which Owner is a
beneficiary regarding the System);
p. Performing for Owner such other services as may from time to time
be reasonably requested or are necessary or appropriate in
connection with the operation and maintenance of the System;
q. Promptly notifying Owner of:
i. Any condition, event or act which is likely to result in a
material deficiency in budgeted revenues, or excess in
budgeted costs, of Owner;
ii. Any forced outages or significant malfunction of the System
as soon as practicable;
iii. Any material failure to comply with any Legal and
Contractual Requirements or any event which is reasonably
expected to cause such material failure;
r. Promptly providing Owner with such information relative to the
System as Owner may reasonably request;
S. Establishing an effective maintenance planning and scheduling
system to optimize the availability, reliability and heat rate
of the System;
7
<PAGE>
t. Assisting Owner in the compliance by Owner with the terms of the
Financing Agreements, as they relate to the operation and
maintenance of the System, including the preparation of reports
concerning operations and making personnel available for
discussions with the Agent or other lender representatives;
u. Subject to Article XI, assisting Owner in selling or otherwise
disposing of used and/or unneeded parts and supplies; and
v. Providing and maintaining written procedures, in a form
reasonably acceptable to Owner, required to enable Operator's
employees to safety and efficiently startup, operate, and shut
down the System equipment and to perform preventive maintenance
on the System equipment.
c. V. RESPONSIBILITIES OF OWNER
1. Subject to the terms of this Agreement, Owner shall, at its cost and
expense, perform and provide the following at the times required to
support the start-up, operation and maintenance of the System:
a. Providing an Owner's Representative who shall represent and
bind Owner in all matters regarding this Agreement and the
performance of Owner hereunder;
b. Providing the System and System site free and clear of all
liens and encumbrances (except for any liens or encumbrances in
favor of Agent or the lenders under the Financing Agreements);
c. Preparing the Owner's Plan of Operation and delivering the same
to Operator on or before September 1 of each year;
d. With Operator's assistance, administering all System Contracts;
e. Providing all required utility services, including water,
sewer, gas, telephone, water/wastewater treatment, waste
disposal, special waste disposal and electricity;
f. With operators assistance, obtaining and reviewing all
necessary licenses and permits except those required by law to be
obtained and maintained in Operator's name;
g. Providing manufacturer's operating and maintenance manuals for
the System;
h. With Operator's assistance, preparing and submitting any
special accounting and reporting documents that may be required
by governmental authorities;
i. Providing at its own expense, an office at the site for use by
Operator
j. Within five days of its receipt thereof, providing Operator
complete copies of all technical, operational and other System
and System site related information, including the System
Contracts, as are in the possession, or under the control of
Owner;
k. Being responsible for the billing and collection of electricity
revenues under the Amended Power Purchase Agreement and thermal
revenues under the Steam Purchase Contract with Newark Boxboard;
8
<PAGE>
l. Being solely responsible for obtaining, maintaining and
renewing all licenses and permits necessary for (i) Owner to do
business in the jurisdictions in which the System is located and
(ii) the ownership, operation and maintenance of the System and
System site;
m. Being responsible for arranging the disposal of hazardous
wastes generated by or at the System or System site: provided,
however, that Operator will coordinate removal of such waste from
the System site using subcontractors chosen by Owner;
n. Complying with, and diligently enforcing, all agreements
(including the System Contracts) to which Owner is a party and
which relate to or impact upon the System or Operator's ability
to perform its obligations hereunder; and
o. Timely paying all of Owner's vendors, suppliers and
contractors.
Such activities shall be provided in a manner consistent with all
Legal and Contractual Requirements, Sound Independent Power Industry
Practice and the Annual Operating Plan and Budget.
VI. EXPENSES, REIMSURUMENTS, BUDGET, CONSIDERATION, COMPENSATION
1. As compensation to Operator for its performance of the Services, Owner
shall Pay operator (a) the Expenses incurred by Operator and (b) an
annual fee ("Operator's Fee"). The Operator's Fee for the first
Contract Year shall be $150,000. The Operator's Fee shall be payable
in equal monthly installments in arrears. The Operator's Fee shall be
adjusted annually in accordance with the following sentence. For each
Contract Year after the first Contract Year, the Operator's Fee shall
be equal to the product of: (i) the ratio of the Producer Price Index
for the lag month of the then expiring Contract Year over the Producer
Price Index for the last month of the previous Contract Year and (ii)
the Operator's Fee for the then expiring Contract Year, provided,
however, that for any partial Contract Year, the Operator's Fee shall
be multiplied by a fraction, the numerator of which shall be the total
number of days in such Contract Year and the denominator of which
shall be 365 or 366, as the case may be. If Operator falls to pay
accrued, undisputed Liquidated Damages in any Contract Year in
accordance with the provisions herein, Owner may elect to reduce the
Operator's Fee in the subsequent Contract Year by the amount of
undisputed Liquidated Damages owed to Owner.
2. Owner shall directly pay, or promptly reimburse to Operator as the
case may be, the following expenses ("Expenses") relating to the
System:
a. Insurance and bond premiums for policies which are required by
Article VIII hereof;
b. Property, and other taxes (including, without limitation, sales
taxes, gross receipts taxes, value added taxes. energy taxes and
capital taxes) related to Owner or the System, but not including
those based an Operator's income or capital;
c. The base salaries, straight time hourly wages and overtime
hourly wages of all of Operator's on-site personnel plus (i)
thirty eight percent (38%) of (x) the base salaries and straight
time hourly wages and (y) the straight time hourly portion of the
actual overtime wages for all hourly employees, and (ii) five
percent (5%) of the base salaries, straight time hourly wages,
and overtime hourly wages.
9
<PAGE>
d. Transportation, travel, lodging, and (for employees newly hired
or newly assigned to the System site) relocation expenses of
persons employed by Operator or its Affiliates performing the
duties of Operator under this Agreement subject to advance
approval by Owner in writing;
e. Reasonably incurred legal and accounting fees relating to the
System, subject to advance approval by Owner in writing;
f. Fuel expenses including fuel purchase, transportation, handling
and demurrage charges;
g. The expenses of purchased electric power, telephone and other
communication services, purchased potable water. waste disposal,
special waste disposal, lubricants and chemicals necessary for
the operation of the System;
h. Costs reasonably incurred or paid by Operator due to an
Emergency;
i. Training, including outside training services;
j. The costs of permits or licenses required for either Owner,
Operator or the System;
k. Costs associated with Routine Maintenance, Major System Repairs
(including scheduled and unscheduled) inspections, and overhauls,
outside contractor services and purchases of replacement
equipment, parts and components;
l. Spare parts, tools, supplies and consumables;
m. Capital costs approved by Owner for improvements, alterations
or additions to the System including those required by
governmental laws, regulations or orders including without
limitation, those arising from environmental concerns; and
n. The cost of transportation of spare parts, tools, supplies,
consumables and any item which is a reimbursable expense
hereunder.
For all Expenses (other then relating to labor, legal and accounting
fees) incurred and paid by operator for which Operator is entitled to
reimbursement hereunder, Owner additionally shall pay Operator a
general and administrative expense fee of five percent (5%) of such
Expenses.
3. a. For convenience and in order to save on expenses, Owner
will directly pay certain Expenses reimbursable to Operator as
set forth in the Annual Operating Plan and Budget described in
Article VI, Section 2 as practicable. To the extent reasonably
practical, the items covered by such Article VI, Section 2 shall
be procured through Operator's issuance of an Owner purchase
order and the cost of any such items shall be paid directly by
Owner to the vendor thereof. Operator shall perform such duty as
owner's agent.
b. Without Owners prior approval, Operator shall be empowered to
prepare and issue an Owner purchase order for any material or
service the cost of which would constitute an Expense, so long as
the total cost for such item is less than or equal to $10,000.
For any item or items whose total cost is greater than $10,000,
Operator shall submit a written requisition to Owner, and after
receipt of written approval from Owner, Operator shall be
authorized as agent for Owner to prepare and issue a purchase
order on behalf of Owner on Owner's purchase order form for such
item. Operator shall (i) verify the receipt at the System site
10
<PAGE>
of all materials end services to be delivered to the System site
covered by Owner's purchase orders issued by Operator, (ii)
verify the accuracy of vendors' invoices in connection therewith.
and (iii) forward such invoices to Owner for approval, processing
and payment by Owner. Nothing in this Agreement shall prevent
Operator from procuring any material or service the cost of which
would constitute an Expense under Article VI(2).
C. Operator shall periodically, but not more often than once a week,
deliver to Owner invoices received by Operator from third parties
for all direct Expenses, accompanied by a summary of all such
invoices which itemizes all such invoices by operating cost
account number. Such invoices shall also be accompanied by a
statement from Operator confirming that all such invoices are
accurate, due and payable, together with all relevant
documentation reasonably necessary for Owner to verify the
accuracy thereof. Each invoice submitted to Owner shall be paid
by Owner directly to the payee of such invoice on or before the
date such invoice is due.
4. From time-to-time, Operator will prepare and send to Owner an invoice,
including expense statements, vouchers or such other supporting
information as Owner may reasonably require, for the amounts then due
for reimbursable Expenses and the monthly installment of the
Operator's Fee. Owner shall pay the amount due to Operator no later
than thirty (30) days after receipt of the invoice. All payments
shall be made by wire transfer of immediately available funds to Texas
Commerce Bank, Houston, Texas, Account No. 00101616119, ABAR 113000
609. Any payment not made within 30 days after receipt of the invoice
will bear interest from the date on which payment was due at the rate
of one and one-half percent (1.5%) per month or the maximum rate
permitted by law, whichever is the lesser.
5. Operator shall maintain complete, true, and correct records in
connection with all Expenses incurred by Operator. Operator shall
retain all such records for five (5) years after Expense reimbursement
by Owner has been fulfilled or for any longer period of time required
by law. All documents and records relating to this Agreement shall be
available for inspection by Owner anytime during normal business
hours. Owner may audit all records of Operator relating to Expenses
and services performed hereunder. In the event the audit shows that
the payment by Owner to Operator exceeds the amount due Operator,
Owner shall disclose such information to Operator and Operator shall
refund the excess amount to Owner within five (5) business days of the
disclosure to Operator. In the event the audit shows that the payment
by Owner to Operator is greater than the amount due Operator under
this Agreement and such error was caused by Operator, Owner shall be
reimbursed its reasonable costs of performing the audit. In the event
the audit shows that the payment by Owner to Operator is less than the
amount due Operator, Owner shall disclose such information to Operator
and pay the underpayment amount to Operator within five (5) business
days of the disclosure to Operator.
6. On or before October 1 of each year, the Operator shall prepare and
submit to Owner a written Annual Operating Plan and Budget which shall
include all expenses of the System anticipated to be paid by Owner as
either a direct or reimbursable Expense during the upcoming calendar
year pursuant to Section 1 of this Article VI, together with a written
operations and maintenance plan for the same period of time. Such
Annual Operating Plan and Budget shall set forth the anticipated
operations and maintenance plan including projected electrical
production from the System on a monthly basis, and a complete schedule
(to the extent technically feasible) of Operator responsible Routine
Maintenance and all Owner-directed major maintenance tasks (including
Major System Repairs) to be accomplished during said year. Owner and
Operator shall agree upon the budget operations and maintenance plan,
and persons to perform maintenance under
11
<PAGE>
the plan prior to the start of the calendar year, and shall meet and
exchange information as is necessary and convenient to such end.
It the parties cannot reach agreement on the Annual Operating Plan and
Budget by the start of any calendar year, then, until such time as
agreement is reached or the dispute is resolved, the Annual Operating
Plan and Budget for such calendar year shall be based on the Annual
Operating Plan and Budget for the preceding calendar year, as adjusted
to reflect the net change, if any, between the most recently published
Producer Price Index available on the first day of the calendar year
in question and the corresponding Producer Price index in effect at
the start of the immediately preceding calendar year.
Operator has submitted, and Owner has accepted, the Annual Operating
Budget for the calendar year ending December 31, 1996. a copy of which
is attached as Exhibit F. All Annual Operating Budgets shall be in
substantially the form attached as Exhibit F. The amounts set forth
on Exhibit F shall be reduced pro rata based on the number of days
remaining in the calendar year from and after the Effective Date.
Likewise, the amounts set forth in the Annual Operating Plan and
Budget in effect during the calendar year in which this Agreement
expires or is terminated shall be reduced on a pro rata basis based on
actual number of days elapsed during such calendar year prior to the
date of the expiration or termination of this Agreement
7. a. The parties recognize that Changes may be required during
the term of this Agreement. Either Owner or Operator may by a
written notice to the other party propose a Change. The written
notice shall describe the proposed Change in reasonable detail
and the reasons therefor.
b. The written notice of a Change proposed by Operator shall be
accompanied by a Change Order Budget Statement. Upon receipt by
Operator of any proposed Change from Owner, Operator shall use
its best efforts to prepare and submit to Owner a Change Order
Budget Statement with respect to such proposed Change within
fifteen (15) days of the receipt of Owner's proposed Change. No
proposed Change the cost of which is in excess of $10,000 shall
be implemented until a Change Order has been executed by both
parties approving the Change and the related Change Order Budget
Statement; provided, however, that Operator shall be entitled to
implement a proposed Change without the prior approval of Owner
if such Change is required due to an Emergency. If Operator
implements a Change without the prior approval of Owner due to an
Emergency, Operator shall promptly notify Owner of such Change
and pursue Owner's approval thereof in accordance with subsection
c below. Operator acknowledges that Owner's approval of any
proposed Change and/or the related Change Order Budget Statement
may require the approval of the Agent.
c. Owner and Operator shall diligently and in good faith endeavor
to reach agreement upon any proposed Change and the related
Change Order Budget Statement within thirty (30) days after the
date of the receipt of a proposed Change and related Change Order
Budget Statement. If a Change is required as a result of an
Emergency. then Operator shall provide to Owner, as soon as
practicable, notice of such Change, together with a statement
describing the Emergency and a Change Order Budget Statement. If
a Change due to an Emergency causes the Annual Operating Plan and
Budget to be exceeded and Owner believes that an Emergency did
not exist, then Owner shall have the right to dispute the Change.
If Owner and Operator do not agree as to the resolution of such
dispute, then either party may submit the dispute to arbitration
in accordance with the provisions of Article XVIII, Section 2 and
3.
12
<PAGE>
8. Operator shall report to Owner in writing monthly on electrical and
thermal output and expenditures incurred to date; projected electrical
and thermal output and expenditures for the balance of the calendar
year, performance to date under the operations and maintenance plan
and such other matters as Owner may reasonably request as to the
operation and maintenance of the System. In such report, Operator
shall recommend such changes to the then current budget and operations
and maintenance plan as Operator considers necessary or appropriate.
9. Operator shall use its best efforts to operate and maintain the
System each year within the budget approved by Owner (as amended by
Change Orders). For purposes of determining the approved budget for
the initial calendar year, the budget provided as Exhibit F in the
aggregate amount of $1,871,860, for operating and maintenance duties
set forth in Article IV, shall be adjusted by the ratio of the
remaining number of days from the Effective Date to year-end divided
by 366. If for any calendar year the Expenses (other than those
Expenses set forth In Article VI, Section 2 (b) and Expenses incurred
in response to Emergencies) whether direct or reimbursable, paid by
Owner exceed the approved Annual Operating Plan and Budget, as amended
by Change Orders mutually agreed by Owner and Operator, then Operator
shall be solely responsible for any such excess.
10. Operator's consideration for services performed and expenses paid
pursuant to this Agreement shall be the reimbursement of expenses
described In Article VI, Section 2, the Operator's Fee, and, if
applicable, the Bonus.
VII. INDEMNIFICATION
1. Operator will protect, indemnify and hold harmless Owner, Owner's
Affiliates and Agent, and their respective directors, officers,
employees, agents and representatives against and from any and all
demands, losses, claims, actions or suits, including costs, judgments,
penalties, fines and attorney's fees, for or on account of injury to
or death of third persons, or for damage to or destruction of property
belonging to third persons or for violation of law, in each case
resulting from or arising out of Operator's negligent maintenance or
operation of the System or Operator's willful act or omission, except
to the extent caused by System design or construction defect, by
Owner's act or omission, or the act or omission of third parties.
2. Owner will protect, indemnify and hold harmless Operator, Operator's
Affiliates. and their respective directors, officers, employees,
agents and representatives against and from any and all demands,
losses, claims, actions or suits, including costs, judgments,
penalties, fines and attorneys' fees, for or on account of injury to
or death of third persons, or for damage to or destruction of property
belonging to third persons, or for violation of law, in each case
resulting from or arising out of a System design or construction
defect, or the negligence or willful act or omission of Owner.
3. The duty to indemnify under this Article will continue in full force
and effect, notwithstanding the expiration or termination of this
Agreement, with respect to any claim or action based on facts or
conditions which occurred prior to such termination.
4. If any indemnified party intends to seek indemnification under this
Article from any indemnifying party with respect to any action or
claim, the indemnified party shall give the indemnifying party notice
of such claim or action within thirty (30) days of the commencement
of, or actual knowledge by the indemnified party of, such claim or
action. The indemnifying party shall have no liability under this
Article for any claim or actions for which such notice is not
conveyed; provided, however, that so long as the indemnifying party is
not materially harmed by the indemnified party's failure to give
timely notice of a claim or action, then the indemnifying party's
indemnify obligation shall
13
<PAGE>
be unaffected. The indemnifying party shall, at its sole cost and
expense, defend any such claim or action; provided. however, that the
indemnified party shall, at its own cost and expense, have the right
to participate in the defense or settlement of any such claim or
action. The indemnified party shall not compromise or settle any such
claim or action without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
VIII.INSURANCE COVERAGE
1. Operator, on its behalf and on the behalf of all subcontractors of
Operator performing any on-site services in connection with the
operation and maintenance of the System or any of its appurtenant
equipment, shall procure and maintain in effect during the term for
which they perform services pursuant to this Agreement the following
minimum insurance coverages, in the given amounts:
a. Vehicle liability insurance covering all owned, non-owned and
hired automobiles, trucks, trailers and other vehicles. Such
insurance shall provide coverage not less than that of the
standard comprehensive automobile liability policy in limits not
less than $1,000,000 combined single limit each occurrence for
bodily injury and property damage. The Owner and NRG Generating
(U.S.) Inc. shall be named as additional insureds.
b. Workers' Compensation insurance that satisfies statutory
requirements and Employers' Liability Insurance with limits of
$1,000,000. This insurance shall include All States Coverage and
Longshoremen & Harbor Workers Compensation Act coverage (if
exposure exists.) The Employer's Liability Coverage shall not
contain an occupational disease exclusion.
c. Liability insurance, on an "Occurrence" basis and in a form
providing coverage not less than that of the standard Commercial
General Liability policy, covering operations of the System
including independent contractors, products and completed
operations, broad form property damage, blanket contractual
liability coverage (for any written or oral contracts related to
the System) and personal injury liability coverage for claims
arising out of the operations of the System for bodily injury,
property damage and personal injury with policy limits not low
than $1,000,000 combined single limit each occurrence and
$2,000,000 aggregate limit. The aggregate policy limits shall
apply solely to this project or site. Coverage shall include a
standard severability of interests clause and cross liability
coverage. The Owner and NRG Generating (U.S.) Inc. shall be
named as additional insureds.
d. Excess or umbrella liability insurance, on an "Occurrence"
basis and with coverage at least as broad as the vehicle
liability, employers' liability and general liability policies,
to provide limits of insurance in excess of Owner's vehicle
liability, employers liability and general liability policies for
not less than $10,000,000 combined single limit each occurrence
and in the aggregate for bodily injury. property damage and
personal injury. The aggregate policy limits shall apply solely
to this project or site. Coverage shall include a standard
severability of interests clause and cross liability coverage.
The Owner and NRG Generating (U.S.) Inc. shell be named as
additional insureds.
2. Owner shall procure and maintain in effect during the term of this
Agreement at its expense the following minimum insurance coverage:
14
<PAGE>
a. Vehicle liability insurance covering all owned, non-owned and
hired automobiles, trucks, trailers. and other vehicles. Such
insurance shall provide coverage not less then that of the
standard comprehensive automobile liability policy in limits not
less than $1,000,000 combined single limit each occurrence for
bodily injury and property damage. The Operator and NRG
Generating (U.S.) Inc. shall be named as additional insureds.
b. Workers' Compensation insurance (if required) that satisfies
statutory requirements and Employees' Liability Insurance with
limits of $1,000,000. This insurance shall include All States
Coverage and Longshoreman & Harbor Workers Compensation Act
coverage Of exposure exists.) The Employer's Liability Coverage
shall not contain an occupational disease exclusion.
c. Liability insurance, on an "Occurrence" basis and in a form
providing coverage not less than that of the standard Commercial
General Liability policy, covering operations of the System
including independent contractors, products and completed
operations, broad form property damage, blanket contractual
liability coverage (for any written or oral contracts related to
the System) and personal injury liability coverage for claims
arising out of the operations of the System for bodily injury,
property damage and personal injury with policy limits not less
than $1,000,000 combined single limit each occurrence and
$2,000,000 aggregate limit. The aggregate policy limits shall
apply solely to this project or site. Coverage shall include a
standard severability of interests clause and cross liability
coverage. The Operator and NRG Generating (L.I.S.) Inc, shall be
named as additional insureds.
d. "All Risk" Property Insurance, including Boiler and Machinery
Insurance and difference in conditions coverage (including flood
perils), with an extension for Business Interruption Coverage,
and naming Operator and NRG Generating (U.S.) Inc, as additional
insureds for all such insurance coverage as their interests
appear.
3. Within thirty (30) days after the date of execution of this
Agreement, each party shall provide to the other party, pursuant to
the notice provisions of Article XIV, properly executed certificates
of insurance, signed by an authorized representative of the insurance
carrier. These certificates shall provide the following information:
a. Name of insurance company, policy number and expiration date;
b. The coverage required hereunder and the limits on each covered
item, including the amount of deductibles and self-insured
retentions;
c. A statement indicating that sixty (60) days notice of
cancellation, non-renewal, or material change in coverage of any
of the policies shall be given to each named insured and any
additional insured; and
d. Named and additional insured.
4. Each party shall have the right to inspect and photocopy the
policies of insurance at the other party's place of business during
regular business hours. on reasonable prior written notice.
5. All insurance policies, including Workers' Compensation insurance,
provided by Owner and Operator shall waive all rights of subrogation
against one another and NRG .
15
<PAGE>
6. The provision of insurance shall not be construed to limit the
liability of any party to the other party.
7. All commercial insurance carriers providing insurance hereunder must
be rated A- or better, with a minimum size rating of VIII by Bests
Insurance Guide and Key Ratings or an equivalent rating by another
nationally recognized insurance rating agency of a standing similar to
Best.
8. All deductibles or self insured retentions associated with policies
required hereunder shall be the responsibility of the named insured.
IX. ENGAGEMENT OF THIRD PARTIES
Operator may engage or subcontract in the ordinary course of business and
at Owner's expense such persons, corporations or other entities as Operator
deems advisable for the purpose of performing or carrying out any of the
obligations of Operator under this Agreement. Except in the case of an
Emergency, before incurring an Expense under this Article IX In excess of
$10,000, Operator shall obtain the prior written approval from Owner.
X. OPERATOR REPORTING OBLIGATIONS
Operator shall provide Owner with copies of all reports generated by
Operator's or Operator's Affiliates' employees, agents, or subcontractors
with respect to the operation of the System that are filed with any
federal, state, or local agency or governmental entity. In addition,
Operator shall provide Owner with monthly compliance reports, summarizing
Operator's compliance with all System permits and licenses. The content of
the monthly compliance reports shall be agreed to by Owner and Operator on
or before June 15, 1996. All monthly compliance reports shall be delivered
to owner within ten (10) days after the last day of the relevant month.
XI. SPECIFIC LIMITATIONS
In the conduct of its duties hereunder, Operator shall not, without first
obtaining the written consent of Owner:
1. Limit on Expenditures. Under-take an expenditure outside Operator's
scope of responsibilities except that, in case of an Emergency,
Operator may make such immediate expenditures as may be necessary, but
notice of any such Emergency and expenditures shall be given to Owner
as promptly as possible, but in no case more than 12 hours after the
event.
2. Settlement of Claims. For any claim for which Owner is or may be
responsible, pay in excess of $10,000 in the settlement of any claim
for injury to or death of persons, or loss of or damage to property,
or in settlement of any contract or other dispute.
3. Disposition of Equipment. On Owner's behalf, sell or otherwise
dispose of any item of equipment which is part of or used in the
operating or maintaining the System if the current price of new
equipment similar thereto is in excess of $5,000.
4. Contracts with Affiliates. On Owner's behalf, enter into any
contract with an Affiliate of Operator with a value in excess of
$5,000.
XII. TERMINATION/DEFAULT
1. This Agreement may be terminated:
16
<PAGE>
a. By the non-defaulting party at any time following the occurrence
of any Event of Default, as described In this Article XII, if
such Event of Default is not cured within the period, if any,
provided therefor,
b. By Operator, if, after Operator has taken all reasonable efforts
to avoid regulation as a public utility, Operator's performance
under this Agreement renders Operator subject to regulation as a
public utility by any federal, state or local agency of any
governmental entity, by delivery of thirty (30) days' prior
written notice to Owner;
c. By Operator, if Owner's action or inactions under this Agreement
renders Operator subject to regulation as a public utility by any
federal, state or local agency of any governmental entity, by
delivery of thirty (30) days' prior written notice to Owner
d. By Owner for its convenience, upon ninety (90) days' written
notice to Operator provided that Owner pays Operator the
applicable termination charge in accordance with the provisions
of Exhibit D (no termination of this Agreement under this
provision may be effective until the third anniversary of the
Effective Date);
e. By Owner, if, at, on, or in connection with the operation and
maintenance of any part or all of either or both of (x) the
System or (y) the properties, plant or equipment operated by
Operator for NRG Generating (Newark) Cogeneration, Inc., Operator
falls to achieve and maintain compliance with all applicable
laws, permits, licenses, regulations, or orders of any
Governmental Authority; provided. however, that no failure of
Operator to perform its obligations under this Article XII,
Section 1 (e) shall be grounds for termination if such failure is
the result of the negligence of a third party other than
subcontractors of or procured by Operator or Operator's
affiliates or an act of Force Majeure, so long as Operator is
diligently pursuing a cure as required by this Agreement. Owner
may exercise its right of termination under this Article XII
action 1 (e), if and when Owner believes that Operator has failed
to achieve and maintain compliance with an applicable law,
permit, license, regulation or order, whether or not (s) a court
or administrative agency with competent jurisdiction has
determined that there has been such a failure or (t) a dispute
resolution process has determined that the failure was not the
result of either negligence of a third party other than
subcontractors or an act of Force Majeure which Operator is
diligently attempting to cure; provided, however, that following
any termination by Owner under this Article XII Section 1 (e), if
(u) a court or administrative agency, with competent jurisdiction
to assess a fine, penalty or other action for failures in
circumstances of the sort which were the basis of Owner's
termination, issues a final nonapealable order (or issues an
order for which all appeals periods have expired) determining as
a matter of both fact and law that the circumstances which were
the basis of Owner's termination did not constitute a violation
of any law, permit, license, regulation or order. or (v) a
dispute resolution process under Article XVIII determines that
the failure was the result of negligence of a third party other
then subcontractors or an act of Force Majeure which Operator is
diligently attempting to cure, then Owner shall pay Operator the
amount determined in accordance with Exhibit E.;
f. By the mutual agreement of the parties; and
g. By Owner, if the Amended Power Purchase Agreement is terminated
for any reason other then a default by Owner or an Owner
Affiliate.
17
<PAGE>
2. Owner shall be in default under this Agreement upon the happening or
occurrence of any of the following events or conditions, each of which
shall be deemed to be an Event of Default for purposes of this
Agreement:
a. Owner materially breaches any of Owner's obligations.
covenants, conditions, services or other responsibilities under
this Agreement unless within thirty (30) days after notice from
Operator specifying the nature of such breach, Owner either cures
such breach or, if such breach (other than the failure to make
payment obligations) cannot be cured within thirty (30) days,
Owner commences and diligently pursues such cure and thereafter
continues to diligently pursue such cure. If the breach is not
cured within 120 days of the date of Operator's written notice to
Owner, then Operator may terminate this Agreement;
b. There is an assignment for the benefit of Owner's creditors, or
Owner or its Parent company, NRG Generating (U.S.) Inc.. is adjudged
bankrupt, or a petition is flied by or against Owner or its parent
company under the provisions of any insolvency or bankruptcy laws
(and such petition is not dismissed within six months), or the
business or principal assets of Owner or its parent company are
placed in the hands of a receiver, assignee or trustee, or Owner is
dissolved, or Owner's existence is terminated or its business is
discontinued; or
c. Any material representation or warranty furnished by Owner in
connection with this Agreement was knowingly false or misleading
in any material respect at the time it was made.
3. Operator shall be in default under this Agreement upon the happening
or occurrence of any of the following events or conditions, each of
which shall be deemed to be an Event of Default for purposes of this
Agreement:
a. Operator materially breaches or falls to observe or timely
perform any of Operator's obligations, covenants, conditions,
services or responsibilities under this Agreement, unless within
thirty (30) days after notice from Owner specifying the nature of
such breach or failure, Operator either cures such breach or
failure or, if such breach cannot be cured within thirty (30)
days, Operator commences and diligently pursues such cure and
thereafter continues to diligently pursue such cure. If the
breach is not cured within 120 days of the date of Owner's
written notice to Operator, then Owner may terminate this
Agreement;
b. There is an assignment for the benefit of Operator's creditors,
or Operator is adjudged bankrupt, or a petition is filed by or
against Operator under the provisions of any insolvency or
bankruptcy laws (and such petition is not dismissed within six
months), or the business or principal assets of Operator are
placed in the hands of a receiver, assignee or trustee, or
Operator is dissolved, or Operators existence is terminated or
its business is discontinued; or
c. Any material representation or warranty furnished by Operator
in connection with this Agreement was knowingly false or
misleading in any material respect at the time when made.
Notwithstanding subsection (a) above, Operator (i) shall not be afforded
any cure period, (ii) will not be permitted to invoke or utilize the
Article XVIII Dispute Resolution provisions, and (iii) will be subject to
immediate termination if the termination of this Agreement is affected
under the language of Article XII, Section 1(e).
4. Upon the occurrence of an Event of Default, the non-defaulting party
may:
18
<PAGE>
a. Without recourse to legal process, terminate this Agreement by
delivery of a written notice of termination to the defaulting
party or its assigns; and/or
b. Pursue, concurrently or separately, other remedies existing in
law, any provision of this Agreement, or otherwise.
5. Upon termination or expiration of this Agreement, Operator
shall:
a. Deliver to Owner all books, records, operator logs, accounts and
manuals developed or maintained by Operator pursuant to this
Agreement, provided however, that Operator may retain copies of
such documents. Furthermore, Owner shall have the right to take
possession of all of the equipment, spare parts and supplies
purchased for the System and paid for by Owner,
b. At Owner's request and expense, cooperate with Owner to effect an
orderly transition of the operations and maintenance of the
System, including, without limitation, perform the following:
i. Continue to operate the System in accordance with this
Agreement for a period not to exceed 180 days while Owner
appoints and mobilizes a successor operator;
ii. Assist Owner in preparing an inventory of all material,
equipment, spare parts and supplies purchased for the
System; and
iii. Assign to Owner all Operator's contractual agreements with
third parties relating to the operations or maintenance of
the System, to the extent such agreements are so assignable.
XIII.ACCESS TO SYSTEM
Operator and Owner and their agents, representatives, and employees shall
have full and free access at all times to the System.
XIV. NOTICES
1. Any notice required or permitted under this Agreement shall be in
writing and shall be valid and sufficient if delivered personally,
mailed by registered or certified mail, or sent by a recognized
private overnight express delivery service. In each case postage
prepaid, return receipt requested, addressed to the other party as
follows:
If to Operator:
STEWART & STEVENSON OPERATIONS, INC.
2707 North Loop West
Houston, Texas 77008
Attn: Vice-President of North American Operations
Telephone: 713-803-0300
If to Owner:
NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 600
Minneapolis, Minnesota 55403
Attn: Chief Executive Officer
Telephone: 612-373-5300
19
<PAGE>
2. Any party may change its address, or add additional addresses, by
notice given to the other parties in the manner se forth above
20
<PAGE>
XV. FURTHER ASSURANCES
1. Owner and Operator agree to execute, acknowledge and deliver any and
all such further documents and instruments and to take such action as
may reasonably be required in order to allow the financing of the
System to proceed, to effectuate the purpose of this Agreement, and to
obtain any government permits, licenses, or approvals necessary or
convenient to accomplish the foregoing.
2. Title to all materials, equipment, supplies, consumables, spare
parts and other items purchased or obtained by Operator for the System
shall pass to and vest in Owner upon the passage of title from the
vendor or supplier thereof and the payment or reimbursement of
Operator's costs by Owner.
XVI. REPRESENTATIONS AND WARRANTIES
1. Owner represents and warrants to Operator as follows:
a. Owner is a corporation duly formed, validly existing, and in
good standing under the laws of Delaware, and it is properly
qualified to do business in New Jersey;
b. The execution of this Agreement has been duly authorized and
approved by Owner, and no other authorizations, approvals, or
consents are required in order for this agreement to constitute a
binding and enforceable legal obligation of Owner;
c. The execution of this Agreement by Owner, and the performance
of Owner's obligations under this Agreement will not conflict
with, or result in a breach or default under, any agreement,
contract, or covenant to which Owner is a party; provided,
however. that this provision is modified to be consistent with
Section 7 of the Agreement which is being executed
contemporaneously herewith as an inducement to the execution of
this agreement; and
d. This Agreement, as executed, constitutes a binding legal
obligation of Owner that is enforceable in accordance with its
terms and conditions.
2. Operator represents and warrants to Owner as follows:
a. Operator is a corporation duly incorporated, validly existing,
and in good standing under the laws of Delaware, and it is
properly qualified to do business in New Jersey;
b. The execution of this Agreement by Operator has been duly
authorized and approved by Operator and no other authorization,
approvals, or consents are required in order for this Agreement
to constitute a binding and enforceable legal obligation of
Operator;
c. The execution of this Agreement by Operator, and the
performance of its obligations under this Agreement will not
conflict with, or result in a breach or default under, any
agreement, contract, or covenant to which Operator is a party;
and
d. This Agreement as executed, constitutes a binding legal
obligation of Operator that is enforceable in accordance with its
terms and conditions.
XVII.FORCE MAJEURE
21
<PAGE>
1. Except for the obligation of either party to make any required
payments hereunder, the parties shall be excused from performing their
respective obligations under this Agreement and shall not be liable in
damages or otherwise if and to the extent that they are unable to so
perform or are prevented from performing by a Force Majeure, provided
that;
a. The non-performing party, as promptly as practicable after the
occurrence of the Force Majeure, but in no event later than 14
days thereafter, gives the other party written notice describing
the particulars of the occurrence;
b. The suspension of performance is of no greater scope and of no
longer duration than is reasonably required by the Force Majeure;
c. The non-performing party uses its best efforts to remedy its
inability to perform; and
d. As soon as the non-performing party is able to resume
performance of its obligations excused as a result of the
occurrence, it shall give prompt written notification thereof to
the other party.
2. Neither party shall be required to settle any strike, walkout,
lockout or other labor dispute on terms which, in the sole
judgment of the party involved in the dispute, are contrary to
its interest, it being understood and agreed that the settlement
of strikes, walkouts, lockouts or other labor disputes shaft be
entirely within the discretion of the party having such dispute.
XVIII. DISPUTE RESOLUTION
1. Resolution by Parties.
a. First Attempt. In the event that a dispute arises hereunder
between the parties, the parties shall attempt in good faith to
settle such dispute by mutual discussions within 30 days after
the date that a party gives written notice of the dispute to the
other party; provided, however, that if the dispute involves any
amount claimed under an invoice and after 10 days of mutual
discussion either party believes in good faith that further
discussion will not resolve the dispute to its satisfaction, such
party may immediately refer the matter to arbitration in
accordance with Section 2 of this Article XVIII.
b. Chief Executive Officers. In the event that the dispute is not
resolved in accordance with subsection 1 (a) above, either party
may refer the dispute to the chief executive officers or chief
operating officers of the respective parties for further
consideration. In the event that such individuals are unable to
reach agreement within 15 days, or such longer period as they may
agree, then either party may refer the matter to arbitration in
accordance with Section 2 of this Article XVIII.
2. Arbitration. In the event a dispute arises between Owner and
Operator which is not resolved pursuant to Section 1 of this Article
XVIII, shall be resolved by arbitration pursuant to the terms hereof.
As a condition to initiating arbitration proceedings, a party must
first have attempted to resolve the dispute under Section 1 of this
Article XVIII. All claims, disputes, and other matters in question
arising out of or relating to this Agreement or the breach thereof
shall be decided by arbitrators selected as hereinafter provided and
shall be conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then obtaining, unless the
parties mutually agree otherwise. The resolution of such disputes
shall not delay Operator's or Owner's performance of their undisputed
obligations under the terms of this Agreement. The
22
<PAGE>
arbitration shall be held in Newark, New Jersey and any arbitration
demand must be filed with the American Arbitration Association office
located closest to Newark, New Jersey. If the claim or defense of
either party is determined to be frivolous, the arbitrators may
require that the party at fault pay or reimburse the other party for
(i) fees and expenses, including. attorneys and expert fees and
expenses, and (ii) reasonable out of pocket expenses incurred by the
other party in connection with the arbitration proceedings.
Notwithstanding the foregoing, a termination of the Agreement under
the language of Article XII, Section 1 (e) shall not, under any
circumstances (except for disputes relating to the settlement of
payment obligations), be subject to arbitration under this Article
VXIII.
3. Selection of Arbitrators. Each dispute shall be submitted to three
arbitrators, one arbitrator being selected by Owner, one arbitrator
being selected by Operator, and the third arbitrator being selected by
the two so selected. The party initiating the arbitration shall
include in its notification under Section 4 below the designation of
its selected arbitrator and the party receiving such notification
shall designate its arbitrator within fifteen (15) days thereafter by
notify the initiating party and its arbitrator of the selection. If
the arbitrators selected by Owner and Operator cannot agree on a third
arbitrator within fifteen (15) days after the second arbitrator is
selected, the third arbitrator shall be selected by the American
Arbitration Association. In the event the party receiving
notification of a demand for arbitration shall not have selected its
arbitrator and given notice thereof to the other party and its
arbitrator within fifteen (15) days after receiving such notification,
such arbitrator shall be selected by the American Arbitration
Association.
4. Notice. Notice of demand for arbitration shall be filed in writing
with the other party to this Agreement and with the American
Arbitration Association. The demand shall be made within a reasonable
time after the claim, dispute or other matter in question has arisen.
In no event shall the demand for arbitration be made after the date
when the applicable statute of limitations would bar institution of a
legal or equitable proceeding based on such claim, dispute, or other
matter in question.
5. Award. This agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. The award rendered
by the arbitrators shall be final and judgment may be entered upon it
in accordance with applicable law in any court having jurisdiction
thereof.
6. Survival. This Article shall survive termination of this Agreement.
XIX. GENERAL PROVISIONS
1. Governing Law. This Agreement shall be governed by and construed
under the laws of New Jersey.
2. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3. Headings. Title and headings of the articles and sections of this
Agreement are for convenience of reference only and do not form a part
of and shall not in any way affect the interpretation of this
Agreement.
4. Amendment. No modification or amendment of this Agreement shall be
valid unless in writing and executed by both parties to this
Agreement.
23
<PAGE>
5. Assignment. This Agreement may not be assigned by Operator without
the written consent of Owner and written agreement of assignee whereby
it expressly assumes and agrees to perform each and every obligation
of Operator hereunder. Any assignment by Operator in violation hereof
shall be null and void. Owner may, without the consent of Operator,
assign its rights (but not its obligations) under this Agreement to or
by a lender (including finance lessor) providing funds to refinance
the System.
6. Successors and Assigns. This Agreement shall be binding and inure
to the benefit of the parties hereto and their respective successors
and assigns, to the extent that assignment is permitted under this
Agreement.
7. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, supersedes all prior representations, documents
or statements transmitted between the parties.
8. Consequential Damages. In no event will Owner or Operator have the
right, with or without legal process. to recover punitive or special
damages, or indirect or consequential damages, such as loss of use,
lost profits, costs incurred because of delays, cost of replacement
energy, "idle plant" costs, interest on borrowed money, letters of
credit, security deposits or bonds. In no event will Owner or
Operator be liable for representations, oral or otherwise, as to the
results intended to be achieved through its undertakings pursuant to
this Agreement, except as specifically provided in this Agreement.
9. Other Provisions. Nothing in this Agreement shall be construed to
prevent or prohibit Operator from providing operating services to any
other person, organization, or entity.
10. Waiver. The waiver of any breach of any term or condition hereof
shall not be deemed a waiver of any other or subsequent breach,
whether of like or different nature.
11. Not for Benefit of Third Parties. This Agreement and each and every
provision thereof is for the exclusive benefit of the parties to this
Agreement and not for the benefit of any third party.
12. Survival of Representations, Warranties and Indemnities. All
representations, warranties and indemnities of the parties set forth
in this Agreement shall survive the termination or expiration of this
Agreement.
13. Approval by Proposed Lender. If any provision of this Agreement must
be approved by a lender, lessor or equity investor in connection with
the financing of the System or any other action contemplated hereby,
and such lender requires any modification of the provisions of this
Agreement, neither owner nor Operator shall unreasonably withhold its
approval and execution of any such modifications.
14. Survival of Obligations. Termination of this Agreement for any reason
shall not relieve Owner or Operator of any obligation accruing or
arising prior to such termination.
15. Confidentiality. The parties shall hold in confidence, and shall use
only for the purposes of this Agreement, any and all Proprietary
information disclosed to each other.
16. Severability. Should any section or subsection hereof be declared
invalid or unenforceable for any reason, the remaining sections and
subsections of this Agreement shall remain in full force an affect,
and the parties hereto agree to immediately renegotiate in good faith
such section or subsection as was declared invalid or unenforceable.
24
<PAGE>
17. Duty to Mitigate. Each party must use its best efforts to mitigate
the injury or damage caused by the other party's failure to perform.
When a party seeking damages fails to make these efforts, the other
party shall be entitled to have the damages accordingly reduced.
18. Consent. Except in the case of an Emergency, when either party's
consent or approval is required, such consent or approval must be in
writing and given prior to the act for which such consent or approval
is sought.
19. Reasonableness. Except as expressly stated to be within the sole
discretion of any party, all consents or approvals required of either
party shall not be unreasonably withheld or delayed, nor shall any
acts or requests of a party be unreasonable in light of the
surrounding facts and circumstances.
20. Disclaimer, THE WARRANTIES EXPRESSLY PROVIDED BY OPERATOR HEREUNDER
ARE THE SOLE, INTENDED WARRANTIES AND OPERATOR HEREBY DISCLAIMS ALL
OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, ORAL, WRITTEN,
EXPRESS OR IMPLIED, INCLUDING ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ALL
WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
21. Limits on Liability. Notwithstanding any provision contained in this
Agreement to the contrary, for any Contract Year, Operator shall not
be liable to Owner (whether by contract, warranty, tort, statute or
otherwise, including Liquidated Damages or penalties owed by Operator
under this Agreement) for any amounts that in the aggregate exceed the
amount of the Operating Fee and Bonuses paid for the Contract Year in
which the claim is made. If a claim(s) is made after the end of the
term, then the claim(s) shall be deemed to have been made in the last
Contract Year of the term. The limits of liability set forth herein
shall not apply to any damages incurred by a party as a result of its
gross negligence or willful misconduct.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first set forth above.
OWNER:
NRG Generating (Newark) Cogeneration Inc.
By: /s/ Leonard Bluhm
Its: President
OPERATOR:
Stewart & Stevenson Operations, Inc.
By: /s/ Harvey Braswell
Its: VP North American OPS
25
<PAGE>
EXHIBIT A
BONUS/LIQUIDATED DAMAGES
For the purpose of determining the liquidated damages ("Liquidated
Damages") payable by Operator to Owner, or the bonus ("Bonus") payable by
Owner to Operator, the effectiveness of Operator under this Agreement shall
be measured in terms of both availability and heat rate. These
measurements shall be applied at the completion of each Contract Year to
determine the Liquidated Damages or Bonus for that Contract Year.
Availability. Operator shall undertake to operate the System to maximize
availability. Availability will be measured for the Base Capacity level,
as defined as 52 MWe (net). In each case the following formula will be
used:
Contract Availability =
[Total Hours - (Equivalent Contract Unavailable Hours)]
Total Hours
where:
Total Hours = total hours in the Contract Year; and
Equivalent Contract Unavailable Hours = total of all hours during the
Contract Year during which there occurred a full or partial Planned,
Forced, or Maintenance Outage, as those terms are defined by Edison
Electric Institute as Equivalent Availability (including outages resulting
from Force Majeure events, but excluding outages resulting from (x) JCP&L's
failure to supply natural gas to the Facility during periods when PSE&G has
not interrupted transportation that it supplies under the PSE&G Gas Supply
Agreement and (y) JCP&L's failure to accept available Output from the
Facility). Partial outages are measured on an equivalency basis, e.g., a
50% outage for one hour would be equivalent to a full outage for one-half
hour, and so forth.
Availability. For purposes of Bonus/Liquidated Damages availability
calculation, the target Base availability will be 95%, for the term of this
Contract. Each one tenth of one percent (0.1%) of availability will have a
value of $20,000 as a Bonus or Liquidated Damages for availability
measurement.
Heat Rate. For purposes of Bonus/Liquidated Damages heat rate
calculations, the heat rate incentive will be based on 9750 Btu per kwh
HHV, as calculated in accordance with Article A.9 of the Amended Power
Purchase Agreement, for the term of this Contract.
26
<PAGE>
LIQUIDATED DAMAGES AND BONUS
The Liquidated Damages payable by Operator to Owner and the Bonus payable
by Owner to operator shall be based on the Availability and Heat Rate
guarantees set forth in this Exhibit. For any Contract Year, the maximum
Liquidated Damages (in the aggregate for each category as adjusted by the
amounts of any Bonus payable to Operator) payable by Operator shall be no
more than one hundred percent(100%) of the Operator's Fee for such Contract
Year. For any Contract Year, once the aggregate Bonuses payable to
Operator (adjusted for the Liquidated Damages, if any, owed by Operator
equal $250,000, then any amounts in excess of $250,000 shall be payable to
Operator at a rate of 4O% of such excess. The availability and heat rate
Bonus/Liquidated Damages calculations will be determined monthly and will
be payable after the end of the Contract Year as set forth in the Amended
Power Purchase Agreement.
27
<PAGE>
EXHIBIT B
DESCRIPTION OF THE SYSTEM
(i) NEWARK SYSTEM
The facility is a combustion gas turbine-steam turbine combined-cycle,
topping cycle cogeneration facility.
The nominal rating is 52 MW electrical with average thermal output of
45,000 lbs/hr steam. The prime movers of the plant is one General Electric
Frame 6 dual fuel combustion turbine, driving a 54,000 kVA synchronous
generator with electrical output PH, 60 Hz and 13.8 kV.
The exhaust from the Frame 6 turbine is directed into a three drum (tri-
pressure) heat recovery steam generator ("HRSG"). The HRSG at full turbine
load and 59F ambient temperature produces when fired with 94.0 million
BtuHHV an hour of auxiliary filing, 227,000 lbs/hr of 600 psig, 700 F
steam; 23,000 lbs/hr of 285 psig/500 F steam; and 12,300 lbs/hr of 30 psig
D&S steam.
The 600 psig steam is directed to the condensing extraction steam turbine
which drives a 22,000 kVa synchronous generator with an electrical output
of 3PH, 60 Hz and 13.8 kV.
The 165 psig steam extracted from the steam turbine is directed into a
header from which 45,000 lbs/hr is directed to process to dry paperboard.
Thermal loads of the system vary seasonally +/- 5,000 lbs from an average
of 45,000 lbs/hr over the course of an 8760 hour year.
The plant will operate on natural gas under normal circumstances other then
interruptions due to curtailment of supply on extremely cold days.
Kerosene fuel is used as the alternate, approximately 480 hr/yr. Output of
the combustion turbine is controlled by sensing and maintaining a constant
optimum turbine exhaust temperature.
NOX emission from the plant are controlled by a combination of steam
injection into the combustion turbine and Selective Catalytic Reduction
using anhydrous ammonia injection with a semi-precious metal catalyst in
the HRSG. The plant is equipped with Continuous Emission Monitoring
equipment.
The interconnection points for the System are shown an identified an the
following diagram associated with this Exhibit.
28
<PAGE>
EXHIBIT C
SYSTEM CONTRACTS
NEWARK
Power Purchase Agreement dated 04/30/96
Transmission Service and Interconnection Agreement dated 11/17/87
Gas Service Agreement dated 04/30/96
Steam Purchase Agreement dated 10/03/86
Amended 03/08 & 07/20/88
Permits
Air Permit/Certification (Rental Boiler Stack) issued 03/11/93
Sewer Connection Permit issued 09/17/95
NJPDES General Permit issued N/A
Air Permit/Certification (Keeler Boiler Stack) issued 03/28/94
Air Permit/Certification (Fuel Oil Storage Tank) issued 08/13/90
Air Permit/Certification (Stack #1) issued 12/10/87
Stormwater Discharge Permit issued 10/15/93
29
<PAGE>
EXHIBIT D
TERMINATION FOR CONVENIENCE
Commencing on the third anniversary of the Effective Date, the Owner may
terminate this agreement for convenience as set forth In Article XII
Section 1 (d). The termination fee shall be $430,000 reduced pro-rata
based on the number of calendar days remaining in the Agreement term as the
numerator and 1096 calendar days as the denominator. The termination fee
will be adjusted accordingly for any pro-rated undisputed Bonus/Liquidated
Damage payments due on the Termination Date. This right of payment shall
be Operator's sole and exclusive remedy for any termination of the
Agreement by Owner under Article XII Section I (d) or the circumstances
that were the basis thereof or were related thereto.
30
<PAGE>
EXHIBIT E
TERMINATION UNDER ARTICLE XII SECTION 1(e)
Commencing on the Effective Date, the Owner has the right to terminate the
Agreement immediately as set forth in Article XII Section 1 (e). If Owner
exercises such termination right and Operator thereafter becomes entitled
to receive a payment from Owner under the language of the second of the
provisos of Article XII Section 1 (e), then the amount of the payment shall
be determined as follows: (i) if the termination occurs on the Effective
Date, then the amount of the payment shall be $860,000 for Newark or (ii)
if the termination occurs after the Effective Date, then the amount of the
payment shall be the product of the amount specified in clause (i) times a
fraction, the numerator of which is the number of calendar days remaining
in the term of the Agreement, measured from the date that Operator
surrendered control of the Project to Owner, and the denominator of which
is 2,191 calendar days. The amount of this payment shall be adjusted for
any prorated undisputed Bonus/Liquidated Damage payments due under the
terms of the Agreement on the date of termination. This right of payment
shall be Operator's sole and exclusive remedy for any termination of the
Agreement by Owner under Article XII Section 1 (a) or the circumstances
that were the basis thereof or were related thereto.
31
<PAGE>
EXHIBIT F
1996 Budget
SEE ATTACHED
32
<PAGE>
APPENDIX I
NEWARK
GUARANTEE OF OPERATOR'S OBLIGATIONS
BY STEWART & STEVENSON SERVICES, INC.
In consideration of, and as an inducement for NRG Generating (Newark)
Cogeneration, Inc. ("Owner") to enter into certain agreements with Stewart
& Stevenson Operations, Inc. ("Subsidiary"), Stewart & Stevenson Services,
Inc. hereby, irrevocably guarantees to Owner the Prompt performance and
payment when due, whether by acceleration or otherwise, of all obligations,
indebtedness, liabilities or undertakings according to the terms of the NRG
Generating (Newark) Cogeneration Inc./Stewart & Stevenson Operations, Inc.
Operating and Maintenance Agreement dated , 1996 and the Agreement
between Stewart & Stevenson Operations, Inc., NRG Generating (Newark)
Cogeneration Inc., NRG Generating (Parlin) Cogeneration Inc., NRG
Generating (U, S.) Inc., and Stewart & Stevenson Services, Inc. (the
"Agreements").
Subject to the terms and provisions herein set forth, the Guaranty is
continuing, absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Agreements, (b) any amendment to, waiver
of or consent to, departure from, or failure to exercise any right or
remedy under the Agreements, (c) any acceptance of partial payment or
performance of any of the guaranteed obligations, (d) any release,
application or amendment of or consent to departure from any security or
guaranty therefor, (e) any assignment of this Guaranty, (f) the insolvency,
bankruptcy, dissolution or liquidation of Subsidiary or any change in
ownership of Subsidiary, or (g) any other circumstance of a similar or
different nature which might otherwise constitute a defense available to
Subsidiary or the undersigned except as to the legal rights and defenses of
Subsidiary watch arc provided for under the Agreements. Notice of
acceptance of the Guaranty is hereby waived, and this Guaranty shall remain
in full force and effect up to and including the expiration of the
Agreements.
The Guarantor waives promptness, diligence, any and all demands for
payment, any notice of credits extended and shipments of merchandise made
hereunder, and all other notices whatsoever. The Guarantor consents to any
extensions of time for the payment of said account, to any changes in the
terms of any settlement or adjustment thereof and to any changes in the
terms of the Agreements. No delays on the part of Owner in the exercise by
Owner of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. No actions of
Subsidiary shall in any way impair or affect this Guaranty.
If Subsidiary defaults in the payment of any amounts due or in the
performance of any other obligation under the Agreements, the Guarantor
shall (a) pay upon demand (i) any sum due and to become due, (ii) any
damages, costs and expenses entitled to be recovered from Subsidiary by
reason of such default, and (iii) reasonable attorneys' fees and all costs
and other expenses incurred as a result of any such default or in enforcing
this Guaranty and (b) upon demand, perform or cause such obligation to be
performed. This
33
<PAGE>
Guaranty is a guarantee of payment and not of collection and no action need
be brought against Subsidiary as a precondition to the enforcement of this
Guaranty.
This Guaranty shall be binding upon the Guarantor and its successors
and assigns and shall be for the benefit of the person named above, its
successors and assigns. Should any one or more of the provisions of the
Guaranty be determined by a court of competent jurisdiction to be illegal
or unenforceable, all other provisions shall remain effective.
This Guaranty shall be governed by and construed under the laws of the
State of New Jersey.
IN WITNESS WHEREOF, this Guaranty has been duly executed this _ day
of , 1996.
STEWART & STEVENSON SERVICES, INC.
By: /s/
Title:
34
<PAGE>
APPENDIX II
[attach Existing O&M Agreement)
35
<PAGE>
APPENDIX III
[attach the Amended and Restated Agreement for Purchase and Sale of
Electric Power]
36
<PAGE>
Exhibit 10.16.2
AGREEMENT
This Agreement dated as of May 1, 1996 (the "Agreement") is entered
into by and among Stewart & Stevenson Operations, Inc. ("SSOI"), NRG
Generating (Newark) Cogeneration Inc. ("NRGG (Newark)"), NRG Generating
(Parlin) Cogeneration Inc. ("NRGG (Parlin)"), NRG Generating (U.S.) Inc.
("NRGG"), and Stewart & Stevenson Services, Inc. ("SSSI").
RECITALS
WHEREAS, SSOI and O'Brien (Newark) Cogeneration, Inc. ("O'Brien
(Newark)") entered into an Operation and Maintenance Contract dated January
12, 1994 ("O'Brien (Newark) O&M Contract");
WHEREAS, SSOI and O'Brien (Parlin) Cogeneration, Inc. ("OBrien
(Parlin)") entered into an Operation and Maintenance Contract dated April
1, 1994 ("O'Brien (Parlin) O&M Contract" and, together with the O'Brien
(Newark) O&M Contract, the "O'Brien O&M Contracts")';
WHEREAS, on or about September 28, 1994, the parent company of O'Brien
(Newark) and O'Brien (Parlin), O'Brien Environmental Energy, Inc,
("O'Brien), filed for relief under Chapter 11 and Title 11 of the United
States Bankruptcy Code in United States Bankruptcy Court in the District of
New Jersey (the "Court") commencing in re O'Brien Environmental Energy,
Inc., Case No. 94-26723 (RG) (the "Chapter 11 Case");
WHEREAS, NRG Energy. Inc. ("NRGE") was approved by the Court to
acquire a substantial interest in O'Brien pursuant to the plan approved by
the Court on or about February 22, 1996;
WHEREAS, NRGE closed its acquisition of a substantial interest in
O'Brien on April 30, 1996 and caused O'Brien to be renamed as NRGG;
WHEREAS, O'Brien (Newark) and O'Brien (Parlin), respectively, are now
known as NRGG (Newark) and NRGG (Parlin), respectively;
WHEREAS, SSOI and NRGG (Newark) are currently negotiating an operating
and Maintenance Agreement (the "NRGG (Newark) O&M Agreement") which will
replace the O'Brien (Newark) O&M Contract;
WHEREAS, SSOI and NRGG (Parlin) are currently negotiating an Operating
and Maintenance Agreement (the "NRGG (Parlin) O&M Agreement" and, together
with the NRGG (Newark) O&M Agreement, the "NRGG O&M Agreements") which will
replace the O'Brien (Parlin) O&M Contract;
<PAGE>
WHEREAS, there are currently unresolved issues under the O'Brien O&M
Contracts, which SSOI, NRGG (Newark) and NRGG (Parlin) desire to resolve
prior to entering into the NRGG O&M Agreements; and
WHEREAS, SSOI, NRGG (Newark), NRGG (Parlin), NRGG and SSSI desire to
enter into this Agreement to memorialize their settlement as to the issues
addressed below and as an inducement to and condition of their entering
into the NRGG O&M Agreements,
NOW, THEREFORE, in consideration of mutual covenants contained herein,
the parties agree as follows:
1. Specialty Handtools.
a. NRGG (Newark) agrees to pay SSOI the lesser of the audited value
of the specialty handtools identified under SSOI Invoice Nos. 53001883,
dated July 31, 1994, 53001997, dated September 30,1994, 53001614 dated June
9, 1994, 53001709 dated March 1, 1994, 53001719 dated June 30, 1994,
53001779 dated 7/31/94, 53002154 dated 10/31/94, or $100,000 (the least of
such amounts being referred to as the "Audited Value").
b.: NRGG (Parlin) agrees to pay SSOI the lesser of the audited value
of the specialty handtools identified under SSOI Invoice Nos. 53001991,
dated August 31, 1994 53001608 dated June 3 1994, 53001714 dated June 30,
1994, and 53001795 dated 7/31/94, or S100,000 (the least of such amounts
being referred to as the Audited value).
c. The Audited Values owed respectively by NRGG (Newark) and NRGG
(Parlin) under this Section 1 shall be due and payable only add completion
of audits conducted respectively by or on behalf of NRGG (Newark) and NRGG
(Parlin), establishing the type, quantity, and value of the Newark and
Parlin specialty handtools. NRGG (Newark) and NRGG (Parlin) shall cause
their respective audits to be completed by August 1. 1996.
d. The amounts owed by NRGG (Newark) and NRGG (Parlin) under this
Section 1 shall be paid as follows:
(i) The annual Operating Fee (as defined in each NRGG O&M
Agreement) will be increased for NRGG (Parlin) and NRGG
(Newark), respectively, by an amount equal to one-sixth
(16.67%) of each location's annual Operating Fee until
each location's Audited Value amount is paid in full;
2
<PAGE>
and
(ii) If NRGG (Newark) and/or NRCYG (Parlin) elects to
terminate its agreements other than for cause of either
NRGG O&M Agreement, then on or before the effective
date of such termination NRGG (Newark) and/or NRGG
(Parlin), as the case may be, shall pay in full the
unpaid balance of each location's Audited Value.
e. NRGG (Newark) and NRGG (Parlin) shall have the right to pay the
unpaid balance of the Audited Value in full in advance without penalty or
premium. Except as provided in either NRGG O&M Agreements for interest on
late payments, them shall be no interest payable on any portion of the
payments owed to SSOI under this Section 1.
f. Upon payment in full of their respective Audited Values, NRGG
(Newark) or NRGG (Parlin) shall automatically obtain and thereafter have
title to all of the specialty handtools identified on the invoices
referenced above. Also, the Operating Fee for each shall be readjusted
downward, to reflect such Payment.
2. Bonus.
a. Notwithstanding the fact that NRGG (Newark) and SSOI may enter
into the NRGG (Newark) O&M Agreement before the expiration of the Agreement
Year (as defined in the O'Brien (Newark) O&M Contract), NRGG (Newark)
agrees to pay SSOI a Bonus (as defined in the O'Brien (Newark) O&M
Contract). The amount of the Bonus shall be calculated under the terms of
the O'Brien (Newark) O&M Contract through April 30,1996, provided, however,
that the amount of the Bonus shall under no circumstances exceed $338,000.
b. SSOI will promptly invoice NRGG (Newark) for the Bonus after the
effective due of the NRGG (Newark) O&M Agreement.
c. There shall not be a bonus payable to SSOI from NRGG (Parlin).
3. Accounts Receivable.
a. Each of NRGG (Newark) and NRGG (Parlin) acknowledges obligations
to pay certain outstanding accounts receivable under the O'Brien (Newark)
O&M Contract and O'Brien (Parlin) O&M Contract, respectively. As of April
30.1996, the outstanding
3
<PAGE>
accounts receivable (the "Accounts Receivable") are: for Newark $333,682.20
and for Parlin $672,333.40.
b. SSOI acknowledges that it has suffered budget cap overages for
the Agreement Year (as defined in the O'Brien O&M Contracts) ending June
30, 1995. The amount of the budget cap overages are: for Newark,
$138,112.80 and for Parlin $217,087.24. SSOI agrees to offset dollar for
dollar, against the Accounts Receivable for the applicable plant, the
budget cap overages for such plant. Therefore, the parties agree that the
amounts to be paid by NRGG (Newark) and NRGG (Parlin) in full satisfaction
of its respective Accounts Receivable are as follows:
NRGG (Newark) $333,692.20 Outstanding accounts
receivable as of 4/30/96
($139,112.80) Credit for budget cap overage
for 1995
$195,570.40 Total amount payable as of
4/30/96
NRGG (Parlin) $672,393.40 Outstanding accounts
receivable as of 4/30/96
($217,097.24) Credit for budget cap overage
for 1995
$455,296.16 Total amount payable as of
4/30/96
c. The total amount of the Accounts Receivable owed by NRGG (Newark)
and NRGG (Parlin) shall be payable in three (3) equal, consecutive monthly
installments of: $65,190.13 for Newark and $151,765.39 for Parlin,
beginning June 1, 1996. Should either NRGG (Newark) or NRGG (Parlin) fail
to timely pay its Accounts Receivable, then SSOI may immediately and
retroactively charge such party interest as provided in the applicable
O'Brien O&M Contract, but otherwise no interest shall be owed.
d. This Section 3 shall. not be construed as a compromise by SSOI or
SSSI of rights, if any, that Calpine Corporation may enjoy by reason of any
accounts payable of O'Brien (Newark) Or O'Brien (Parlin) that SSOI or SSSI
may have sold to Calpine Corporation..
4
<PAGE>
4. Environmental Matters.
Payment at any time of any fine or penalties payable to any state
or the United States as a result of SSOI's failure prior to the
date hereof to operate and maintain either or both of the
Projects (as defined in the O'Brien O&M Contracts) in accordance
with Requirements of Law (as defined in the O'Brien O&M
Contracts) or Approvals and Permits (as defined in the O'Brien
O&M Contracts) applicable to the operation and maintenance of
either or both of the Projects shall be the sole responsibility
of SSOI and such fines or penalties shall not result in any costs
to be borne by NRGG (Newark), NRGG (Parlin) or NRGG.
5. Guarantee.
a. By signing in the space provided below, NRGG hereby
guarantees the prompt performance in payment when due, of
the indebtedness, liabilities and undertakings of NRGG
(Newark) and NRGG (Parlin) according to the terms of this
Agreement. This guarantee is continuing, absolute and
unconditional. This guarantee is a guarantee of payment and
not collection and no action or demand need be made or
brought against the entity whose obligations arc guaranteed
as a precondition of enforcement.
b. By signing in the space provided below, SSSI hereby
acknowledges that the Guarantee which guarantees SSOI's
obligations under each of the NRGG O&M Agreements, dated as
of , by and among SSSI, NRGG (Newark) and NRGG
(Parlin), shall also guarantee prompt performance of SSOI's
obligations under this Agreement.
6. Settlement of Payment Obligations.
Except as expressly set forth in this Agreement, none of NRGG
(Newark), NRGG (Parlin), or SSOI shall have any obligation to
make any payment of any funds to any of the others of than under
either or both of the O'Brien O&M Contracts or any provision or
provisions thereof, provided, however, that this provision shall.
not be construed as a compromise by SSOI or SSSI of rights, if
any, that either or both of them may enjoy by reason of any
agreements heretofore made by O'Brien (Newark) or O'Brien
(Parlin) with Calpine Corporation.
7. Financing Agreements.
NRGG, NRGG (Newark) and NRGG (Parlin) represent that their
execution of this Agreement will not violate any Financing
Agreement (as
5
<PAGE>
defined in the NRGG O&M Agreements) executed on or subsequent to
the date hereof
8. No Conditions Precedent.
The effectiveness of this Agreement is not conditioned upon the
consent of the Agent (as defined under the NRGG O&M Agreements)
or any lender. This Agreement will be executed simultaneously
with the NRGG O&M Agreements.
9. Cooperation in Refinancing.
Should NRGG (Newark) and/or NRGG (Parlin) decide to refinance,
SSOI and SSSI agrees to execute the documents reasonably
requested by their lender to effectuate such refinancing,
including without limitation, consents to assignment of the NRGG
O&M Agreements and any guarantees given by SSOI in connection
with either or both of the NRGG O&M Agreements. This provision
shall apply to the refinancing that NRGG (Newark) and NRGG
(Parlin) are currently negotiating with Credit Suisse.
10. General.
This Agreement shall be governed by and construed under the laws
of New Jersey. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
No modification or amendment of this Agreement shall be valid
unless in writing and executed by all parties to this Agreement.
This Agreement shall be binding and inure to the benefit of the
parties hereto and their respective successors and assigns. The
waiver of any breach of any term or condition hereof shall not be
deemed a waiver of any other or substantive breach, whether of
like or different nature.
[End of document text - next page contains signature blocks]
6
<PAGE>
STEWART & STEVENSON OPERATIONS, INC.
/s/ Harvey Braswell
(b) Harvey Braswell
Vice President - North American Operations
NRG GENERATING (NEWARK) COGENERATION INC.
By: /s/ Leonard Bluhm
Name:
Title:
NRG GENERATING (PARLIN) COGENERATION INC.
By: /s/ Leonard Bluhm
Name:
Title:
NRG GENERATING (U.S.) INC.
By: /s/ Leonard Bluhm
Name:
Title:
STEWART & STEVENSON SERVICES, INC.
By: /s/
Name:
Title:
<PAGE>
Exhibit 10.16.3
[Letterhead]
NRG Generating (U.S.) Inc.
1221 Nicollet Mall
Suite 700
Minneapolis, MN 55403-2445
Telephone (612) 373-5305
Fax (612) 373-8833
May 20, 1996
Mr. Harvey A. Braswell
Stewart & Stevenson Operations, Inc.
2707 North Lake West, 2nd Floor
Houston, TX 77008
Re: Auxiliary Boilers - NRG Generating (Newark) Inc.
Dear Harvey,
Please refer to that certain NRG Generating (Newark) Inc./Stewart &
Stevenson Operations, Inc. Operating and Maintenance Agreement, dated as of
May 1, 1996 (the "Newark O&M Agreement") between NRG Generating (Newark)
Inc. ("NRG Newark") and Stewart & Stevenson Operations, Inc. ("SSOI").
This letter is to confirm the mutual understanding and agreement of NRG
Newark and SSOI that the term "System" as used in the Newark O&M Agreement
includes any auxiliary boiler (and any replacement boiler) used to meet NRG
Newark's obligations under the Amended Power Purchase Agreement or the
Steam Purchasing Agreement dated October 3, 1986, as amended, between NRG
Generating (Newark) and Newark Group Industries Inc. ("Newark Group"), so
long as such boiler is located within the boundaries of the Newark Group
facilities located on Blanchard Street regardless of whether such boiler is
regarded as owned by NRG Newark or Newark Group. It is also our mutual
understanding and agreement that SSOI will operate and maintain the Newark
auxiliary boiler under the terms of the Newark O&M Agreement as modified by
this letter.
Nevertheless, we acknowledge that NRG Newark's current auxiliary boiler is
currently mounted on a movable skidmounting system and that arrangements
are being made by NRG Newark with Newark Group to create a permanent
mounting for it. We recognize that SSOI's budgets underlying the NRG
Newark Agreement did not include the operation and maintenance costs
related to the auxiliary boiler. Consequently, until the auxiliary boiler
is permanently installed as contemplated above, NRG Newark will pay the
operation and maintenance costs outside of SSOI's budget cap under the NRG
Newark Agreement to the extent that SSOI can separately identify and
document operation and maintenance costs specifically related to operation
and maintenance of the auxiliary boiler. Additionally, NRG Newark will pay
the costs incurred in moving the auxiliary boiler to its permanent
installation site.
Subsequent to the permanent installation of the boiler to occur on or about
October 4, 1996 and prior to the effective date of the 1997 budget (January
1, 1997) at which time agreement will have been reached on costs to be
included in the 1997 budget, all parties agree to review Exhibit F of the
Newark O&M Agreement, the Operating Budget, and
<PAGE>
initiate a Change Order Budget Statement as defined in the NRG Newark O&M
Agreement to accommodate those variable, incremental O&M costs resulting
from the inclusion of the auxiliary boiler as part of the System. The
incremental costs for the partial 1996 period referenced here are those
that are in excess of 1996 Exhibit F Budget estimates for variable costs
over amounts that would have been incurred.
It is understood that the permanent installation of the auxiliary boiler in
the Newark Group facility will encompass interconnection (mechanical and
electrical) to various Newark Group systems not under control of the
Operator. Owner and Operator agree to review the final installation to
define where Operator scope ends and Newark Group's scope begins with
regard to the auxiliary boiler installation.
SSOI will not be held accountable for damages, repairs, or emission
excedences resulting from unavailability of, or the malfunction of, all
equipment outside of those connections defined as "customer connection".
NRG Newark agrees to indemnify, defend, and hold SSOI and Stewart &
Stevenson ("SSSI") harmless for all damages arising out of the negligent
acts or omissions of Newark Group, its affiliates, employees,
representatives, and contractors.
Furthermore is recognized that SSOI will require 24 hour unrestricted
access to the auxiliary boiler and necessary connections on Newark Group's
property, and NRG Newark agrees to immediately obtain all agreements from
Newark Group to ensure SSOI has such access. SSOI will not be in default
under the NRG Newark O&M Agreement resulting from a lack of access to the
auxiliary boiler and necessary connections.
If the auxiliary boiler package is owned by Newark Group then as an express
condition to SSOI's performance of its obligation under this letter
agreement, NRG Newark shall provide or obtain from Newark Group a
certificate of insurance naming SSOI and SSSI as additional insured on
Newark Group's general liability, excess liability and boiler and machinery
insurance policies, each of which shall be in an amount no less than those
required under the NRG Newark O&M Agreement for such coverages. Such
insurance shall also include waivers of subrogation in favor of SSOI and
SSSI and shall not be canceled or modified except upon 30 days' written
notice.
SSOI agrees to furnish NRG Newark a spare parts list for the auxiliary
boiler to allow operation consistent with good industry practice. Such
costs for procurement will be regarded as initial inventory and will be to
the NRG Newark's account and will not affect SSOI's budget caps as defined
in the NRG Newark O&M Agreement.
NRG Newark agrees to provide or to cause Newark Group to provide all
permits pertinent to the operation and maintenance of the auxiliary boiler
for SSOI's review no less than 10 business days prior to commercial
operation of the auxiliary boiler, regardless of eventual ownership of
auxiliary boiler.
NRG Newark recognizes that the auxiliary boiler will be in an unsecured
environment not with SSOI's control. SSOI shall have no responsibility for
security for the auxiliary boiler and NRG Newark releases SSOI from any
liability for damage to the auxiliary boiler except to the extent such
damage results from the negligent operation and maintenance thereof.
<PAGE>
NRG Newark acknowledges that the auxiliary boiler will be located in an
area at the Newark Group facility which may contain unknown environmental
concerns over which SSOI has not control and NRG Newark shall be solely
responsible for ensuring such areas in full compliance with all applicable
laws, permits, and regulations.
SSOI shall not be responsible or liable for, and it shall not constitute an
event of default under the NRG Newark O&M Agreement, the failure of such
area on the auxiliary boiler to comply with such applicable laws,
regulations and permits.
This letter is intended as a clarifying amendment to the NRG Newark
Agreement. Accordingly, the NRG Newark Agreement is hereby amended to
reflect the terms hereof and, except as explicitly stated above, shall
continue in full force and effect in accordance with its provisions.
Additionally, the provisions of Article XIX of the NRG Newark Agreement are
hereby incorporated into this letter as if they were separately stated
herein.
If this letter accurately sets forth the terms of our understanding, please
so indicated by executing a copy of this letter in the space provided
below.
Yours very truly,
NRG GENERATING (NEWARK) COGENERATION
By: /s/ Leonard Bluhm
Name: Leonard A. Bluhm
Title: President
ACKNOWLEDGED AND AGREED TO:
STEWART & STEVENSON OPERATIONS, INC.
By: /s/ Harvey A. Braswell
Name: Harvey A. Braswell
Title: Vice President
<PAGE>
Exhibit 10.17.2
FIRST AMENDMENT TO AGREEMENT
FOR PURCHASE AND SALE OF ELECTRIC POWER
This FIRST AMENDMENT, dated as of June 11, 1991 ("Amendment") to the
Agreement of Purchase and Sale of Electric Power, dated October 28, 1986,
("Agreement") between O'BRIEN ENERGY SYSTEMS, INC. ("Seller") and JERSEY
CENTRAL POWER & LIGHT COMPANY ("JCP&L").
WHEREAS, the Agreement provides for the purchase by JCP&L of the
capacity and energy from a project being developed by SELLER at the DuPont
(Parlin) New Jersey plant site; and
WHEREAS, the Agreement was assigned to O'Brien (Parlin) Cogeneration,
In by SELLER on December 1, 1988 which assignment was consented to by JCP&L
on December 1, 1988; and
WHEREAS, the Parties now desire to ratify and amend the Agreement in
certain respects and make certain modifications thereto;
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Parties hereby agree as follows:
1
<PAGE>
1. Definition of "Company Availability Factor": A new Article 3.7.5
is added to read as follows: "Company Availability Factor" means the
weighted average of the Equivalent Availability of all the Company's non-
nuclear electric generating facilities.
2. Definition of "Contract Capacity": The definition of "Contract
Capacity" in Article 3.8 of the Agreement is amended to read as follows:
"When Operating Status Option I is selected, "Contract Capacity" means the
maximum summer peak season (92 F ambient air temperature or 78 F incoming
condensing water temperature) producing capability of the Generating
Facility, as specified in Paragraph 5A of Preface A to this Agreement, that
Seller shall demonstrate according to PJM guidelines in MWH/Hr. When
Operating Status Option II is selected, "Contract Capacity" means the
maximum summer peak season (92 F ambient air temperature or 78 F incoming
condensing water temperature) producing capability of the Generating
Facility consisting of three components: the "Base Contract Capacity"
which shall equal 92 megawatts; the "Supplemental Schedule A Capacity"
which shall represent capacity in excess of the Base Contract Capacity as
determined by the Seller in accordance with Article 6.18, and the
"Supplemental Schedule B Capacity" which shall represent capacity in excess
of the sum of the Base Contract Capacity and Supplemental Schedule A
Capacity.
2
<PAGE>
Supplemental Schedule B Capacity will be established by the Seller on a
daily basis.
3. Definition of "Date of Initial Commercial Operation": The
definition of "Date of Initial Commercial Operation" in Article 3.9 is
hereby amended to read as follows: "Date of Initial Commercial Operation"
means the date specified by the Seller and agreed to by JCP&L after the
Seller has completed start-up and testing including the acceptance test of
the Generating Facility by the engineering/construction firm, which date
shall not precede the Initial Delivery Date. The Seller shall notify JCP&L
of the proposed Date of Initial Commercial Operation upon not less than 30
days prior written notice. JCP&L's approval of such date shall not
unreasonably be withheld.
4. Definition of "Dispatchable Capacity": A new Article 3.9.5 is
added to read as follows: "Dispatchable Capacity" means the total hourly
output of the Supplemental Schedule A Capacity and Supplemental Schedule B
Capacity.
5. Definition of "Equivalent Availability" and "Facility
Availability Factor": New Articles 3.10.1 and 3.10.2 are added to read as
follows: "Equivalent Availability" means the percentage of hours that a
generating unit is available to operate taking into account any partial
outage time as determined in accordance with
3
<PAGE>
the methodology set forth in Appendix III. "Facility Availability Factor"
means the Equivalent Availability of the Facility.
6. Definition of "Forced Outage": A new Article 3.10.5 is added to
read as follows: "Forced Outage" means the unscheduled removal of the
Generating Facility or a portion thereof from service or the inability of
the Generating Facility to operate in accordance with the capacity-
temperature tables included as Appendix II.
7. Definition of "GPU System": A new Article 3.11.5 is added to
read as follows: "GPU System" means the integrated electric generating
system of General Public Utilities Corporation, a Pennsylvania corporation,
which is the parent of JCP&L.
8. "Maintenance Outage": A new Article 3.17.5 is added to read as
follows: "Maintenance Outage" means the scheduled removal of the
Generating Facility from service in order to perform necessary repairs on
specific components of the Generating Facility where removal of the
Generating Facility can be postponed to the weekend past the immediately
succeeding weekend. A Maintenance Outage must be scheduled with PJM
through JCP&L and be accepted by JCP&L and PJM.
4
<PAGE>
9. Definition of "Maximum Hourly Production". The definition of
"Maximum Hourly Production" in Article 3.19 is hereby amended to read as
follows: When Operating Status Option I is selected, "Maximum Hourly
Production" shall equal 92 megawatt hours per hour. When Operating Status
Option II is selected. "Maximum Hourly Production" shall equal a base
component of 92 megawatt hours per hour and a dispatchable component [in
megawatt hours per hour] consisting of the total of Supplemental Schedule A
Capacity and Supplemental; Schedule B Capacity. Maximum Hourly Production
shall not exceed, in any event, 140 MWH per hour.
10. Definition of "Net Electric Energy". The definition of "Net
Electric Energy" in Article 3.20 is hereby amended to read as follows:
"Net Electric Energy" or "Electricity" means the gross amount of
electricity in kilowatt hours (kWh) generated by Seller's Generating
Facility less kWh consumed by the Host and Seller's Generating Facility and
less transformation and transmission losses, if any, to the point of
Interconnection.
11. Definitions for "On-Peak Hours" and "Off-Peak Hours":
(a) A new Article 3.20.5 is added to read as follows: "Off-Peak
Hours" means all hours other than On-Peak Hours.
5
<PAGE>
(b) A new Article 3.21.5 is added to read as follows: "On-Peak
Hours" means all hours from 8 a.m. to 8 p.m., prevailing time, Monday
through Friday, 52 weeks per year other than New Years Day, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas.
12. Definition of "On-Peak Period". The definition of "On-Peak
Period" in Article 3.22 is hereby amended to read as follows: "On-Peak
Period" means all hours from 8 a.m. to 8 p.m., prevailing time, Monday
through Friday, during the months of December through February and June
through September, other than New Years Day, Independence Day, Labor Day
and Christmas.
13. Definition of "PJM" or "PJM System". A new Article 3.26.3 is
added to read as follows:
"PJM" or "PJM System" means the Pennsylvania/New Jersey/Maryland
Interconnected Power Pool cooperatively operated under the Pennsylvania/New
Jersey/Maryland Interconnection Agreement dated as of September 26, 1956 as
amended or supplemented from time to time.
14. Definition of "Planned Outage" and Amendments to Articles 3.32
and 3.36. A New Article 3.26.5 is added to read as follows:
"Planned Outage" means the scheduled removal of the Generating
Facility from service for inspection or repair. A
6
<PAGE>
Planned Outage must be scheduled by the Seller 2 months in advance and be
approved by JCP&L and PJM.
Articles 3.22 and 3.36 are deleted in their entirety.
15. Definition of "Scheduled Dispatch Period", "Shut Down Period" and
"Start-Up Period". New Articles 3.31.5, 3.32.5, and 3.35.5 are hereby
added to read as follows:
"Scheduled Dispatch Period" means the time duration of a request for
delivery of output in excess of the Base Contract Capacity (92 MW)
beginning and ending at the time specified by JCP&L. Such periods are
exclusive of Start-Up and Shut-Down Periods and shall require thirty
minutes notice in advance of commencement of a Start-Up Period.
"Shut-Down Period" means the period, as determined by test, necessary
to return the Generating Facility to Base Contract Capacity in accordance
with good engineering practice and manufacturer's recommendations
immediately following a Scheduled Dispatch Period.
"Start-Up Period" means the period, as determined by test, necessary
to ramp up the dispatchable portion of the Generating Facility and reach
steady state operation in a
7
<PAGE>
manner consistent with good engineering practice and manufacturer's
recommendations immediately preceding a Scheduled Dispatch Period.
16. Amendment to Article 4.1. Article 4.1(B) is hereby amended to
read as follows: Notwithstanding the preceding paragraph and subject to
the "force majeure" provisions stated in Article 12 hereof, JCP&L may
terminate this Agreement by providing Seller 45 days written notice if the
Date of Initial Commercial Operation has not occurred prior to February 28,
1992."
17. Amendment to Article 5.3 (Interconnection Facility and Protective
Apparatus Design and Construction): The following language is added to
Article 5.3 following the second full sentence thereof: "Seller shall also
reimburse JCP&L for all reasonable costs associated with the routine
maintenance of interconnection equipment on JCP&L's side of the Point of
Interconnection. Upon thirty days notice by Seller, prior to the planned
Date of Initial Commercial Operation and on each subsequent anniversary of
such Date of Initial Commercial Operation, JCP&L shall provide an estimate
(for planning purposes only) and a description of the work to be performed
in the succeeding year to conduct routine maintenance of interconnection
equipment on JCP&L's side of the Point of Interconnection."
8
<PAGE>
18. Amendment to Article 5.6 (Interconnection Facility and Protective
Apparatus Design and Construction): Article 5.6 is hereby added and reads
as follows:
"5.6: Seller shall indemnify, hold harmless and agrees to defend
JCP&L from and against any and all liability, loss, cost and expense,
associated with any and all Federal, State and/or local income tax
liability, arising out of or connected with the transfer from the Seller to
JCP&L of the Seller's Interconnection Facilities, Protective Apparatus,
Special Facilities and/or any and all associated and/or related structures,
equipment, facilities and devices in performance of, pursuant to and/or in
connection with this Agreement. JCP&L and Seller intend that such transfer
shall be a Qualifying Facility transfer pursuant to IRS Advance Notice 88-
129. Accordingly, Seller shall obtain, at its own expense, the report of
an independent engineer regarding electricity sales by JCP&L to the Seller
as provided by that Advance Notice."
19. Amendment to Article 6.1. The last sentence of Article 6.1 is
hereby deleted.
20. Amendment to Article 6.2 (Conditions Requiring
9
<PAGE>
Curtailment or Interruption of Deliveries of Electricity). The last three
lines of Article 6.2(a) are hereby amended to read as follows: ". . . .
provided further that any such PJM requirement to reduce or interrupt such
purchases does not exceed 600 hours in any calendar year, with the further
provision that no more than 400 of the 600 hours shall occur during On-Peak
Periods."
21. Amendment to Article 6.4 (Maintenance Outages). Article 6.4 is
hereby amended to read as follows: "Seller shall furnish JCP&L with an
annual forecast not later than December 15 of each year setting forth the
expected dates and anticipated duration of each Planned Outage for the
succeeding 36 months. Seller shall update, on a monthly basis, the outage
request schedule by the 15th day of each month. Such updates shall be
transmitted to JCP&L by telephone and promptly confirmed in writing. JCP&L
shall forward its response to an outage request not later than 10 days
following JCP&L's receipt of such outage request. Seller shall notify
JCP&L's dispatcher approximately 15 minutes prior to the approved outage
period of its intent to remove the Generating Facility from service.
Seller shall also notify JCP&L concerning the cause and duration of any
Forced Outage."
22. Amendments to Article 6.5 and 6.6.
10
<PAGE>
(a) Article 6.5 is deleted in its entirety.
(b) Article 6.6 is hereby amended to read as follows: "Seller
shall not schedule or conduct Planned Outages during On-Peak Periods."
23. Amendments to Article 6.7. Article 6.7 is hereby amended to read
as follows:
(a) "Seller shall keep and maintain accurate and complete
records for the Generating Facility containing such information regarding
operation and maintenance of the Generating Facility and all associated
equipment as is appropriate and consistent with industry practice and as
may be necessary for JCP&L to comply with its applicable requirements.
JCP&L will advise the Seller of such requirements as in effect from time to
time. Seller shall make such records available to JCP&L for inspection and
copying from time to time as JCP&L may reasonably request."
(b) "Seller shall maintain and classify outage statistics for
the Generating Facility in accordance with the GPU System outage
classification procedures as the same may be in effect from time to time.
Seller shall supply such statistics to
11
<PAGE>
JCP&L upon request. In addition, Seller shall maintain or cause to be
maintained such other records relating to the Generating Facility as may be
reasonably required by the GPU System of cogeneration projects, and, upon
written notice from JCP&L, will maintain or cause to be maintained such
other records as the BPU, Federal Energy Regulatory Commission (FERC) or
other regulatory body having jurisdiction, may from time to time require."
24. Amendment to Article 6.9. Article 6.9 is hereby amended to read
as follows: "Seller shall furnish to JCP&L on each January 1 following the
Date of Initial Commercial Operation satisfactory evidence that during the
previous calendar year, Seller has performed or caused to be performed all
manufacturer-recommended maintenance and testing of the Generating Facility
and the Protective Apparatus and interconnection equipment, including
circuit breakers, relays and auxiliary equipment. Seller shall provide
JCP&L with at least 30 days prior written notice of its intent to test such
equipment and JCP&L personnel or their representatives may, if JCP&L
desires, observe such testing."
25. Amendment to Article 6.12 (Contract Capacity and Reduction of
Capacity Component of Price). Article 6.12 is hereby amended to read as
follows:
12
<PAGE>
(a) "When Operating Status Option I is selected, Seller shall,
at JCP&L's request, demonstrates the ability of the Generating Facility to
provide JCP&L Contract Capacity within 30 days after the Date of Initial
Commercial Operation. Thereafter, twice annually Seller shall, once during
On-Peak Period summer months and once during On-Peak Period summer months
and once during On-Peak Period winter months demonstrate the ability of the
Generating Facility to provide Contract capacity for such period of time as
is required by PJM from time to time for all PJM suppliers. Seller's
demonstration of Contract Capacity shall be at Seller's expense and
conducted at a time and pursuant to procedures as may be required by
applicable GPU System rules, regulations and guidelines. If Seller fails
to demonstrate the ability of the Generating Facility to provide at least
90% of the Base Contract Capacity, the Capacity Component of the price to
be paid for Electricity pursuant to Article 9.1(b)(v) thereof shall be
reduced to the following amount until Seller is able to demonstrate the
ability to provide at least 90% of the Base Contract Capacity.
Demonstrated Capacity X 5.97 cents/kWh
Contract Capacity
If Seller does not demonstrate the ability of the Generating Facility
to provide at least 90% of the Base
13
<PAGE>
Contract Capacity during the applicable On-Peak Period, then a retroactive
reduction of the Capacity Component of the price to be paid for Electricity
pursuant to Article 9.1(b)(v) based upon the above formula will be applied
to the entire applicable On-Peak Period.
However, should Seller's failure to demonstrate the ability of the
Generating Facility to provide Contract Capacity be caused by a "force
majeure" event as defined in Article 12 hereof, the provisions of this
Article 6.12 shall not apply until the "force majeure" has ceased to exist.
Should Seller fail to demonstrate the ability of the Generating
Facility to provide at least 90% of Contract Capacity for any reason other
than "force majeure", Seller shall have the right to schedule subsequent
demonstrations at Seller's expense as soon as possible during The
Adjustment Period at a time mutually agreed upon by the Parties, but not
later than 1 months following the last such demonstration. The Capacity
Component of the price to be paid for Electricity pursuant to Article
9.1(b)(v) shall be immediately readjusted to its original formulation (i.e.
5.97 cents/kWh) following the expiration of The Adjustment Period provided
Seller has successfully demonstrated the ability of the Generating
14
<PAGE>
Facility to provide at least 90% of Contract Capacity during The Adjustment
Period.
(b) When Operating Status Option II is selected, Seller shall
demonstrate the ability of the Generating Facility to provide JCP&L Base
Contract Capacity within 30 days after the Date of Initial Commercial
Operation. Thereafter, twice annually at JCP&L's request, Seller shall,
once during On-Peak Period summer months and once during On-Peak Period
winter months demonstrate the ability of the Generating Facility to provide
Base Contract Capacity for such period of time as is required by PJM from
time to time for all PJM suppliers. Seller's demonstration of Base
Contract Capacity shall be at Seller's expense and conducted at a time and
pursuant to procedures as may be required by applicable GPU System rules,
regulations and guidelines. JCP&L and Seller agree to use their reasonable
best efforts to cause the capacity demonstration to be scheduled as early
as practicable in each peak period. If Seller fails to demonstrate the
ability of the Generating Facility to provide at least 90% of the Base
Contract Capacity, the Capacity Component of the price to be paid for
Electricity pursuant to Article 9.1(b)(v) thereof shall be reduced to the
following amount until Seller is able to demonstrate the ability to provide
at least 90% of the Base
15
<PAGE>
Contract Capacity:
Demonstrated Capacity x 5.97 cents/kWh
Base Contract Capacity
If Seller does not demonstrate the ability of the Generating Facility
to provide at least 90% of the Base Contract Capacity during the applicable
On-Peak Period, then a retroactive reduction of the Capacity Component of
the price to be paid for Electricity pursuant to Article 9.1(b)(v) based
upon the above formula will be applied to the entire applicable On-peak
Period.
However, should Seller's failure to demonstrate the ability of the
Generating Facility to provide Contract Capacity be caused by a "force
majeure" event as defined in Article 12 hereof, the provision, of this
Article 6.12 for Base Contract Capacity shall not apply until the "force
majeure" has ceased to exist.
As part of the foregoing capacity test, Seller shall demonstrate the
ability of the Generating Facility to provide JCP&L the Supplemental
Schedule A Capacity. This test shall be conducted pursuant to procedures
as may be required by applicable GPU System rules, regulations and
guidelines. If Seller fails to demonstrate the ability of the Generating
Facility to provide 100% of the sum
16
<PAGE>
of the Base Contract Capacity and the Supplemental Schedule A Capacity, the
Capacity Component of the price set out in Appendix I hereto for the
Supplemental Schedule A Capacity shall be reduced by an amount calculated
using the following formula until Seller is able to demonstrate the ability
of the Generating Facility to provide 100% of the sum of Supplemental
Schedule A Capacity plus the Base Contract Capacity. (Supplemental
Schedule A Capacity will be based on the capacity which can be demonstrated
according to GPU System rules above 92 MWH/Hr.)
The lesser of:
1.5 x (1- Demonstrated Supplemental Schedule A Capacity) x Applicable
Supplemental
Supplemental Schedule A Capacity Schedule A Capacity
payment
pursuant to Appendix I.
or
100% x Applicable Supplemental
Supplemental Schedule A
Capacity payment pursuant
to Appendix I.
If Seller does not demonstrate the ability of the Generating Facility to
provide at least 100% of the Supplemental Schedule A
17
<PAGE>
Capacity during the applicable On-Peak Period, then a retroactive reduction
to the Supplemental Schedule A Capacity Component of the price to be paid
for Electricity pursuant to Appendix I based upon the above formula will be
applied to the entire applicable On-Peak Period. If at any time during
each consecutive three (3) year period commencing with the latter of the
Date of Initial Commercial Operation or the Effective Date of this First
Amendment (hereafter referred to as a "Supplemental Schedule A Nomination
Period") Seller fails to demonstrate the ability of the Facility to provide
at least 1/3 of the Supplemental Schedule A capacity during any scheduled
peak period capacity demonstration, and such failure results in a 100%
reduction of Supplemental Schedule A capacity payments for the applicable
on-peak period, then Seller shall pay to JCP&L a penalty equal to 1.25% of
the full Supplemental Schedule A capacity payments to be made to Seller
over the entire Supplemental Schedule A Nomination Period, which penalty
Seller shall pay to JCP&L in six (6) equal monthly payments commencing in
the month following the month such failure occurs.
Should Seller's failure to demonstrate 100% of Supplemental Schedule A
Capacity be for any reason other than "force majeure", Seller shall have
the right to schedule subsequent demonstrations at Seller's expense as soon
as possible at a time mutually agreed upon by JCP&L and Seller, following a
failed demonstration of
18
<PAGE>
Supplemental Schedule A Capacity.
However, should Seller's failure to demonstrate the ability to provide
Supplemental Schedule A Capacity be caused by JCP&L's inability to accept
delivery of such capacity, the provision of this Section shall not apply.
Demonstrated Capacity will be based on the earliest demonstration
thereafter which JCP&L can accept.
Should Seller's failure to demonstrate the ability to provide
Supplemental Schedule A Capacity be caused by a "force majeure" event, as
defined in Article 12 hereof, there will be no penalty incurred for such
documented "force majeure" period and no Schedule A Capacity payment will
be made during such period.
Seller shall demonstrate 100% of the applicable Supplemental Schedule
B Capacity when requested by JCP&L during scheduled Dispatch Periods. If
the Seller fails to demonstrate 100% of the Supplemental Schedule B
Capacity, the Supplemental Schedule B Capacity payment set out in Appendix
I hereto shall be reduced by an amount calculated using the following
formula until Seller is able to successfully demonstrate such capacity, or
the next succeeding Scheduled Dispatch Period, whichever occurs first. In
the absence of a Supplemental Schedule B Dispatch Period, Supplemental
Schedule B Capacity Payments will be based upon the
19
<PAGE>
last demonstrated Supplemental Schedule B Capacity until the next Dispatch
Period. Seller may also demonstrate the ability of the Generating Facility
to produce Supplemental Schedule B Capacity by self test in the absence of
a Dispatch Period. Such self test will be for a one hour period. The
payment for the energy delivered to JCP&L during this self test will be the
applicable On-Peak or off-Peak PJM billing rate to GPU minus ten (10%)
percent.
1.5 x (1- Demonstrated Supplemental Schedule B Capacity) x Applicable
Supplemental
Supplemental Schedule A Capacity Schedule B Capacity
payment
pursuant to Appendix I.
For purposes of this test, demonstrated Supplemental Schedule B
Capacity shall be the average output delivered during the Scheduled
Dispatch Period and shall not include sales to the Generating Facility's
steam host, Base Contract Capacity at 100% output and Supplemental Schedule
A Capacity at 100% output.
26. Amendment to Article 6.13 (Electric Sales and Reduction of Energy
Component of Price): Article 6.13 is hereby amended to read as follows:
When Operating Status I is selected:
"(a) Seller shall sell Electricity to JCP&L continuously
20
<PAGE>
throughout the term of this Agreement and any extensions or renewals hereof
at an annual level which is equal to or greater than 90% of the Theoretical
Output using the Contract Capacity. For the purposes of this Agreement,
the Theoretical Output which could be sold in any calendar year using the
Contract Capacity shall be determined by the following formula:
A = 92,000 x (8760-B-C) where,
A = Theoretical Output expressed in kilowatt hours;
B = Non-generating hours as required by JCP&L due to curtailment or
interruption caused by JCP&L and for which the Seller is not at fault, or a
:force majeure";
C = Planned Outage Hours for a major facility overhaul as furnished to
JCP&L pursuant to Article 6.4.
Annual or yearly periods for determining sales of Electricity to JCP&L
shall be based on a calendar year.
Failure to maintain Electricity sales equal to or greater than 90% of the
Theoretical Output for any calendar year, which shall be the twelve
calendar months beginning on January 1 of each year, shall result in a
reduction in the energy component
21
<PAGE>
of the price pursuant to Article 9.1(b) to be paid for Electricity in the
following year.
(b) To determine whether there is to be an energy component price
reduction in any year, beginning with January 1 of the second calendar year
of Commercial Operation, the actual annual amount of Electricity sold by
Seller to JCP&L in the most recent year, less sales of Electricity during
the same period in excess of Maximum Hourly Production, the resulting
difference being referred to hereafter as the "Annual Electricity Sold"
shall be compared to the Theoretical Output. If the Annual Electricity
Sold to JCP&L in the most recent year is less than 90% of the Theoretical
Output, then the energy component of the price (Article 9.1(b)) to be paid
for Electricity in the following year shall be calculated in accordance
with the following formula:
E = (Y/A) x P where
E = Energy Component of Price
Y = Annual Electricity Sold, expressed in kilowatt hours
A = Theoretical Output expressed in kilowatt hours
22
<PAGE>
P = Fixed plus Variable Energy Component Price as specified in Article
9.1(b) and applicable to the contract year.
(c) In all cases, pricing will be determined and effective in
accordance with this Article 6.13 for each 3 month adjustment of the energy
component of the price set forth in Article 9.1(b) beginning with January 1
of the year the reduction will take effect and remain in effect until the
following January 1. When the Seller has in the most recently completed
calendar year achieved in Annual Electricity Sold result of at least 90% of
the Theoretical Output, the Fixed plus Variable Energy Component of the
price in the following year will be returned to 100% of that specified in
Article 9.1[b].
(d) If JCP&L determined there should be an energy component price
reduction, it shall submit a statement to Seller within 30 days after the
end of a calendar year, which shall contain the calculation as performed
pursuant to Article 6.13(b) (referred to hereafter as the "Pricing
Statement"). Seller shall promptly (but in any event, within fifteen (15)
days following receipt) advise JCP&L of any objections to the Pricing
Statement. All such objections shall be settled by the
23
<PAGE>
Parties as expeditiously as possible.
(e) If JCP&L does not receive written notice from Seller concerning
Seller's objection to a Pricing Statement within fifteen (15) days from the
date of its receipt by Seller, said Pricing Statement shall be binding,
absent manifest error, upon Seller and upon JCP&L.
When Operating Status Option II is selected:
(a) Seller shall provide Base Contract Capacity and dispatchable
energy to JCP&L at a level which results in a Facility Available Factor
based on Base Contract Capacity and Supplemental Schedule A Capacity for
each calendar year (a "Performance Year") at least equal to the Company
Availability Factor for the immediately preceding calendar year.
(b) Subject to paragraphs (h) and (I) below, if for any Performance
Year the Facility Availability Factor is less than the Company Availability
Factor for the immediately preceding calendar year, the Seller shall be
assessed a performance penalty for such Performance Year, equal to the
weighted average of the PJM capacity deficiency payment rate for that year
multiplied by the difference between the Company
24
<PAGE>
Availability Factor and the Facility Availability Factor multiplied by the
sum of the Base Contract and the Supplemental Schedule A Capacity.
(c) For purposes of calculating the Facility Availability Factor, the
Facility will not be penalized during the relevant Performance Year due to
a "force majeure" event or negligent actions or inactions by JCP&L which
prevent JCP&L from accepting deliveries from the Facility.
(d) Notwithstanding anything contained in this Article VI or this
Agreement to the contrary, Seller shall not be liable for and no
performance penalty payment shall be payable if the Facility Availability
Factor for a Performance Year is at least 85%.
(e) JCP&L shall submit to Seller a performance penalty payment
statement setting forth the amount of any performance penalty payment to be
made by the Seller to JCP&L pursuant to this Article VI within 90 days
after the close of each Performance year.
(f) If JCP&L does not receive written notice from Seller of any
objection to the performance penalty payment statement
25
<PAGE>
within 15 days from the date of receipt thereof, said performance penalty
payment statement shall be deemed conclusive and binding on the parties
absent manifest error.
(g) Seller shall make any performance penalty payment due to JCP&L in
6 equal monthly payments by applying said monthly payments against amounts
due from the Company for output delivered during the first six months
following the receipt by Seller of the performance penalty payment
statement. If Seller does not deliver sufficient electric energy to JCP&L
in any month to allow the full set-off of the monthly payment as provided
herein, Seller shall pay to JCP&L no later than 10 days following the date
of Seller's receipt of JCP&L's invoice therefor any amount which cannot be
set-off. Any and all amounts due and owing to JCP&L under this Article VI
shall be immediately due and payable by Seller in the event of a
termination of the Agreement.
27. Amendment to Article 6.14 (Electricity in Excess of Maximum
Hourly Production): Article 6.14 is hereby amended to read as follows:
"Subject to the provisions of Article 6.2 hereof, when Operating Status
Option I is selected, JCP&L shall accept additional megawatt hours per hour
of Electricity in excess of the Contract Capacity of 92 megawatt hours per
hour, pursuant to the
26
<PAGE>
pricing formula in Article 9.1 adjusted as follows:
Electricity -% in excess Price as a Percentage
of 92 MW per hour of Article 9.1[b] Price
up to 1 90%
1 to 2 80%
2 to 3 70%
3 to 4 60%
above 4 50%
28. Amendment to Articles 6.15 and 6.16: Articles 6.15 and 6.16 are
deleted in their entirety.
29. Amendment to Article 6.18 (Operating Options): Articles 6.18 is
hereby amended to read as follows: "Seller must, 6 months prior to every
third year anniversary of the Date of Initial Commercial Operation, elect
to operate its Generating Facility in parallel with JCP&L's electric system
for the next 3 years pursuant to one of the following options.
(a) Operating Status Option I: Seller shall sell to JCP&L the
Base Contract Capacity of 92 MWH/Hr. and associated energy. Seller may
sell any output in excess of the Base Contract Capacity at the rates set
forth in Article 6.14.
(b) Operating Status Option II: Seller shall sell to JCP&L Base
Contract Capacity of 92 MWH/Hr. and associated energy and offer annually
for the following three years
27
<PAGE>
Supplemental Schedule A Capacity and on a daily basis. Supplemental
Schedule B Capacity. The Seller shall also make any energy above the Base
Contract Capacity fully dispatchable by JCP&L.
(c) The Seller must specify, in writing, the Operating Status Option
it will initially follow at least 4 months prior to the Date of Initial
Commercial Operation, and must specify the amount of Supplemental Schedule
A Capacity, if any, which Seller has selected for the initial Supplemental
Schedule A Nomination Period no later than the Date Initial Commercial
Operation. Thereafter, at least 6 months prior to every third-year
anniversary of the Date of Initial Commercial Operation, Seller must notify
JCP&L in writing concerning the Operating Status Option and the amount of
Supplemental Schedule A Capacity, if any, which Seller has selected for the
succeeding Supplemental Schedule A Nomination Period.
30. Amendment to Article 7.0 (Delivery and Metering): The following
sentence shall be added to the end of Article 7.0: "Seller shall reimburse
JCP&L for the reasonable costs of all meters and equipment used for the
measurement of Electricity, and shall also reimburse JCP&L for costs
involved with the inspection and periodic testing of such meters."
28
<PAGE>
31. Amendment to Article 7.2: Article 7.2 is hereby amended to read
as follows: "For purposes of monitoring the generator operation, JCP&L
shall have the right to require, at Seller's expense, the installation of
generation telemetering and control of selected breakers and switching
equipment. Seller will also be responsible for the operating and
maintenance costs associated with the metering and telemetering equipment."
32. Amendments to Articles 8.1, 8.2., 8.3., 8.4(c), 8.5 and 8.6:
(a) Article 8.1 is hereby amended to read as follows: "Seller agrees
to deliver and JCP&L agrees to purchase Net Electric Energy and Contract
Capacity generated by the Generating Facility pursuant to the terms and
conditions of this Agreement. Not later than August 30 of each year,
Seller will provide a schedule of expected monthly generated for the next 3
years. Seller will provide each week by Thursday at 9:30 a.m. or by
Wednesday at 9:30 a.m. if Thursday at 9:30 a.m. or by Wednesday at 9:30
a.m. if Thursday or Friday is a scheduled holiday for JCP&L,. a schedule of
expected hourly output for the coming week. The schedule for each day will
be confirmed on the preceding workday. Seller will promptly inform JCP&L
of any occurrences which will cause a change to
29
<PAGE>
the expected hourly output schedule".
(b) Article 8.2 and 8.3 are hereby deleted in their entirety.
(c) Article 8.4(c) is hereby amended to read as follows: "Conditions
on the PJM System are such that generators of all PJM member utility are
required to reduce generation to minimum levels during periods of low load
in accordance with Section 9.00 of the Alert and Emergency Procedures
contained in the PJM Interconnection Operating Instruction OI-B.11 and
pursuant thereto JCP&L has received a request from the PJM interconnection
dispatcher to reduce or interrupt purchases from generation external to
PJM, provided that any such PJM requirement to reduce or interrupt such
purchases shall not exceed 600 hours in any calendar year, and provided
further that no more than 400 of the 600 hours shall be during On-Peak
Periods."
(d) Article 8.5 is hereby added and reads as follows:
8.5 (a) When Operating Status Option II is selected, JCP&L shall have
full dispatching control of the output generated by the Generating Facility
above the Base Contract Capacity subject to paragraphs (b) through (d)
below.
30
<PAGE>
(b) The Seller will supply to JCP&L by the tenth calendar day of each
month a cents/kWh energy price for the succeeding month, not to exceed 2
times the Base Contract Capacity Energy Component Price, for output above
the Base Contract Capacity level and also an estimate of the daily
dispatchable capacity (Supplemental Schedule A and Supplemental Schedule B
Capacity) available. JCP&L shall use reasonable efforts to provide Seller
with a monthly operating forecast for the succeeding month by the 20th day
of each month. The monthly operating forecast will contain the hours JCP&L
expects to require dispatch of the Generating Facility and the level of
output at which it expects the Generating Facility to operate for each day
during the next month. Such operating forecast is intended solely for use
by Seller in planning fuel purchases and shall not create an obligation on
JCP&L to dispatch the Generating Facility.
(c) JCP&L will supply a more detailed monthly operating plan on or
about the 30th day of each month. Thereafter, JCP&L will provide a weekly
operating plan to Seller by 3:00 p.m. Friday of each week for
implementation the following Monday. The weekly operating plan as amended
shall be used by Seller to plan maintenance and work schedules. Seller
will provide
31
<PAGE>
each day by 9:30 a.m. the level of dispatch capacity (both Supplemental
Schedule A and Supplemental Schedule B Capacity) available for the next
day. Unless otherwise agreed, Seller will be prepared to commence a
dispatchable level operation within thirty (30) minutes of receiving a
Scheduled Dispatch Period request from JCP&L. Shut-Down Periods will
commence immediately upon notification by JCP&L.
(d) The normal dispatchable level of output is expected to be the sum
of the Supplemental Schedule A and Supplemental Schedule B Capacity.
(e) Article 8.6 is hereby added and reads as follows:
"8.6 In recognition of the understanding of the parties hereto that
any payments made pursuant to this Agreement are intended by the parties to
be treated as received in the year in which such payments are due, Seller
acknowledges that the parties intend that JCP&L shall have a deductible
expense, and the Seller shall have taxable income or expense, as the case
may be, with respect to any payments made to the Seller under this
Agreement. Seller shall not take a contrary or inconsistent position with
respect to the foregoing on
32
<PAGE>
any federal, state or local tax return, before any taxing authority or in
any related tax proceeding."
33. Amendments to Article 9 (Price): Article 9 is hereby amended to
read as follows:
9.1 (a) The price for all energy 1) delivered prior to the Date
of Initial Commercial Operation and 2) delivered in excess of 92 MWH/Hr.
during Start-Up and Shut-Down Periods when Operating Status Option II has
been selected, thereafter, will be the applicable On or Off-Peak PJM
billing rate to GPU minus ten (10) percent.
(b) The price for Contract Capacity, if Operating Status Option
I is selected, or Base Contract Capacity, if Operating Status Option II is
selected, delivered to JCP&L shall consist of an energy component and a
capacity component.
The energy component shall be as follows:
(i) a fixed energy component equal to 1.362 cents per kWh shall be
paid for the first twelve years of the term hereof following the Date of
Initial Commercial Operation; plus
(ii) a Variable energy component equal to 2.347 cents per
33
<PAGE>
kWh which represents 85% of the 1988 hourly average PJM billing rate to GPU
plus 10%.
The energy component of the price for Contract Capacity shall be varied
according to the time of delivery as follows:
(iii) during On-Peak Hours, the sum of the Fixed and Variable
energy component of price shall be multiplied by 127%.
(iv) during Off-Peaks Hours, the sum of the Fixed and Variable energy
component of price shall be multiplied by 85%.
The Fixed energy component of price shall not be paid during years thirteen
through twenty from the Date of Initial Commercial Operation.
The capacity component for Contract Capacity shall be as follows:
(v) 1.21 cents per kWh averaged over all hours. The capacity
component will, however, be paid only for kWh delivered during the On-Peak
Period at the rate of 5.97 cents per kWh.
(vi) There will be no capacity component payment during
34
<PAGE>
the Off-Peak Period.
Amendment to Article 9.2 (Index): Article 9.1 is hereby amended to
read as follows: "With respect to the Contract Capacity or Base Contract
Capacity delivered to JCP&L, depending upon the Operating Status Option
which is in effect, the variable portion of the energy component of price
will be adjusted every three months during the term hereof commencing on
January 1, 1990 by a percentage equal to the lower of the percentage change
in the gas or oil average price for the four quarters ending with the
quarter prior to the quarter immediately preceding the current quarter
compared to the value for the calendar year 1988 as published for JCP&L
plants in the DOE/EIA Publication "Cost and Quality of Fuels for Electric
Plants".
Example: (Not based on actual index results)
1988 Variable Price = 2.347
Oil Cost Gas Cost
Calendar Year 1988 = 2.0 Calendar Year 1988 = 2.1
Four Quarters ending 9/1989 = 2.4 Four Quarters ending 9/1989 = 2.3
Percentage Change 20% 10%
The index change which would be used in this example for the January 1,
1990 adjustment is .10 corresponding to the lower percentage change of the
two indices.
The variable energy component of the price for the succeeding three
35
<PAGE>
months will be equal to the 1988 variable energy component of the price
(2.347 cents/kwh) multiplied by the sum of one plus the lower percentage
change of the indices.
Variable energy component for succeeding three months =
2.347 * [1 + .1] = 2.582
A new Article 9.3 is added to read as follows:
9.3 If Operating Status Option I is selected, any energy delivered in
excess of the Base Contract Capacity will be purchased at the rates set
forth in Article 6.14. If Operating Status Option II is selected, a
payment for Supplemental Schedule A Capacity and Supplemental Schedule B
Capacity will be made in accordance with Appendix I. The price for
dispatchable energy will be the price supplied by Seller in Article 8.5(b).
No payment will be made for energy in excess of 92 Mwh/hr during Non
Scheduled Dispatch Periods.
34. Amendment Article 10.3. A New Article 10.3 is hereby added and
reads as follows:
10.3 Commencing with the month in which the Date of Initial
Commercial Operation occurs, Seller shall pay to the Company a monthly
administration fee in the amount of $1,440. Such fee shall be offset
against JCP&L's payment to Seller pursuant to
36
<PAGE>
Section 10.1. This fee is be adjusted annually based upon the change in
Gross National Product Deflator Index.
35. Amendment to Article 10.4: A new Article 10.4 is hereby added
and reads as follows:
10.4 The Company shall have the right to set off at any time
against any and all amounts which may be due and owing from the Company to
the Seller under this Agreement the full cost of any and all materials,
equipment, services and supplies for which payment is past due.
36. Amendment to Article 12 (Force Majeure): Article 12 is hereby
amended to read as follows:
12.1 (a) The term "force majeure" as used herein means
unforeseeable causes beyond the reasonable control of and without the fault
or negligence of the party claiming "force majeure", including but not
limited to acts of God, strike, flood, earthquake, storm, fire, lightening,
epidemic, war, riot, civil disturbance, sabotage, change in law or
applicable regulation subsequent to the date hereof and action or inaction
by any federal, state or local legislative, executive, administrative or
judicial agency or body which, in any of the foregoing cases, by exercise
of due foresight such party could
37
<PAGE>
not reasonably have been expected to avoid, and which, by the exercise of
due diligence, it is unable to overcome.
(b) Anything to the contrary contained in Section 12.1(a) or
otherwise in this Agreement notwithstanding, except as may expressly be
provided in Section 12.1(a), the term "force majeure" shall not include any
of the following:
(i) Any reduction, curtailment or interruption of
generation or operation of the Generating Facility, whether in whole or in
part, or the ability of JCP&L to accept or transmit electricity generated
by the Generating Facility which reduction, curtailment or interruption is
caused by or arises from the action or inaction of any third party,
including without limitation, any vendor or supplier to the Generating
Facility or JCP&L of materials, equipment, supplies or services, unless,
and then only to the extent that, any such action or inaction would itself
be excused hereunder as a "force majeure";
(ii) Any outage, whether or not due to the fault or
negligence of JC&L or the Seller, of the Generating Facility or JCP&L's
system attributable to a defect or
38
<PAGE>
inadequacy in the manufacture, design or installation of the Generating
Facility or JCP&L's facilities of equipment or to a breakdown of their
mechanical or electrical equipment that prevents, curtails, interruption or
reduces the ability of the Generating Facility to generate electricity or
the ability of JCP&L to period its obligations hereunder; or
(iii) Changes in market conditions that affect to cost
or availability of the Generating Facility's prime or alternate fuel supply
or demand for the Seller products or affect JCP&L's fuel supplies or
alternate supplies of electric energy or customer demand therefor.
12.2 Except for the obligations of either party to make required
payments under this Agreement, the parties shall excuse from performing
their respective obligations under Agreement and shall not be liable in
damages or otherwise and to the extent that they are unable to so perform
or prevented from performing by a "force majeure", provided:
(a) the non-performing party, as promptly as practical
after the occurrence of the "force majeure", but in no later than 14 days
thereafter, gives the other party was notice describing the particulars of
the occurrence;
39
<PAGE>
(b) the suspension of performance is of no greater scope
and of no longer duration than is reasonably required by the "force
majeure";
(c) the non-performing party uses its best efforts to
remedy its inability to perform; and
(d) as soon as the non-performing party is able to resume
performance of its obligations excused as a result of the occurrence, its
shall give prompt written notification thereof to the other party.
12.3 Neither party shall be required to settle any strike, walkout,
lockout or other labor dispute on terms which, in the sole judgment of the
party involved in the dispute, are contrary to its interest, it being
understood and agreed that the settlement of strikes, walkouts, lockouts or
other labor disputes shall be entirely within the discretion of the party
having such dispute.
12.4 (a) Either party may terminate this Agreement upon 10 days
written notice if, following the Date of Initial Commercial Operation (1)
the generating Facility is either
40
<PAGE>
destroyed or substantially damaged and the Seller advises JCP&L that it
does not intend promptly to reconstruct or repair the Generating Facility,
or (2) an event of "force majeure" hereunder prevents either party from
substantial performance of its respective obligations hereunder for a
period of 24 consecutive months; provided, however, that this Agreement may
not be so terminated if the party prevented from performing due to such
"force majeure" event (i) is to the reasonable satisfaction of the other
party, unable despite use of its best efforts, to overcome the effects of
such "force majeure" during such 24 months and (ii) demonstrates to the
reasonable satisfaction of the other party that the effects of such "force
majeure" can nevertheless be overcome and that it is diligently applying
its best efforts to do so. The party prevented from performing shall at
its expense provide the other party not later than 60 days following a
request therefor with an opinion of an independent engineering firm,
reasonably acceptable to such other party, supporting the matters set forth
in (ii) above. Failure to provide such an opinion shall be adequate ground
for termination of this Agreement.
(b) Upon termination of this Agreement as provided in
subparagraph (a) above, the parties shall have no further liability or
obligation to each other except for (i) any
41
<PAGE>
obligation arising prior to the date of such termination; and (ii) payment
in full by the Seller of any performance penalty payments which may be owed
to the Company pursuant to Article VI hereof.
37. Amendment to Article 13 (Insurance Liability and
Indemnification): Article 13.1 is hereby amended to read as follows:
(a) Seller agrees to keep, or cause its contractors to keep, the
Generating Facility continuously insured with reputable insurance companies
against loss or damage in the amounts and for the risks that property of
similar character is usually so insured by entities owning and operating
like properties.
(b) Seller shall maintain, or cause its contractors to maintain,
in effect insurance coverage for the Generating Facility with initial
minimum limits as follows:
Insurance Limits
1. a. Worker's Compensation Insurance As required by statute
b. Employer's Liability Insurance $1,000,000
2. Comprehensive General Liability (Public Liability) Insurance
Including:
a. Bodily Injury $1,000,000 per occurrence
42
<PAGE>
and and
Property Damage $1,000,000 per occurrence
or
b. Bodily Injury and $1,000,000
Property Damage combined single occurrence
c. Personal Injury $1,000,000 per occurrence
3. Automobile Liability Insurance (owned, hired & non-owned):
a. Bodily Injury $1,000,000 per Accident
b. Property Damage $1,000,000 per Accident
(c) At the time Seller accepts the Generating Facility from its
turnkey contractor, Seller shall also procure or cause to be procured and
maintain in effect business interruption insurance (or in lieu thereof, an
operating and maintenance agreement for the Generating Facility with a
reputable equipment manufacturer containing availability guarantees for the
Generating Facility which agreement shall be satisfactory to JCP&L).
(d) JCP&L may, upon 90 days prior written notice, require Seller
and Seller shall, from time to time, increase the foregoing initial limits
to amounts which shall be reasonable, based upon (a) commercial
availability of such increased limits on commercially reasonable terms, and
(b) the location, size and type of the Generating Facility, to meet changed
43
<PAGE>
circumstances and then current industry practice.
(e) Seller's liability insurance (other than its worker's
compensation insurance) shall include provisions or endorsements (a) naming
JCP&L as an additional insured, (b) stating that such insurance is primary
insurance with respect to the interest of JCP&L and that any insurance
maintained by JCP&L is excess and not contributory insurance with the
insurance required hereunder, and (c) providing that such policies shall
not be canceled or their limits of liability reduced except upon 30 days
prior written notice to JCP&L.
(f) A copy of each such insurance policy, certified as a true
copy by an authorized representative of the issuing insurance company or in
lieu thereof, a certificate in form satisfactory to JCP&L certifying that
such insurance is in effect, shall be furnished to the JCP&L not less than
30 days prior to the commencement of construction of the Interconnection
Facilities and 15 days prior to the expiration date of each such policy.
38. Effectiveness; Further Agreements: This First Amendment,
together with the Agreement, constitutes the complete agreement between the
Parties, and may only be further modified by written
44
<PAGE>
agreement signed by both parties. It is expressly understood by the
Parties that this First Amendment shall only become effective upon its
approval by the New Jersey Board of Public Utilities ("BPU"). The Parties
agree to submit the amendment to the BPU for approval promptly, and to take
all reasonable steps to secure its prompt approval by the BPU. In the
event that the BPU refuses to approve this First Amendment, or requests
modifications thereto, the Parties agree to negotiate in good faith
appropriate revisions hereto. If after such good faith efforts, the
Parties cannot agree on a revised First Amendment, the Parties shall retain
all legal rights, and this First Amendment shall not serve to waive any
rights which either Party may have at law or in equity.
39. Counterparts. This First Amendment may be signed in two or more
counterparts, all which taken together shall constitute one and the same
agreement.
45
<PAGE>
IN WITNESS WHEREOF the undersigned have duly executed this First
Amendment as of the date first above written.
JERSEY CENTRAL POWER & O'BRIEN (PARLIN)
LIGHT COMPANY COGENERATION, INC.
/s/ Sanders D. Newman
Date: 6/11/91 Date: 3/19/91
46
<PAGE>
Appendix I
Capacity Schedules
Schedule "A" Schedule "B"
Year S/MW-Month S/MW-Day
1991 5534 92.15
1992 8492 96.36
1993 8132 101.36
1994 7733 107.51
1995 7356 113.95
1996 7000 120.46
1997 6661 128.06
1998 6322 135.72
1999 5987 143.87
2000 5652 152.07
2001 5312 161.63
2002 4978 165.73
2003 4643 154.59
2004 4303 142.88
2005 3968 132.10
2006 3659 121.81
2007 3405 113.32
2008 3180 105.57
2009 2955 98.40
2010 2730 90.90
2011 2438 81.14
<PAGE>
Appendix II
Gas Turbine Capacity vs. Temperature Table
Temperature Capacity Factor
90 1.0
80 1.04
70 1.09
60 1.13
50 1.18
40 1.22
30 1.26
<PAGE>
Appendix II
Capacity vs. Temperature Table
To be provided by
O'Brien (Parlin)
Cogeneration, Inc.
<PAGE>
Appendix III
EQUIVALENT AVAILABILITY FACTOR
The equation used to calculate Equivalent Availability Factor is:
EAF (%) = AH - (EFPOH - EMPOH - EPPOH) X 100%
PH
WHERE:
EAF = Equivalent Availability Factor
AH = Available Hours which are the time a unit is capable of producing
energy, regardless of its capacity level.
PH = Period Hours which are the total calendar time for the period (year).
EFPOH
EMPOH
EPPOH = Equivalent Forced, Maintenance, and Planned Partial Outage Hours.
These are the number of hours a unit was involved in a less than 100
percent outage expressed as equivalent hours of full outage at the unit''
net summer installed capacity. Equivalent hours are calculated using the
following formula.
E = (D1 x T1)
-------------
C
WHERE:
E = Equivalent Outage Hours
D1 = Capacity duration for outage I, MW.
T1 = Time accumulated during outage I, hrs.
C = Base Contract Capacity and Supplemental Schedule A Capacity.
<PAGE>
Appendix IV
Capacity Payment Methodology
Capacity Test - Base and Supplemental Schedule A Capacity
1. Test results will be based on the delivery to JC through the billing
meter.
Test may be scheduled any time except during minimum load problems on JC
or PJM system.
2. During the first season, payment will be based on the initial
demonstration of Contract Capacity until the final test has been
completed.
3. During subsequent seasons, payments will be based on the previous
season's test results until the new test is completed.
Capacity Test - Schedule B Capacity
1. Capacity shall be the average output delivered during the scheduled
dispatch period. Because of metering limitations, this will be limited
to whole clock hours.
2. When the facility is not dispatched, payment will be made for
nominated capacity.
3. If nominated capacity exceeds that demonstrated during the last
scheduled dispatch period, supplier must demonstrate this capacity for
one clock hour. The energy above 92 MW will be priced at the
applicable PJM billing rate minus 10%.
Capacity Payments - Base
Payment are made for on peak, on season energy up to 92 Mwh/hr
Rate is $0.0597/kWh adjusted for penalty, if any.
Final rate will be applied to the entire peak period.
Any overpayment will be adjusted in the last month of the peak period.
Capacity Payments - Schedule A
The monthly values in Appendix I will be multiplied by 12/7 and paid
only in peak months.
IV-1
<PAGE>
The rate will be adjusted by the penalty, if any.
Any overpayment will be adjusted in the last month of the peak period.
Capacity Payment - Schedule B
The daily capacity rate will be adjusted for the penalty, if any.
The penalty, if any, will be calculated using only full dispatch
hours.
The nominated capacity will be limited to that demonstrated during the
most recent dispatch period unless the supplier demonstrates the higher
value for one clock hour at his expense.
IV-2
<PAGE>
Example 1a
Assumptions
Base Capacity = 92
"A" Capacity = 20
1-91 Verification Test = 112 @ 92 F
8-91 Verification Test = 106 @ 92 F
There will be no penalty on base capacity since it was demonstrated. All
on peak kWh delivered in June, July, August and September will be paid for
at 5.97 cents/kWh.
"A" capacity payments will be made in full during June, July and August
since "A" capacity was demonstrated in January. Penalty will be calculated
and applied in September bill.
The applied rate = $5,534/MW-mo. X 12/7 = $9,487/MW-mo.
June 20 MW x $9,487/MW-mo. = $189,740
July 20 MW x $9,487/MW-mo. = $189,740
August 20 MW x $9,487/MW-mo. = $189,740
Capacity Price Reduction Factor (CPRF) = 1.5 (1-(14/20)) = 45%
Final capacity rate = $9,487 (1-.45) = $5,218/MW-mo.
Summer Period Payment = 20 MW x 4 months x $5,218/MW-mo = $417,440
June-August Payment = $189,740 x 3 = $569,220
September Payment = - $151,780
This amount will be deducted from the September base capacity payment.
IV-3
<PAGE>
Example 1b
Assumptions
Base capacity = 92
"A" capacity = 20
8-91 Verification Test = 106 @ 92 F
8-91 CPRF = 45%
2-92 Verification Test = 98 @ 92 F
1991 initial capacity rate = 5,534 x 12/7 x .55 = $5,218/MW-mo
1992 initial capacity rate = 8,492 x 12/7 x .55 = $8,007/MW-mo
December = 20 MW x $5,218/MW/mo. = $104,360
January = 20 MW x $8,007/MW/mo. = $160,140
December Actual = 20 MW ($0/MW-mo) = $
Jan-Feb Actual = 20 MW ($0/MW-mo) x 2 mo. = $
December reversal $104,360
January reversal $160,140
Net adjustment to February base capacity $264,500
Since the demonstrated availability of 30% (=6/20) falls below the (1/3)
availability threshold specified in Section 25(b) of the First Amendment,
an amount equal to 1.25% of the Full Supplemental A Capacity payment for
the entire Nomination Period is assessed as follows:
0.125 x [20 MW x $5534 x 12 mo. + 20 MW x $8492 x 12 mo. + 20 MW x 8132 x
12 mo.] = $66,474.
Six (6) equal monthly payments of $11,079 would be paid by Seller starting
in February.
IV-4
<PAGE>
Example 1c
Assumptions
Base capacity = 92
"A" capacity = 20
2-92 Verification Test = 98 @ 92 F
2-92 CPRF = 105%, capped at 100%
7-92 Verification Test = 112
Initial capacity rate = $8,492 x 12/7 x (1-1) = $0/MW-mo
June = 20 MW ($0/MW-mo) = $0
7-92 CPRF = 1.5 (1-20/20) = 0
Final capacity rate = $8,492 x 12/7 = $14,558/MW-mo
June, July Actual = 20 MW x $14,558/MW-mo x 2 mo =$582,320
Reversal of June Payment $ 0
July Payment $582,320
August Payment = 20 x $14,558 = $291,160
September Payment = 20 x $14,558 = $291,160
IV-5
<PAGE>
Example 2
Assumptions
Base capacity = 92
"A" capacity = 20
Year = 1991
Determination of "B" capacity delivery
Average delivery to JC 117
Base capacity -92
"A" capacity -20
"B" capacity delivery 5
Day Mon Tues Wed Thu Fri Sat
"B" Capacity
Nominated 5 5 4* 5*** 5 5
"B" Capacity
Dispatched 0 5 0 0 0 0
"B" Capacity
Delivered 0 4 5** 0 0 0
CPRF 0 0.3 0 0 0 0
Schedule B Rate 92.15 92.15 92.15 92.15 92.15 92.15
Actual Rate 92.15 64.51 92.15 92.15 92.15 92.15
Actual Payment 460.75 322.55 368.60 460.75 460.75 460.75
* Nomination limited to amount previously demonstrated
Actual capacity delivered and associated penalties, if any, will
be based on the billing meter. Allowable capacity nominated
will, by necessity, be based on values telemetered to JCP&L.
Nominated capacity will not be retroactively adjusted when the
billing meter is read.
** Seller demonstrated 5 MW at his expense.
*** Seller may now nominate 5MW until it is dispatched and not made.
IV-6
<PAGE>
Appendix V
Energy Payment Methodology
Parsing of hourly energy values:
If the dispatch request is not for full hours, partial dispatch hours
will be considered full dispatch hours.
If the dispatch request is for full hours, the hour before dispatch
and the hour after dispatch will be considered ramp hours.
If the dispatch period starts on a partial hour, subtract the contract
ramp time from the start time. If still in the same hour, no ramp time
will be billed. If part of ramp time is in previous hour, entire previous
hour will be considered ramp hour.
Assumptions for example:
Base capacity - 92 mw
"A" capacity - 110 mw
"B" capacity - 118 mw
Ramp up time - 20 min
Ramp down time - 10 min
Peak season weekday
Base energy cost - Fixed 1.362 cent/KWH
Variable 2.775 cent/KWH
Total 4.137 cent/KWH
On Peak = 5.254 cent/KWH
Off Peak = 3.516 cent/KWH
Dispatch energy cost 4.5 cent/KWH
PJM billing rate - On Peak 3.5 cent/KWH x .9 = 3.15 cent/KWH
Off Peak 2.5 cent/KWH x .9 = 2.25 cent/KWH
"B" capacity dispatched from 1030 to 1400
Notes: The example does not show the effect of regulation.
The example is for a day. The PJM billing rates are for the month.
V-1
<PAGE>
MWH RECEIVED
HOUR TOT BASE OFPK BASE ONPK DISP PJMOFPK PJMONPK FREE
1 90 90
2 91 91
3 89 89
4 91 91
5 88 88
6 70 70
7 94 92 2
8 92 92
9 91 91
10 90 90
11 108 92 16
12 118 92 26
13 117 92 25
14 116 92 24
15 95 92 3
16 91 91
17 90 90
18 89 89
19 88 88
20 89 89
21 90 90
22 90 90
23 91 91
24 89 89
Total 2247 1063 1088 91 0 3 2
V-2
<PAGE>
INVOICE
Energy Type Output Rate Bill $
Base OFPK 1,063,000 3.516 37,375.08
Base ONPK 1,088,000 5,254 57,163.52
Disp 91,000 4.500 4,095.00
PJM OFPK 0 2.250 0
PJM ONPK 3,000 3.150 94.50
FREE 2,000 0.000 0
Total 2,247,000 98,728.10
V-3
<PAGE>
Exhibit 10.22.1
NRG GENERATING (PARLIN) COGENERATION INC./
STEWART & STEVENSON OPERATIONS, INC.
OPERATING AND MAINTENANCE AGREEMENT
This System Operating and Maintenance Agreement ("Agreement") is made as of
the 1st day of May 1996 between NRG Generating (Parlin) Cogeneration Inc.,
a Delaware corporation ("Owner"), and Stewart & Stevenson Operations, Inc.,
a Delaware corporation ("Operator"), having its principal place of business
at Houston, Texas, whose obligations hereunder shall be fully guaranteed by
STEWART & STEVENSON SERVICES, INC. ("SSSI"), pursuant to a Guarantee in the
form of Appendix I.
Owner (formerly named "O'Brien (Parlin) Cogeneration, Inc.") and Operator
entered into an Operation & Maintenance Contract dated as of April 1, 1994
with respect to the System (as defined below), a copy of which is attached
as Appendix II (the "Existing O&M Agreement").
In connection with the bankruptcy of Owner's parent, the existing
Electricity Purchase Agreement between Owner and Jersey Central Power Light
Company relating to the System has been amended with the Third Amendment to
the Power Purchase Agreement (as defined below).
Owner and Operator have renegotiated the terms and conditions of the
Existing O&M Agreement and desire to replace it with this Agreement
effective upon the Effective Date.
In consideration of the foregoing and the mutual covenants and benefits
contained herein, the parties hereby agree as follow:
I. DEFINITIONS
In this Agreement the following terms have the associated meaning:
1 . Affiliate - With reference to a specified person, any other person or
entity, directly or indirectly through one or more intermediaries,
which controls, is controlled by, or is under common control with,
such person. A person or entity is controlled by another person or
entity if the second person or entity holds a sufficient number of
securities in the first person or entity to elect a majority of the
directors of the first person or entity.
2. Agent - The agent for the lenders under the Financing Agreements.
3. Amended Power Purchase Agreement - The Amended Power Purchase
Agreement for Purchase and Sale of Electric Power, dated April 30,
1996, between Owner and Jersey Central Power & Light, a copy of which
Is attached as Appendix III hereto.
4. Annual Operating Plan and Budget - As set forth In Article VI, Section
6.
5. Bonus - As set forth in Exhibit A.
6. Change - Shall mean any of the following that are proposed by one
party to the other by a written notice to the other party: (i) a
change in the then current Annual Operating Plan and Budget: (ii) a
change in connection with the services to be provided by Operator
hereunder (iii) a change made necessary to avoid injury to persons or
property or to mitigate losses as a result of the occurrence of an
Emergency; and (iv) a change enabling Operator to accomplish or
contract for a Major System Repair.
<PAGE>
7. Change Order - Shall mean the written approval of a proposed Change
and the related Change Order Budget Statement by Operator and Owner as
further provided for In Article VI, Section 7(b).
8. Change Order Budget Statement - Shall mean the statement prepared by
Operator pursuant to Article VI, Section 7(b) with respect to a
proposed Change setting forth In reasonable detail: (i) the direct
cost or savings to Owner of the proposed Change; (ii) the indirect
costs or savings of the proposed Change, including without limitation,
any loss of electricity revenues or steam host revenues and any
increased insurance, operating. maintenance or other costs during or
following the implementation of the proposed Change; (iii) changes in
the operating efficiency of the System; and (iv) any other material
effect on the operation, maintenance, efficiency or profitability of
the System or the provision of the services hereunder.
9. Contract Year - As set forth in the Amended and Restated Power
Purchase Agreement.
10. Effective Date - May 1, 1996.
11. Emergency - Any event or occurrence which in the judgment of Operator
or Owner, as the case may be, requires immediate action and which
constitutes a serious hazard to the safety of persons or property or
may materially Interfere with the safe, economical, lawful or
environmentally sound operation of the System.
12. Event of Default - As set forth in Article XII.
13. Existing O&M Agreement - As set forth in the Recitals.
14. Expenses - As set forth in Article VI, Section 2.
15. Financing Agreements - Any loan, lease financing, security, of related
agreements entered into at any time by and among owner and the lending
institutions providing financing for the System.
16. Force Majeure - Unforeseeable causes beyond the reasonable control of
and without the fault or negligence of the party claiming Force
Majeure, including but not limited to acts of God, strike, flood,
earthquake, storm, fire. lightning. epidemic, war, riot, civil
disturbance, sabotage, change in low or applicable regulation
subsequent to the date thereof and action or inaction by any federal,
state or local legislative, executive, administrative or judicial
agency or body which, in any of the foregoing cases, by exercise of
due foresight such party could not reasonably have been expected to
avoid, and which by the exercise of due diligence, it is unable to
overcome.
17. Legal and Contractual Requirements - All:
a. Laws, permits, approvals, regulations or orders of governmental
authorities applicable to the Amended and Restated Power Purchase
Agreement, the System. Owner's obligations under this Agreement
as owner of the System and Operator's scope of work hereunder;
b. Provisions of the System Contracts;
c. Agreements, warranties and specifications of Operator's or
Owner's suppliers or vendors; and
2
<PAGE>
d. Operating and maintenance manuals and procedures furnished
by Owner applicable to the System or the components thereof (such
operating manuals to reflect Sound Independent Power Industry
Practice).
l8. Liquidated Damages -As set forth in Exhibit A.
19. Major System Repair
The inspection, overhaul, repair or replacement of any piece of
equipment needed to operate the System where such inspection,
overhaul, repair or replacement is the result of: (i) an unscheduled
breakdown, repair, or failure of such equipment or (ii) a scheduled
inspection, overhaul, repair or replacement of such equipment (union
the inspection, overhaul, repair or replacement has been incorporated
into the Annual Operating Plan and Budget) and further that such
inspection, overhaul, repair or replacement shall have a cost in
excess of $10,000, which includes labor and material costs, and shall
be adjusted each year by the increase or decrease in the Producer
Price Index. Equipment shall include the gas turbines, the
generators, boilers, heat steam recovery generators, chillers, load
gears, exhaust ducting, emissions equipment. water and waste water
treatment, fuel treatment facilities and interconnection facilities;
provided, however, that a Major System Repair shall not include the
replacement of accessories, equipment and consumables required in the
ordinary course of Routine Maintenance and preventative maintenance of
the System reflecting Sound Independent Power Industry Practice.
20. Operating Fee - As set forth in Article VI Section 1.
21. Owner's Plan of Operation - Owner's instructions to Operator as to the
desired electricity and/for thermal energy production schedule and
other operating and maintenance objectives.
22. Owner's Representative - As set forth in Article V. Section 1 (a).
23. Producer Price Index - The U.S. Producer Price Index for All Item, as
currently published in the United States Department of Labor Bureau of
Labor Statistic's monthly publication, PPI Detailed Report or any
successor publication of such information, or if such index is no
longer published or the method of computation thereof is substantially
modified, a mutually agreeable alternative index.
24. Proprietary Information - All financial, technical and operating
information which the parties, directly or indirectly, acquire from
each other, and any other information which a party expressly
designates in writing to be confidential. However, Proprietary
Information shall exclude information failing into any of the
following categories
a. Information that, at the time of disclosure thereof, is in the
public domain;
b. Information that, after disclosure thereof, enters the public
domain other than by breach of this Agreement;
c. Information that prior to disclosure thereof, was already in the
recipient's possession, either without limitation on disclosure
to others or subsequently becoming free of such limitation;
d. Information obtained by the recipient from a third party having
an independent right to disclose such information;
3
<PAGE>
e. Information that is available by independent research without use
of or access to the Proprietary Information acquired from the
other party; and
f. Information that a party is required by low or governmental
action to disclose, provided the disclosing party notifies the
party from whom the information originated in advance and gives
it the opportunity to resist the order.
25. Routine Maintenance - Those activities including the replacement of
accessories, equipment, and consumables required in the ordinary
course of routine and preventative maintenance of the System and
System site in accordance with Sound Independent Power Industry
Practice.
26. Sound Independent Power Industry Practice - Those prudent practices
and methods in effect at the time of performance that am customarily
followed by operators of similarly situated plants and equipment.
27. System - Owner's properties, plant and equipment located in
Sayreville, New Jersey, including a single gas turbine combined cycle
generating station with a nominal capacity of 52 megawatts, more fully
defined in Exhibit B.
28. System Contracts - Contracts and agreements to which Owner is a party
(including, without limitation, insurance policies) relating to the
operation and maintenance of the System, set forth an Exhibit C, which
Exhibit shall be amended by Owner to provide a more comprehensive list
on or before June 15, 1996.
II. ENGAGEMENT OF OPERATOR
1. Effective on the Effective Date, Owner engages Operator to operate and
maintain the System and perform certain duties, all as hereinafter set
forth in this Agreement, and Operator accepts such engagement to
operate and maintain the System and perform the duties specified in
this Agreement in accordance with its terms and conditions.
2. All operating and management personnel involved in the operation and
maintenance of the System shall be employees of Operator or its
Affiliates and shall not for any purposes be deemed employees of
Owner.
III. TERM
The term of this Agreement shall become effective upon the Effective Date
and expire on the sixth (6th) anniversary of the Effective Date, unless
terminated earlier in accordance with Article XII of this Agreement.
IV. OPERATING AND MAINTENANCE DUTIES OF OPERATOR
1. Subject to the terms of this Agreement Operator shall operate and
maintain the System and shall control the details and means of
performing its obligations hereunder.
2. For the period prior to and including the Effective Date, Operator
shall assist Owner in preparing the System for operation under the
Amended Power Purchase Agreement. These services will include but not
be limited to:
a. Preparing a plan and schedule to staff the System;
b. Recruiting and training the staff which will operate and maintain
the System;
4
<PAGE>
c. Responding, in a timely manner, to Owners requests for
information;
d. Procuring, as agent for Owner, replacement of stock of
consumables, spare parts, tools, and supplies in accordance with
the Annual Operating Plan and Budget;
e. Appointing a plant manager (subject to Owner's approval) who
shall supervise the performance of Operators employees at the
System site;
f. Reviewing plans, specifications and drawings of machinery and
equipment layouts and commenting to Owner thereon with regard to
matters affecting operation and maintenance;
g. Observing and receiving training and instructions from Owner,
such training and instructions to be in accordance with Sound
Independent Power Industry Practice;
h. Performing for Owner such other services as may from time to time
be reasonably requested or are reasonably necessary or
appropriate in connection with the operation and maintenance of
the System; and
i. Reporting to and consulting with Owner about the operation of the
System on a scheduled basis, as reasonably requested by Owner.
Such services shall be provided in a manner consistent with all Legal and
Contractual Requirements, Sound Independent Power Industry Practice and the
Annual Operating Plan and Budget.
3. All full time personnel whom Operator will provide for the operation
and maintenance of the System shall be at the site and available full
time for training and to perform services to support System operation
and maintenance as required by the staffing plan to be developed by
Operator and approved by Owner.
4. A written management program shall be developed by operator for
approval by Owner to ensure optimal performance, responsiveness, and
cost-effectiveness in the operation and maintenance of the System.
The program shall include provisions regarding:
a. Budget tracking, analysis and adjustments;
b. Personnel policies, including policies regarding payroll,
compensation, pensions and other benefits;
c. Training;
d. Purchasing and inventory control;
e. A System safety and health program which will include procedures
and a manual;
f. An employee job-site handbook for Operator's employees operating
and maintaining the System;
g. A maintenance planning and scheduling system; and
5
<PAGE>
h. A system for maintaining an inventory of consumables, spare
parts, tools and supplies.
5. Subsequent to the Effective Date, Operator shall provide all
operations and maintenance services necessary to efficiently operate
and maintain the System, including but not limited to performing the
following operating and maintenance services:
a. Operating and maintaining the System in compliance with all Legal
and Contractual Requirements, Sound Independent Power Industry
Practice and the Annual Operating Plan and Budget;
b. Obtaining and maintaining in effect all licenses and permits
required by law to be obtained and maintained in Operator's name
and assisting Owner in obtaining and renewing all licenses and
permits required by low to be obtained and maintained by Owner or
in Owners name;
c. Paying all employees of itself and its Affiliates, agents and
subcontractors promptly and filing all reports and remitting all
payments required under labor statutes to the appropriate
governmental authorities, as the obligations arise:
d. Conducting the operations and maintenance of the System
including, but not limited to. entering into contracts with third
parties as agent for Owner (subject to Owner's approval if not in
the ordinary course of business);
e. Employing, and ensuring adequate training of, Operator employees
and employees of its Affiliates (duly licensed where required by
statute or regulation) for the operation and maintenance of the
System consistent with Sound Independent Power Industry Practice,
and planning and administering all matters pertaining to employee
relations, salaries, wages, working conditions, hours of work,
termination of employment, employee benefits, employee staffing.
safety and related matters pertaining to such employees, and
maintaining records with respect to all such matters;
f. Monitoring, preparing and maintaining records of the operations
and maintenance aspects of the System (including records of
financial, business, and sales tax aspects of the System) in such
form and covering such matters as Owner may reasonably request,
consistent with Sound Independent Power Industry Practice,
generally accepted accounting principles, and applicable records
retention requirements; and making such records available for
inspection and/or audit by Owner and Owner's designees;
g. Implementing an inventory control system to identify, catalog,
and disburse spare parts for the maintenance of the System and
procuring, as agent for Owner, replacement spare parts and
refurbishing. where practical or economical, spare parts to allow
their reuse;
h. Operating and maintaining the System according to the operations
and maintenance programs prepared by Operator for Owner and, if
necessary, creating updates for such programs and creating new
programs as required for operation and maintenance of the System;
i. Operating and maintaining the System to maximize the continuous,
reliable, safe and efficient generation of electrical and/or
thermal energy by the System so as to conserve fuel and financial
resources and to minimize unscheduled outages, and providing
maintenance for the System in a cost-effective manner to prevent
deterioration beyond normal wear and tear provided, however, that
6
<PAGE>
Owner acknowledges such efforts shall necessarily be limited by
the operating life, capacity and maintenance requirements of the
system and by Legal and Contractual Requirements;
j. Using all reasonable care necessary to keep the System and the
System site clean, orderly, and free from debris, rubbish or
waste to the extent consistent with the operation of the System;
k. Taking necessary precautions and corrective actions in the event
of an Emergency;
l. Keeping the System and the System site free and clear of all
liens and encumbrances arising out of the acts, omissions, or
debts of Operator or its employees, agents or subcontractors
claiming by, through or under Operator (this subsection shall not
apply to mechanics liens and liens of any nature arising by
operation of law, provided such liens are promptly removed by the
payment of the debts they secure when due; in the event of a
dispute between Operator or its subcontractors and a lienholder,
Operator's obligation to Owner pursuant to this provision may be
satisfied by the posting of an appropriate bond to the extent
acceptable to the Agent);
m. Within 30 days of its receipt of Owner's Plan of Operation
submitted in accordance with Article V, Section 1 (c), preparing
and submitting to Owner for Owner's approval a written proposed
Annual Operating Plan and Budget which shall include all
anticipated Expenses of the System to be paid by Owner for each
succeeding calendar year, all as more fully described in Article
VI, Section 6 or required by the Agent;
n. Reporting to and consulting with Owner about the operation of the
System on a scheduled basis, as reasonably requested by Owner;
o. Using reasonable commercial efforts to secure from vendors,
suppliers and subcontractors the best indemnities, warranties and
guarantees as may be commercially available regarding supplies.
equipment and services purchased for the System, all of which
shall be assigned to Owner (Operator shall render reasonable
assistance to Owner for the purpose of enforcing such
indemnities, warranties or guarantees of which Owner is a
beneficiary regarding the System);
p. Performing for Owner such other services as may from time to time
be reasonably requested or are necessary or appropriate in
connection with the operation and maintenance of the System;
q. Promptly notifying Owner of:
i. Any condition, event or act which is likely to result in a
material deficiency in budgeted revenues, or excess in
budgeted costs, of Owner;
ii. Any forced outages or significant malfunction of the System
as soon as practicable;
iii. Any material failure to comply with any Legal and
Contractual Requirements or any event which is reasonably
expected to cause such material failure;
r. Promptly providing Owner with such information relative to the
System as Owner may reasonably request;
7
<PAGE>
S. Establishing an effective maintenance planning and scheduling
system to optimize the availability, reliability and heat rate
of the System;
t. Assisting Owner in the compliance by Owner with the terms of the
Financing Agreements, as they relate to the operation and
maintenance of the System, including the preparation of reports
concerning operations and making personnel available for
discussions with the Agent or other lender representatives;
u. Subject to Article XI, assisting Owner in selling or otherwise
disposing of used and/or unneeded parts and supplies; and
v. Providing and maintaining written procedures, in a form
reasonably acceptable to Owner, required to enable Operator's
employees to safety and efficiently startup, operate, and shut
down the System equipment and to perform preventive maintenance
on the System equipment.
V. RESPONSIBILITIES OF OWNER
1. Subject to the terms of this Agreement, Owner shall, at its cost and
expense, perform and provide the following at the times required to
support the start-up, operation and maintenance of the System:
a. Providing an Owner's Representative who shall represent and
bind Owner in all matters regarding this Agreement and the
performance of Owner hereunder;
b. Providing the System and System site free and clear of all
liens and encumbrances (except for any liens or encumbrances in
favor of Agent or the lenders under the Financing Agreements);
c. Preparing the Owner's Plan of Operation and delivering the same
to Operator on or before September 1 of each year;
d. With Operator's assistance, administering all System Contracts;
e. Providing all required utility services, including water,
sewer, gas, telephone, water/wastewater treatment, waste
disposal, special waste disposal and electricity;
f. With operators assistance, obtaining and reviewing all
necessary licenses and permits except those required by law to be
obtained and maintained in Operator's name;
g. Providing manufacturer's operating and maintenance manuals for
the System;
h. With Operator's assistance, preparing and submitting any
special accounting and reporting documents that may be required
by governmental authorities;
i. Providing at its own expense, an office at the site for use by
Operator
j. Within five days of its receipt thereof, providing Operator
complete copies of all technical, operational and other System
and System site related information, including the System
Contracts, as are in the possession, or under the control of
Owner;
8
<PAGE>
k. Being responsible for the billing and collection of electricity
revenues under the Amended and Restated Power Purchase Agreement
and under the Electricity Purchase Contract with E. I. Dupont de
Nemours and Company ("Dupont") and thermal revenues under the
Steam Purchase Contract with Dupont;
l. Being solely responsible for obtaining, maintaining and
renewing all licenses and permits necessary for (i) Owner to do
business in the jurisdictions in which the System is located and
(ii) the ownership, operation and maintenance of the System and
System site;
m. Being responsible for arranging the disposal of hazardous
wastes generated by or at the System or System site: provided,
however, that Operator will coordinate removal of such waste from
the System site using subcontractors chosen by Owner;
n. Complying with, and diligently enforcing, all agreements
(including the System Contracts) to which Owner is a party and
which relate to or impact upon the System or Operator's ability
to perform its obligations hereunder; and
o. Timely paying all of Owner's vendors, suppliers and
contractors.
Such activities shall be provided in a manner consistent with all
Legal and Contractual Requirements, Sound Independent Power Industry
Practice and the Annual Operating Plan and Budget.
VI. EXPENSES, RRIMSURUMENTS, BUDGET, CONSIDERATION, COMPENSATION
1. As compensation to Operator for its performance of the Services, Owner
shall Pay operator (a) the Expenses incurred by Operator and (b) an
annual fee ("Operator's Fee"). The Operator's Fee for the first
Contract Year shall be $200,000. The Operator's Fee shall be payable
in equal monthly installments in arrears. The Operator's Fee shall be
adjusted annually in accordance with the following sentence. For each
Contract Year after the first Contract Year, the Operator's Fee shall
be equal to the product of: (i) the ratio of the Producer Price Index
for the lag month of the then expiring Contract Year over the Producer
Price Index for the last month of the previous Contract Year and (ii)
the Operator's Fee for the then expiring Contract Year, provided,
however, that for any partial Contract Year, the Operator's Fee shall
be multiplied by a fraction, the numerator of which shall be the total
number of days in such Contract Year and the denominator of which
shall be 365 or 366, as the case may be. If Operator falls to pay
accrued, undisputed Liquidated Damages in any Contract Year in
accordance with the provisions herein, Owner may elect to reduce the
Operator's Fee in the subsequent Contract Year by the amount of
undisputed Liquidated Damages owed to Owner.
2. Owner shall directly pay, or promptly reimburse to Operator as the
case may be, the following expenses ("Expenses") relating to the
System:
a. Insurance and bond premiums for policies which are required by
Article VIII hereof;
b. Property, and other taxes (including, without limitation, sales
taxes, gross receipts taxes, value added taxes. energy taxes and
capital taxes) related to Owner or the System, but not including
those based an Operator's income or capital;
c. The base salaries, straight time hourly wages and overtime
hourly wages of all of Operator's on-site personnel plus (i)
thirty eight percent (38%) of (x) the base
9
<PAGE>
salaries and straight time hourly wages and (y) the straight
time hourly portion of the actual overtime wages for all hourly
employees, and (ii) five percent (5%) of the base salaries,
straight time hourly wages, and overtime hourly wages.
d. Transportation, travel, lodging, and (for employees newly hired
or newly assigned to the System site) relocation expenses of
persons employed by Operator or its Affiliates performing the
duties of Operator under this Agreement subject to advance
approval by Owner in writing;
e. Reasonably incurred legal and accounting fees relating to the
System, subject to advance approval by Owner in writing;
f. Fuel expenses including fuel purchase, transportation, handling
and demurrage charges;
g. The expenses of purchased electric power, telephone and other
communication services, purchased potable water. waste disposal,
special waste disposal, lubricants and chemicals necessary for
the operation of the System;
h. Costs reasonably incurred or paid by Operator due to an
Emergency;
i. Training, including outside training services;
j. The costs of permits or licenses required for either Owner,
Operator or the System;
k. Costs associated with Routine Maintenance, Major System Repairs
(including scheduled and unscheduled) inspections, and overhauls,
outside contractor services and purchases of replacement
equipment, parts and components;
l. Spare parts, tools, supplies and consumables;
m. Capital costs approved by Owner for improvements, alterations
or additions to the System including those required by
governmental laws, regulations or orders including without
limitation, those arising from environmental concerns; and
n. The cost of transportation of spare parts, tools, supplies,
consumables and any item which is a reimbursable expense
hereunder.
For all Expenses (other then relating to labor, legal and accounting
fees) incurred and paid by operator for which Operator is entitled to
reimbursement hereunder, Owner additionally shall pay Operator a
general and administrative expense fee of five percent (5%) of such
Expenses.
3. a. For convenience and in order to save on expenses, Owner
will directly pay certain Expenses reimbursable to Operator as
set forth in the Annual Operating Plan and Budget described in
Article VI, Section 2 as practicable. To the extent reasonably
practical, the items covered by such Article VI, Section 2 shall
be procured through Operator's issuance of an Owner purchase
order and the cost of any such items shall be paid directly by
Owner to the vendor thereof. Operator shall perform such duty as
owner's agent.
b. Without Owners prior approval, Operator shall be empowered to
prepare and issue an Owner purchase order for any material or
service the cost of which would constitute an Expense, so long as
the total cost for such item is less than or equal to $10,000.
For any item or items whose total cost is greater than
10
<PAGE>
$10,000, Operator shall submit a written requisition to Owner,
and after receipt of written approval from Owner, Operator shall
be authorized as agent for Owner to prepare and issue a purchase
order on behalf of Owner on Owner's purchase order form for such
item. Operator shall (i) verify the receipt at the System site
of all materials end services to be delivered to the System site
covered by Owner's purchase orders issued by Operator, (ii)
verify the accuracy of vendors' invoices in connection therewith.
and (iii) forward such invoices to Owner for approval, processing
and payment by Owner. Nothing in this Agreement shall prevent
Operator from procuring any material or service the cost of which
would constitute an Expense under Article VI(2).
C. Operator shall periodically, but not more often than once a week,
deliver to Owner invoices received by Operator from third parties
for all direct Expenses, accompanied by a summary of all such
invoices which itemizes all such invoices by operating cost
account number. Such invoices shall also be accompanied by a
statement from Operator confirming that all such invoices are
accurate, due and payable, together with all relevant
documentation reasonably necessary for Owner to verify the
accuracy thereof. Each invoice submitted to Owner shall be paid
by Owner directly to the payee of such invoice on or before the
date such invoice is due.
4. From time-to-time, Operator will prepare and send to Owner an invoice,
including expense statements, vouchers or such other supporting
information as Owner may reasonably require, for the amounts then due
for reimbursable Expenses and the monthly installment of the
Operator's Fee. Owner shall pay the amount due to Operator no later
than thirty (30) days after receipt of the invoice. All payments
shall be made by wire transfer of immediately available funds to Texas
Commerce Bank, Houston, Texas, Account No. 00101616119, ABAR 113000
609. Any payment not made within 30 days after receipt of the invoice
will bear interest from the date on which payment was due at the rate
of one and one-half percent (1.5%) per month or the maximum rate
permitted by law, whichever is the lesser.
5. Operator shall maintain complete, true, and correct records in
connection with all Expenses incurred by Operator. Operator shall
retain all such records for five (5) years after Expense reimbursement
by Owner has been fulfilled or for any longer period of time required
by law. All documents and records relating to this Agreement shall be
available for inspection by Owner anytime during normal business
hours. Owner may audit all records of Operator relating to Expenses
and services performed hereunder. In the event the audit shows that
the payment by Owner to Operator exceeds the amount due Operator,
Owner shall disclose such information to Operator and Operator shall
refund the excess amount to Owner within five (5) business days of the
disclosure to Operator. In the event the audit shows that the payment
by Owner to Operator is greater than the amount due Operator under
this Agreement and such error was caused by Operator, Owner shall be
reimbursed its reasonable costs of performing the audit. In the event
the audit shows that the payment by Owner to Operator is less than the
amount due Operator, Owner shall disclose such information to Operator
and pay the underpayment amount to Operator within five (5) business
days of the disclosure to Operator.
6. On or before October 1 of each year, the Operator shall prepare and
submit to Owner a written Annual Operating Plan and Budget which shall
include all expenses of the System anticipated to be paid by Owner as
either a direct or reimbursable Expense during the upcoming calendar
year pursuant to Section 1 of this Article VI, together with a written
operations and maintenance plan for the same period of time. Such
Annual Operating Plan and Budget shall set forth the anticipated
operations and maintenance plan including projected electrical
production from the System on a monthly basis, and a
11
<PAGE>
complete schedule (to the extent technically feasible) of Operator
responsible Routine Maintenance and all Owner-directed major
maintenance tasks (including Major System Repairs) to be accomplished
during said year. Owner and Operator shall agree upon the budget
operations and maintenance plan, and persons to perform maintenance
under
the plan prior to the start of the calendar year, and shall meet and
exchange information as is necessary and convenient to such end.
It the parties cannot reach agreement on the Annual Operating Plan and
Budget by the start of any calendar year, then, until such time as
agreement is reached or the dispute is resolved, the Annual Operating
Plan and Budget for such calendar year shall be based on the Annual
Operating Plan and Budget for the preceding calendar year, as adjusted
to reflect the net change, if any, between the most recently published
Producer Price Index available on the first day of the calendar year
in question and the corresponding Producer Price index in effect at
the start of the immediately preceding calendar year.
Operator has submitted, and Owner has accepted, the Annual Operating
Budget for the calendar year ending December 31, 1996. a copy of which
is attached as Exhibit F. All Annual Operating Budgets shall be in
substantially the form attached as Exhibit F. The amounts set forth
on Exhibit F shall be reduced pro rata based on the number of days
remaining in the calendar year from and after the Effective Date.
Likewise, the amounts set forth in the Annual Operating Plan and
Budget in effect during the calendar year in which this Agreement
expires or is terminated shall be reduced on a pro rata basis based on
actual number of days elapsed during such calendar year prior to the
date of the expiration or termination of this Agreement
7. a. The parties recognize that Changes may be required during
the term of this Agreement. Either Owner or Operator may by a
written notice to the other party propose a Change. The written
notice shall describe the proposed Change in reasonable detail
and the reasons therefor.
b. The written notice of a Change proposed by Operator shall be
accompanied by a Change Order Budget Statement. Upon receipt by
Operator of any proposed Change from Owner, Operator shall use
its best efforts to prepare and submit to Owner a Change Order
Budget Statement with respect to such proposed Change within
fifteen (15) days of the receipt of Owner's proposed Change. No
proposed Change the cost of which is in excess of $10,000 shall
be implemented until a Change Order has been executed by both
parties approving the Change and the related Change Order Budget
Statement; provided, however, that Operator shall be entitled to
implement a proposed Change without the prior approval of Owner
if such Change is required due to an Emergency. If Operator
implements a Change without the prior approval of Owner due to an
Emergency, Operator shall promptly notify Owner of such Change
and pursue Owner's approval thereof in accordance with subsection
c below. Operator acknowledges that Owner's approval of any
proposed Change and/or the related Change Order Budget Statement
may require the approval of the Agent.
c. Owner and Operator shall diligently and in good faith endeavor
to reach agreement upon any proposed Change and the related
Change Order Budget Statement within thirty (30) days after the
date of the receipt of a proposed Change and related Change Order
Budget Statement. If a Change is required as a result of an
Emergency. then Operator shall provide to Owner, as soon as
practicable, notice of such Change, together with a statement
describing the Emergency and a Change Order Budget Statement. If
a Change due to an Emergency causes the Annual Operating Plan and
Budget to be exceeded and Owner believes that an Emergency did
not exist, then Owner shall have the right
12
<PAGE>
to dispute the Change. If Owner and Operator do not agree as
to the resolution of such dispute, then either party may submit
the dispute to arbitration in accordance with the provisions of
Article XVIII, Section 2 and 3.
8. Operator shall report to Owner in writing monthly on electrical and
thermal output and expenditures incurred to date; projected electrical
and thermal output and expenditures for the balance of the calendar
year, performance to date under the operations and maintenance plan
and such other matters as Owner may reasonably request as to the
operation and maintenance of the System. In such report, Operator
shall recommend such changes to the then current budget and operations
and maintenance plan as Operator considers necessary or appropriate.
9. Operator shall use its best efforts to operate and maintain the
System each year within the budget approved by Owner (as amended by
Change Orders). For purposes of determining the approved budget for
the initial calendar year, the budget provided as Exhibit F in the
aggregate amount of $1,871,860, for operating and maintenance duties
set forth in Article IV, shall be adjusted by the ratio of the
remaining number of days from the Effective Date to year-end divided
by 366. If for any calendar year the Expenses (other than those
Expenses set forth In Article VI, Section 2 (b) and Expenses incurred
in response to Emergencies) whether direct or reimbursable, paid by
Owner exceed the approved Annual Operating Plan and Budget, as amended
by Change Orders mutually agreed by Owner and Operator, then Operator
shall be solely responsible for any such excess.
10. Operator's consideration for services performed and expenses paid
pursuant to this Agreement shall be the reimbursement of expenses
described In Article VI, Section 2, the Operator's Fee, and, if
applicable, the Bonus.
VII. INDEMNIFICATION
1. Operator will protect, indemnify and hold harmless Owner, Owner's
Affiliates and Agent, and their respective directors, officers,
employees, agents and representatives against and from any and all
demands, losses, claims, actions or suits, including costs, judgments,
penalties, fines and attorney's fees, for or on account of injury to
or death of third persons, or for damage to or destruction of property
belonging to third persons or for violation of law, in each case
resulting from or arising out of Operator's negligent maintenance or
operation of the System or Operator's willful act or omission, except
to the extent caused by System design or construction defect, by
Owner's act or omission, or the act or omission of third parties.
2. Owner will protect, indemnify and hold harmless Operator, Operator's
Affiliates. and their respective directors, officers, employees,
agents and representatives against and from any and all demands,
losses, claims, actions or suits, including costs, judgments,
penalties, fines and attorneys' fees, for or on account of injury to
or death of third persons, or for damage to or destruction of property
belonging to third persons, or for violation of law, in each case
resulting from or arising out of a System design or construction
defect, or the negligence or willful act or omission of Owner.
3. The duty to indemnify under this Article will continue in full force
and effect, notwithstanding the expiration or termination of this
Agreement, with respect to any claim or action based on facts or
conditions which occurred prior to such termination.
4. If any indemnified party intends to seek indemnification under this
Article from any indemnifying party with respect to any action or
claim, the indemnified party shall give the indemnifying party notice
of such claim or action within thirty (30) days of the commencement
of, or actual knowledge by the indemnified party of, such claim or
13
<PAGE>
action. The indemnifying party shall have no liability under this
Article for any claim or actions for which such notice is not
conveyed; provided, however, that so long as the indemnifying party is
not materially harmed by the indemnified party's failure to give
timely notice of a claim or action, then the indemnifying party's
indemnify obligation shall be unaffected. The indemnifying party
shall, at its sole cost and expense, defend any such claim or action;
provided. however, that the indemnified party shall, at its own cost
and expense, have the right to participate in the defense or
settlement of any such claim or action. The indemnified party shall
not compromise or settle any such claim or action without the prior
written consent of the indemnifying party, which consent shall not be
unreasonably withheld.
VIII.INSURANCE COVERAGE
1. Operator, on its behalf and on the behalf of all subcontractors of
Operator performing any on-site services in connection with the
operation and maintenance of the System or any of its appurtenant
equipment, shall procure and maintain in effect during the term for
which they perform services pursuant to this Agreement the following
minimum insurance coverages, in the given amounts:
a. Vehicle liability insurance covering all owned, non-owned and
hired automobiles, trucks, trailers and other vehicles. Such
insurance shall provide coverage not less than that of the
standard comprehensive automobile liability policy in limits not
less than $1,000,000 combined single limit each occurrence for
bodily injury and property damage. The Owner and NRG Generating
(U.S.) Inc. shall be named as additional insureds.
b. Workers' Compensation insurance that satisfies statutory
requirements and Employers' Liability Insurance with limits of
$1,000,000. This insurance shall include All States Coverage and
Longshoremen & Harbor Workers Compensation Act coverage (if
exposure exists.) The Employer's Liability Coverage shall not
contain an occupational disease exclusion.
c. Liability insurance, on an "Occurrence" basis and in a form
providing coverage not less than that of the standard Commercial
General Liability policy, covering operations of the System
including independent contractors, products and completed
operations, broad form property damage, blanket contractual
liability coverage (for any written or oral contracts related to
the System) and personal injury liability coverage for claims
arising out of the operations of the System for bodily injury,
property damage and personal injury with policy limits not low
than $1,000,000 combined single limit each occurrence and
$2,000,000 aggregate limit. The aggregate policy limits shall
apply solely to this project or site. Coverage shall include a
standard severability of interests clause and cross liability
coverage. The Owner and NRG Generating (U.S.) Inc. shall be
named as additional insureds.
d. Excess or umbrella liability insurance, on an "Occurrence"
basis and with coverage at least as broad as the vehicle
liability, employers' liability and general liability policies,
to provide limits of insurance in excess of Owner's vehicle
liability, employers liability and general liability policies for
not less than $10,000,000 combined single limit each occurrence
and in the aggregate for bodily injury. property damage and
personal injury. The aggregate policy limits shall apply solely
to this project or site. Coverage shall include a standard
severability of interests clause and cross liability coverage.
The Owner and NRG Generating (U.S.) Inc. shell be named as
additional insureds.
14
<PAGE>
2. Owner shall procure and maintain in effect during the term of this
Agreement at its expense the following minimum insurance coverage:
a. Vehicle liability insurance covering all owned, non-owned and
hired automobiles, trucks, trailers. and other vehicles. Such
insurance shall provide coverage not less then that of the
standard comprehensive automobile liability policy in limits not
less than $1,000,000 combined single limit each occurrence for
bodily injury and property damage. The Operator and NRG
Generating (U.S.) Inc. shall be named as additional insureds.
b. Workers' Compensation insurance (if required) that satisfies
statutory requirements and Employees' Liability Insurance with
limits of $1,000,000. This insurance shall include All States
Coverage and Longshoreman & Harbor Workers Compensation Act
coverage Of exposure exists.) The Employer's Liability Coverage
shall not contain an occupational disease exclusion.
c. Liability insurance, on an "Occurrence" basis and in a form
providing coverage not less than that of the standard Commercial
General Liability policy, covering operations of the System
including independent contractors, products and completed
operations, broad form property damage, blanket contractual
liability coverage (for any written or oral contracts related to
the System) and personal injury liability coverage for claims
arising out of the operations of the System for bodily injury,
property damage and personal injury with policy limits not less
than $1,000,000 combined single limit each occurrence and
$2,000,000 aggregate limit. The aggregate policy limits shall
apply solely to this project or site. Coverage shall include a
standard severability of interests clause and cross liability
coverage. The Operator and NRG Generating (L.I.S.) Inc, shall be
named as additional insureds.
d. "All Risk" Property Insurance, including Boiler and Machinery
Insurance and difference in conditions coverage (including flood
perils), with an extension for Business Interruption Coverage,
and naming Operator and NRG Generating (U.S.) Inc, as additional
insureds for all such insurance coverage as their interests
appear.
3. Within thirty (30) days after the date of execution of this
Agreement, each party shall provide to the other party, pursuant to
the notice provisions of Article XIV, properly executed certificates
of insurance, signed by an authorized representative of the insurance
carrier. These certificates shall provide the following information:
a. Name of insurance company, policy number and expiration date;
b. The coverage required hereunder and the limits on each covered
item, including the amount of deductibles and self-insured
retentions;
c. A statement indicating that sixty (60) days notice of
cancellation, non-renewal, or material change in coverage of any
of the policies shall be given to each named insured and any
additional insured; and
d. Named and additional insured.
4. Each party shall have the right to inspect and photocopy the
policies of insurance at the other party's place of business during
regular business hours. on reasonable prior written notice.
15
<PAGE>
5. All insurance policies, including Workers' Compensation insurance,
provided by Owner and Operator shall waive all rights of subrogation
against one another and NRG .
6. The provision of insurance shall not be construed to limit the
liability of any party to the other party.
7. All commercial insurance carriers providing insurance hereunder must
be rated A- or better, with a minimum size rating of VIII by Bests
Insurance Guide and Key Ratings or an equivalent rating by another
nationally recognized insurance rating agency of a standing similar to
Best.
8. All deductibles or self insured retentions associated with policies
required hereunder shall be the responsibility of the named insured.
IX. ENGAGEMENT OF THIRD PARTIES
Operator may engage or subcontract in the ordinary course of business and
at Owner's expense such persons, corporations or other entities as Operator
deems advisable for the purpose of performing or carrying out any of the
obligations of Operator under this Agreement. Except in the case of an
Emergency, before incurring an Expense under this Article IX In excess of
$10,000, Operator shall obtain the prior written approval from Owner.
X. OPERATOR REPORTING OBLIGATIONS
Operator shall provide Owner with copies of all reports generated by
Operator's or Operator's Affiliates' employees, agents, or subcontractors
with respect to the operation of the System that are filed with any
federal, state, or local agency or governmental entity. In addition,
Operator shall provide Owner with monthly compliance reports, summarizing
Operator's compliance with all System permits and licenses. The content of
the monthly compliance reports shall be agreed to by Owner and Operator on
or before June 15, 1996. All monthly compliance reports shall be delivered
to owner within ten (10) days after the last day of the relevant month.
XI. SPECIFIC LIMITATIONS
In the conduct of its duties hereunder, Operator shall not, without first
obtaining the written consent of Owner:
1. Limit on Expenditures. Under-take an expenditure outside Operator's
scope of responsibilities except that, in case of an Emergency,
Operator may make such immediate expenditures as may be necessary, but
notice of any such Emergency and expenditures shall be given to Owner
as promptly as possible, but in no case more than 12 hours after the
event.
2. Settlement of Claims. For any claim for which Owner is or may be
responsible, pay in excess of $10,000 in the settlement of any claim
for injury to or death of persons, or loss of or damage to property,
or in settlement of any contract or other dispute.
3. Disposition of Equipment. On Owner's behalf, sell or otherwise
dispose of any item of equipment which is part of or used in the
operating or maintaining the System if the current price of new
equipment similar thereto is in excess of $5,000.
4. Contracts with Affiliates. On Owner's behalf, enter into any
contract with an Affiliate of Operator with a value in excess of
$5,000.
16
<PAGE>
XII. TERMINATION/DEFAULT
1. This Agreement may be terminated:
a. By the non-defaulting party at any time following the occurrence
of any Event of Default, as described In this Article XII, if
such Event of Default is not cured within the period, if any,
provided therefor,
b. By Operator, if, after Operator has taken all reasonable efforts
to avoid regulation as a public utility, Operator's performance
under this Agreement renders Operator subject to regulation as a
public utility by any federal, state or local agency of any
governmental entity, by delivery of thirty (30) days' prior
written notice to Owner;
c. By Operator, if Owner's action or inactions under this Agreement
renders Operator subject to regulation as a public utility by any
federal, state or local agency of any governmental entity, by
delivery of thirty (30) days' prior written notice to Owner
d. By Owner for its convenience, upon ninety (90) days' written
notice to Operator provided that Owner pays Operator the
applicable termination charge in accordance with the provisions
of Exhibit D (no termination of this Agreement under this
provision may be effective until the third anniversary of the
Effective Date);
e. By Owner, if, at, on, or in connection with the operation and
maintenance of any part or all of either or both of (x) the
System or (y) the properties, plant or equipment operated by
Operator for NRG Generating (Parlin) Cogeneration, Inc., Operator
falls to achieve and maintain compliance with all applicable
laws, permits, licenses, regulations, or orders of any
Governmental Authority; provided. however, that no failure of
Operator to perform its obligations under this Article XII,
Section 1 (e) shall be grounds for termination if such failure is
the result of the negligence of a third party other than
subcontractors of or procured by Operator or Operator's
affiliates or an act of Force Majeure, so long as Operator is
diligently pursuing a cure as required by this Agreement. Owner
may exercise its right of termination under this Article XII
action 1 (e), if and when Owner believes that Operator has failed
to achieve and maintain compliance with an applicable law,
permit, license, regulation or order, whether or not (s) a court
or administrative agency with competent jurisdiction has
determined that there has been such a failure or (t) a dispute
resolution process has determined that the failure was not the
result of either negligence of a third party other than
subcontractors or an act of Force Majeure which Operator is
diligently attempting to cure; provided, however, that following
any termination by Owner under this Article XII Section 1 (e), if
(u) a court or administrative agency, with competent jurisdiction
to assess a fine, penalty or other action for failures in
circumstances of the sort which were the basis of Owner's
termination, issues a final nonapealable order (or issues an
order for which all appeals periods have expired) determining as
a matter of both fact and law that the circumstances which were
the basis of Owner's termination did not constitute a violation
of any law, permit, license, regulation or order. or (v) a
dispute resolution process under Article XVIII determines that
the failure was the result of negligence of a third party other
then subcontractors or an act of Force Majeure which Operator is
diligently attempting to cure, then Owner shall pay Operator the
amount determined in accordance with Exhibit E.;
17
<PAGE>
f. By the mutual agreement of the parties; and
g. By Owner, if the Amended Power Purchase Agreement is terminated
for any reason other then a default by Owner or an Owner
Affiliate.
2. Owner shall be in default under this Agreement upon the happening or
occurrence of any of the following events or conditions, each of which
shall be deemed to be an Event of Default for purposes of this
Agreement:
a. Owner materially breaches any of Owner's obligations.
covenants, conditions, services or other responsibilities under
this Agreement unless within thirty (30) days after notice from
Operator specifying the nature of such breach, Owner either cures
such breach or, if such breach (other than the failure to make
payment obligations) cannot be cured within thirty (30) days,
Owner commences and diligently pursues such cure and thereafter
continues to diligently pursue such cure. If the breach is not
cured within 120 days of the date of Operator's written notice to
Owner, then Operator may terminate this Agreement;
c. There is an assignment for the benefit of Owner's creditors, or Owner
or its Parent company, NRG Generating (U.S.) Inc.. is adjudged bank-
rupt, or a petition is flied by or against Owner or its parent
company under the provisions of any insolvency or bankruptcy laws
(and such petition is not dismissed within six months), or the busi-
ness or principal assets of Owner or its parent company are placed in
the hands of a receiver, assignee or trustee, or Owner is dissolved,
or Owner's existence is terminated or its business is discontinued; or
c. Any material representation or warranty furnished by Owner in
connection with this Agreement was knowingly false or misleading
in any material respect at the time it was made.
3. Operator shall be in default under this Agreement upon the happening
or occurrence of any of the following events or conditions, each of
which shall be deemed to be an Event of Default for purposes of this
Agreement:
a. Operator materially breaches or falls to observe or timely
perform any of Operator's obligations, covenants, conditions,
services or responsibilities under this Agreement, unless within
thirty (30) days after notice from Owner specifying the nature of
such breach or failure, Operator either cures such breach or
failure or, if such breach cannot be cured within thirty (30)
days, Operator commences and diligently pursues such cure and
thereafter continues to diligently pursue such cure. If the
breach is not cured within 120 days of the date of Owner's
written notice to Operator, then Owner may terminate this
Agreement;
b. There is an assignment for the benefit of Operator's creditors,
or Operator is adjudged bankrupt, or a petition is filed by or
against Operator under the provisions of any insolvency or
bankruptcy laws (and such petition is not dismissed within six
months), or the business or principal assets of Operator are
placed in the hands of a receiver, assignee or trustee, or
Operator is dissolved, or Operators existence is terminated or
its business is discontinued; or
c. Any material representation or warranty furnished by Operator
in connection with this Agreement was knowingly false or
misleading in any material respect at the time when made.
Notwithstanding subsection (a) above, Operator (i) shall not be afforded
any cure period, (ii) will not be permitted to invoke or utilize the
Article XVIII Dispute Resolution
18
<PAGE>
provisions, and (iii) will be subject to immediate termination if the
termination of this Agreement is affected under the language of Article
XII, Section 1(e).
4. Upon the occurrence of an Event of Default, the non-defaulting party
may:
a. Without recourse to legal process, terminate this Agreement by
delivery of a written notice of termination to the defaulting
party or its assigns; and/or
b. Pursue, concurrently or separately, other remedies existing in
law, any provision of this Agreement, or otherwise.
5. Upon termination or expiration of this Agreement, Operator
shall:
a. Deliver to Owner all books, records, operator logs, accounts and
manuals developed or maintained by Operator pursuant to this
Agreement, provided however, that Operator may retain copies of
such documents. Furthermore, Owner shall have the right to take
possession of all of the equipment, spare parts and supplies
purchased for the System and paid for by Owner,
b. At Owner's request and expense, cooperate with Owner to effect an
orderly transition of the operations and maintenance of the
System, including, without limitation, perform the following:
i. Continue to operate the System in accordance with this
Agreement for a period not to exceed 180 days while Owner
appoints and mobilizes a successor operator;
ii. Assist Owner in preparing an inventory of all material,
equipment, spare parts and supplies purchased for the
System; and
iii. Assign to Owner all Operator's contractual agreements with
third parties relating to the operations or maintenance of
the System, to the extent such agreements are so assignable.
XIII.ACCESS TO SYSTEM
Operator and Owner and their agents, representatives, and employees shall
have full and free access at all times to the System.
XIV. NOTICES
1. Any notice required or permitted under this Agreement shall be in
writing and shall be valid and sufficient if delivered personally,
mailed by registered or certified mail, or sent by a recognized
private overnight express delivery service. In each case postage
prepaid, return receipt requested, addressed to the other party as
follows:
If to Operator:
STEWART & STEVENSON OPERATIONS, INC.
2707 North Loop West
Houston, Texas 77008
Attn: Vice-President of North American Operations
Telephone: 713-803-0300
If to Owner:
19
<PAGE>
NRG Generating (U.S.) Inc.
1221 Nicollet Mall, Suite 600
Minneapolis, Minnesota 55403
Attn: Chief Executive Officer
Telephone: 612-373-5300
2. Any party may change its address, or add additional addresses, by
notice given to the other parties in the manner se forth above
XV. FURTHER ASSURANCES
1. Owner and Operator agree to execute, acknowledge and deliver any and
all such further documents and instruments and to take such action as
may reasonably be required in order to allow the financing of the
System to proceed, to effectuate the purpose of this Agreement, and to
obtain any government permits, licenses, or approvals necessary or
convenient to accomplish the foregoing.
2. Title to all materials, equipment, supplies, consumables, spare
parts and other items purchased or obtained by Operator for the System
shall pass to and vest in Owner upon the passage of title from the
vendor or supplier thereof and the payment or reimbursement of
Operator's costs by Owner.
XVI. REPRESENTATIONS AND WARRANTIES
1. Owner represents and warrants to Operator as follows:
a. Owner is a corporation duly formed, validly existing, and in
good standing under the laws of Delaware, and it is properly
qualified to do business in New Jersey;
b. The execution of this Agreement has been duly authorized and
approved by Owner, and no other authorizations, approvals, or
consents are required in order for this agreement to constitute a
binding and enforceable legal obligation of Owner;
c. The execution of this Agreement by Owner, and the performance
of Owner's obligations under this Agreement will not conflict
with, or result in a breach or default under, any agreement,
contract, or covenant to which Owner is a party; and
d. This Agreement, as executed, constitutes a binding legal
obligation of Owner that is enforceable in accordance with its
terms and conditions.
2. Operator represents and warrants to Owner as follows:
a. Operator is a corporation duly incorporated, validly existing,
and in good standing under the laws of Delaware, and it is
properly qualified to do business in New Jersey;
b. The execution of this Agreement by Operator has been duly
authorized and approved by Operator and no other authorization,
approvals, or consents are required in order for this Agreement
to constitute a binding and enforceable legal obligation of
Operator;
c. The execution of this Agreement by Operator, and the
performance of its obligations under this Agreement will not
conflict with, or result in a breach or
20
<PAGE>
default under, any agreement, contract, or covenant to which
Operator is a party; provided, however. that this provision is
modified to be consistent with Section 7 of the Agreement which
is being executed contemporaneously herewith as an inducement to
the execution of this agreement; and
d. This Agreement as executed, constitutes a binding legal
obligation of Operator that is enforceable in accordance with its
terms and conditions.
XVII.FORCE MAJEURE
1. Except for the obligation of either party to make any required
payments hereunder, the parties shall be excused from performing their
respective obligations under this Agreement and shall not be liable in
damages or otherwise if and to the extent that they are unable to so
perform or are prevented from performing by a Force Majeure, provided
that;
a. The non-performing party, as promptly as practicable after the
occurrence of the Force Majeure, but in no event later than 14
days thereafter, gives the other party written notice describing
the particulars of the occurrence;
b. The suspension of performance is of no greater scope and of no
longer duration than is reasonably required by the Force Majeure;
c. The non-performing party uses its best efforts to remedy its
inability to perform; and
d. As soon as the non-performing party is able to resume
performance of its obligations excused as a result of the
occurrence, it shall give prompt written notification thereof to
the other party.
2. Neither party shall be required to settle any strike, walkout,
lockout or other labor dispute on terms which, in the sole
judgment of the party involved in the dispute, are contrary to
its interest, it being understood and agreed that the settlement
of strikes, walkouts, lockouts or other labor disputes shaft be
entirely within the discretion of the party having such dispute.
XVIII. DISPUTE RESOLUTION
1. Resolution by Parties.
a. First Attempt. In the event that a dispute arises hereunder
between the parties, the parties shall attempt in good faith to
settle such dispute by mutual discussions within 30 days after
the date that a party gives written notice of the dispute to the
other party; provided, however, that if the dispute involves any
amount claimed under an invoice and after 10 days of mutual
discussion either party believes in good faith that further
discussion will not resolve the dispute to its satisfaction, such
party may immediately refer the matter to arbitration in
accordance with Section 2 of this Article XVIII.
b. Chief Executive Officers. In the event that the dispute is not
resolved in accordance with subsection 1 (a) above, either party
may refer the dispute to the chief executive officers or chief
operating officers of the respective parties for further
consideration. In the event that such individuals are unable to
reach agreement within 15 days, or such longer period as they may
agree, then either party may refer the matter to arbitration in
accordance with Section 2 of this Article XVIII.
21
<PAGE>
2. Arbitration. In the event a dispute arises between Owner and
Operator which is not resolved pursuant to Section 1 of this Article
XVIII, shall be resolved by arbitration pursuant to the terms hereof.
As a condition to initiating arbitration proceedings, a party must
first have attempted to resolve the dispute under Section 1 of this
Article XVIII. All claims, disputes, and other matters in question
arising out of or relating to this Agreement or the breach thereof
shall be decided by arbitrators selected as hereinafter provided and
shall be conducted in accordance with the Commercial Arbitration Rules
of the American Arbitration Association then obtaining, unless the
parties mutually agree otherwise. The resolution of such disputes
shall not delay Operator's or Owner's performance of their undisputed
obligations under the terms of this Agreement. The arbitration shall
be held in Newark, New Jersey and any arbitration demand must be filed
with the American Arbitration Association office located closest to
Newark, New Jersey. If the claim or defense of either party is
determined to be frivolous, the arbitrators may require that the party
at fault pay or reimburse the other party for (i) fees and expenses,
including. attorneys and expert fees and expenses, and (ii) reasonable
out of pocket expenses incurred by the other party in connection with
the arbitration proceedings. Notwithstanding the foregoing, a
termination of the Agreement under the language of Article XII,
Section 1 (e) shall not, under any circumstances (except for disputes
relating to the settlement of payment obligations), be subject to
arbitration under this Article VXIII.
3. Selection of Arbitrators. Each dispute shall be submitted to three
arbitrators, one arbitrator being selected by Owner, one arbitrator
being selected by Operator, and the third arbitrator being selected by
the two so selected. The party initiating the arbitration shall
include in its notification under Section 4 below the designation of
its selected arbitrator and the party receiving such notification
shall designate its arbitrator within fifteen (15) days thereafter by
notify the initiating party and its arbitrator of the selection. If
the arbitrators selected by Owner and Operator cannot agree on a third
arbitrator within fifteen (15) days after the second arbitrator is
selected, the third arbitrator shall be selected by the American
Arbitration Association. In the event the party receiving
notification of a demand for arbitration shall not have selected its
arbitrator and given notice thereof to the other party and its
arbitrator within fifteen (15) days after receiving such notification,
such arbitrator shall be selected by the American Arbitration
Association.
4. Notice. Notice of demand for arbitration shall be filed in writing
with the other party to this Agreement and with the American
Arbitration Association. The demand shall be made within a reasonable
time after the claim, dispute or other matter in question has arisen.
In no event shall the demand for arbitration be made after the date
when the applicable statute of limitations would bar institution of a
legal or equitable proceeding based on such claim, dispute, or other
matter in question.
5. Award. This agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law. The award rendered
by the arbitrators shall be final and judgment may be entered upon it
in accordance with applicable law in any court having jurisdiction
thereof.
6. Survival. This Article shall survive termination of this Agreement.
XIX. GENERAL PROVISIONS
1. Governing Law. This Agreement shall be governed by and construed
under the laws of New Jersey.
22
<PAGE>
2. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
3. Headings. Title and headings of the articles and sections of this
Agreement are for convenience of reference only and do not form a part
of and shall not in any way affect the interpretation of this
Agreement.
4. Amendment. No modification or amendment of this Agreement shall be
valid unless in writing and executed by both parties to this
Agreement.
5. Assignment. This Agreement may not be assigned by Operator without
the written consent of Owner and written agreement of assignee whereby
it expressly assumes and agrees to perform each and every obligation
of Operator hereunder. Any assignment by Operator in violation hereof
shall be null and void. Owner may, without the consent of Operator,
assign its rights (but not its obligations) under this Agreement to or
by a lender (including finance lessor) providing funds to refinance
the System.
6. Successors and Assigns. This Agreement shall be binding and inure
to the benefit of the parties hereto and their respective successors
and assigns, to the extent that assignment is permitted under this
Agreement.
7. Entire Agreement. This Agreement constitutes the entire agreement
between the parties, supersedes all prior representations, documents
or statements transmitted between the parties.
8. Consequential Damages. In no event will Owner or Operator have the
right, with or without legal process. to recover punitive or special
damages, or indirect or consequential damages, such as loss of use,
lost profits, costs incurred because of delays, cost of replacement
energy, "idle plant" costs, interest on borrowed money, letters of
credit, security deposits or bonds. In no event will Owner or
Operator be liable for representations, oral or otherwise, as to the
results intended to be achieved through its undertakings pursuant to
this Agreement, except as specifically provided in this Agreement.
9. Other Provisions. Nothing in this Agreement shall be construed to
prevent or prohibit Operator from providing operating services to any
other person, organization, or entity.
10. Waiver. The waiver of any breach of any term or condition hereof
shall not be deemed a waiver of any other or subsequent breach,
whether of like or different nature.
11. Not for Benefit of Third Parties. This Agreement and each and every
provision thereof is for the exclusive benefit of the parties to this
Agreement and not for the benefit of any third party.
12. Survival of Representations, Warranties and Indemnities. All
representations, warranties and indemnities of the parties set forth
in this Agreement shall survive the termination or expiration of this
Agreement.
13. Approval by Proposed Lender. If any provision of this Agreement must
be approved by a lender, lessor or equity investor in connection with
the financing of the System or any other action contemplated hereby,
and such lender requires any modification of the provisions of this
Agreement, neither owner nor Operator shall unreasonably withhold its
approval and execution of any such modifications.
23
<PAGE>
14. Survival of Obligations. Termination of this Agreement for any reason
shall not relieve Owner or Operator of any obligation accruing or
arising prior to such termination.
15. Confidentiality. The parties shall hold in confidence, and shall use
only for the purposes of this Agreement, any and all Proprietary
information disclosed to each other.
16. Severability. Should any section or subsection hereof be declared
invalid or unenforceable for any reason, the remaining sections and
subsections of this Agreement shall remain in full force an affect,
and the parties hereto agree to immediately renegotiate in good faith
such section or subsection as was declared invalid or unenforceable.
17. Duty to Mitigate. Each party must use its best efforts to mitigate
the injury or damage caused by the other party's failure to perform.
When a party seeking damages fails to make these efforts, the other
party shall be entitled to have the damages accordingly reduced.
18. Consent. Except in the case of an Emergency, when either party's
consent or approval is required, such consent or approval must be in
writing and given prior to the act for which such consent or approval
is sought.
19. Reasonableness. Except as expressly stated to be within the sole
discretion of any party, all consents or approvals required of either
party shall not be unreasonably withheld or delayed, nor shall any
acts or requests of a party be unreasonable in light of the
surrounding facts and circumstances.
20. Disclaimer, THE WARRANTIES EXPRESSLY PROVIDED BY OPERATOR HEREUNDER
ARE THE SOLE, INTENDED WARRANTIES AND OPERATOR HEREBY DISCLAIMS ALL
OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, ORAL, WRITTEN,
EXPRESS OR IMPLIED, INCLUDING ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND ALL
WARRANTIES ARISING FROM COURSE OF DEALING OR USAGE OF TRADE.
21. Limits on Liability. Notwithstanding any provision contained in this
Agreement to the contrary, for any Contract Year, Operator shall not
be liable to Owner (whether by contract, warranty, tort, statute or
otherwise, including Liquidated Damages or penalties owed by Operator
under this Agreement) for any amounts that in the aggregate exceed the
amount of the Operating Fee and Bonuses paid for the Contract Year in
which the claim is made. If a claim(s) is made after the end of the
term, then the claim(s) shall be deemed to have been made in the last
Contract Year of the term. The limits of liability set forth herein
shall not apply to any damages incurred by a party as a result of its
gross negligence or willful misconduct.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first set forth above.
OWNER:
NRG Generating (Parlin) Cogeneration Inc.
By: /s/ Leonard Bluhm
Its: President
OPERATOR:
Stewart & Stevenson Operations, Inc.
By: /s/ Harvey Braswell
Its: VP North American OPS
24
<PAGE>
EXHIBIT A
BONUS/LIQUIDATED DAMAGES
For the purpose of determining the liquidated damages ("Liquidated
Damages") payable by Operator to Owner, or the bonus ("Bonus") payable by
Owner to Operator, the effectiveness of Operator under this Agreement shall
be measured in terms of both availability and heat rate. These
measurements shall be applied at the completion of each Contract Year to
determine the Liquidated Damages or Bonus for that Contract Year.
Availability. Operator shall undertake to operate the System to maximize
availability. Availability will be measured for both the Base Capacity and
Dispatchable Capacity levels, as defined in the Amended and Restated Power
Purchase Agreement. In each case the following formula will be used:
Contract Availability =
[Total Hours - (Equivalent Contract Unavailable Hours)]
Total Hours
where:
Total Hours = total hours in the Contract Year; and
Equivalent Contract Unavailable Hours = total of all hours during the
Contract Year during which there occurred a full or partial Planned,
Forced, or Maintenance Outage, as those terms are defined in Article 3 of
the Amended and Restated Power Purchase Agreement (including outages
resulting from Force Majeure events, but excluding outages resulting from
(x) JCP&L's failure to supply natural gas to the Facility during periods
when PSE&G has not interrupted transportation that it supplies under the
PSE&G Gas Supply Agreement and (y) JCP&L's failure to accept available
Output from the Facility). Partial outages are measured on an equivalency
basis, e.g., a 50% outage for one hour would be equivalent to a full outage
for one-half hour, and so forth.
Availability. For purposes of Bonus/Liquidated Damages availability
calculation, the target Base availability will be 97%, and the Dispatchable
availability will be 94%, for the term of this Contract. Each one tenth of
one percent (0.1%) of availability will have a value of $10,000 as a Bonus
or Liquidated Damages for availability measurement.
Heat Rate. For purposes of Bonus/Liquidated Damages heat rate
calculations, the heat rate incentive will be based on 9500 Btu per kwh
HHV, as calculated in accordance with Article 8.3, Section h of the Amended
and Restated Power Purchase Agreement, as adjusted by Article 9, for the
term of this Contract.
25
<PAGE>
LIQUIDATED DAMAGES AND BONUS
The Liquidated Damages payable by Operator to Owner and the Bonus payable
by Owner to operator shall be based on the Availability and Heat Rate
guarantees set forth in this Exhibit. For any Contract Year, the maximum
Liquidated Damages (in the aggregate for each category as adjusted by the
amounts of any Bonus payable to Operator) payable by Operator shall be no
more than one hundred percent(100%) of the Operator's Fee for such Contract
Year. For any Contract Year, once the aggregate Bonuses payable to
Operator (adjusted for the Liquidated Damages, if any, owed by Operator
equal $200,000, then any amounts in excess of $200,000 shall be payable to
Operator at a rate of 4O% of such excess. The availability and heat rate
Bonus/Liquidated Damages calculations will be determined monthly and will
be payable after the end of the Contract Year as set forth in the Amended
and Restated Power Purchase Agreement.
26
<PAGE>
EXHIBIT B
DESCRIPTION OF THE SYSTEM
PARLIN SYSTEM
The cogeneration plant consists of a dual combustion gas turbine-steam
turbine combined cycle (topping cycle) plant.
The nominal rating is 120 MW electrical, with average thermal output of
30,000 lbs/hr steam. The prime movers of the plant are two General
Electric Frame 6 dual fuel combustion turbines, each direct connected to a
54,000 kVA synchronous generator with electrical output at 3 PH, 60 Hz and
13.8 kV.
The exhaust from each of the G.E. Frame 6 turbines is directed into a three
drum (tri-pressure) heat recovery steam generator (HRSG). Each HRSG, at
full turbine load and 59 F ambient temperature produces when fired with
94.0 million BtuHHV an hour of auxiliary filing, 227,000 lbs/hr of 700
psig, 900 F steam; 23,000 lbs/hr of 285 psig/521 F steam; and 12,300 lbs/hr
of 30 psig dry and saturated steam.
The combined 700 psig steam is directed to two condensing extraction steam
turbines, each of which is direct connected through a step-up gearbox to a
24,000 kVa synchronous generator with an electrical output of 3PH, 60 Hz
and 13.8 kV.
The 165 psig steam extracted from the steam turbine is directed into a
header from which 35,000 lbs/hr is directed to process to the site steam
host.
Thermal loads of the system vary seasonally from an average of 30,000
lbs/hr over the course of an 8760 hour year.
The plant will operate on natural gas under normal circumstances other then
interruptions due to curtailment of supply on extremely cold days.
Kerosene fuel is used as the alternate, approximately 480 hr/yr. Output of
the combustion turbine is controlled by sensing and maintaining a constant
optimum turbine exhaust temperature.
NOX emission from the plant are controlled by a combination of steam
injection into the combustion turbine and Selective Catalytic Reduction
using anhydrous ammonia injection with a semi-precious metal catalyst in
the HRSG. The plant is equipped with Continuous Emission Monitoring
equipment.
The interconnection points for the System are shown an identified an the
following diagram associated with this Exhibit.
27
<PAGE>
EXHIBIT C
SYSTEM CONTRACTS
NEWARK
Power Purchase Agreement dated 04/30/96
Gas Service Agreement dated 04/30/96
Electricity Agreement with Dupont dated 01/18/88
Steam Purchase Agreement dated 12/08/86
Permits
Air Permit/Certification (Storage Tank #1) issued 10/10/90
Air Permit/Certification (Auxiliary Boiler) issued 05/21/89
Wastewater Discharge Permit issued 04/01/93
Air Permit/Certification (Auxiliary Boiler) issued 06/15/95
Air Permit/Certification (Stack #2) issued 10/21/90
Air Permit/Certification (Stack #1) issued 12/22/93
Air Permit/Certification (Storage Tank #2) issued 10/10/90
28
<PAGE>
EXHIBIT D
TERMINATION FOR CONVENIENCE
Commencing on the third anniversary of the Effective Date, the Owner may
terminate this agreement for convenience as set forth In Article XII
Section 1 (d). The termination fee shall be $570,000 reduced pro-rata
based on the number of calendar days remaining in the Agreement term as the
numerator and 1096 calendar days as the denominator. The termination fee
will be adjusted accordingly for any pro-rated undisputed Bonus/Liquidated
Damage payments due on the Termination Date. This right of payment shall
be Operator's sole and exclusive remedy for any termination of the
Agreement by Owner under Article XII Section I (d) or the circumstances
that were the basis thereof or were related thereto.
29
<PAGE>
EXHIBIT E
TERMINATION UNDER ARTICLE XII SECTION 1(e)
Commencing on the Effective Date, the Owner has the right to terminate the
Agreement immediately as set forth in Article XII Section 1 (e). If Owner
exercises such termination right and Operator thereafter becomes entitled
to receive a payment from Owner under the language of the second of the
provisos of Article XII Section 1 (e), then the amount of the payment shall
be determined as follows: (i) if the termination occurs on the Effective
Date, then the amount of the payment shall be $1.4mm for Parlin or (ii) if
the termination occurs after the Effective Date, then the amount of the
payment shall be the product of the amount specified in clause (i) times a
fraction, the numerator of which is the number of calendar days remaining
in the term of the Agreement, measured from the date that Operator
surrendered control of the Project to Owner, and the denominator of which
is 2,191 calendar days. The amount of this payment shall be adjusted for
any prorated undisputed Bonus/Liquidated Damage payments due under the
terms of the Agreement on the date of termination. This right of payment
shall be Operator's sole and exclusive remedy for any termination of the
Agreement by Owner under Article XII Section 1 (a) or the circumstances
that were the basis thereof or were related thereto.
30
<PAGE>
EXHIBIT F
1996 Budget
SEE ATTACHED
31
<PAGE>
APPENDIX I
GUARANTEE OF OPERATOR'S OBLIGATIONS
BY STEWART & STEVENSON SERVICES, INC.
In consideration of, and as an inducement for NRG Generating (Parlin)
Cogeneration, Inc. ("Owner") to enter into certain agreements with Stewart
& Stevenson Operations, Inc. ("Subsidiary"), Stewart & Stevenson Services,
Inc. hereby, irrevocably guarantees to Owner the Prompt performance and
payment when due, whether by acceleration or otherwise, of all obligations,
indebtedness, liabilities or undertakings according to the terms of the NRG
Generating (Parlin) Cogeneration Inc./Stewart & Stevenson Operations, Inc.
Operating and Maintenance Agreement dated , 1996 and the Agreement
between Stewart & Stevenson Operations, Inc., NRG Generating (Newark)
Cogeneration Inc., NRG Generating (Parlin) Cogeneration Inc., NRG
Generating (U, S.) Inc., and Stewart & Stevenson Services, Inc. (the
"Agreements").
Subject to the terms and provisions herein set forth, the Guaranty is
continuing, absolute and unconditional irrespective of (a) any lack of
validity or enforceability of the Agreements, (b) any amendment to, waiver
of or consent to, departure from, or failure to exercise any right or
remedy under the Agreements, (c) any acceptance of partial payment or
performance of any of the guaranteed obligations, (d) any release,
application or amendment of or consent to departure from any security or
guaranty therefor, (e) any assignment of this Guaranty, (f) the insolvency,
bankruptcy, dissolution or liquidation of Subsidiary or any change in
ownership of Subsidiary, or (g) any other circumstance of a similar or
different nature which might otherwise constitute a defense available to
Subsidiary or the undersigned except as to the legal rights and defenses of
Subsidiary watch arc provided for under the Agreements. Notice of
acceptance of the Guaranty is hereby waived, and this Guaranty shall remain
in full force and effect up to and including the expiration of the
Agreements.
The Guarantor waives promptness, diligence, any and all demands for
payment, any notice of credits extended and shipments of merchandise made
hereunder, and all other notices whatsoever. The Guarantor consents to any
extensions of time for the payment of said account, to any changes in the
terms of any settlement or adjustment thereof and to any changes in the
terms of the Agreements. No delays on the part of Owner in the exercise by
Owner of any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy. No actions of
Subsidiary shall in any way impair or affect this Guaranty.
If Subsidiary defaults in the payment of any amounts due or in the
performance of any other obligation under the Agreements, the Guarantor
shall (a) pay upon demand (i) any sum due and to become due, (ii) any
damages, costs and expenses entitled to be recovered from Subsidiary by
reason of such default, and (iii) reasonable attorneys' fees and all costs
and other expenses incurred as a result of any such default or in enforcing
this Guaranty and (b) upon demand, perform or cause such obligation to be
performed. This
32
<PAGE>
Guaranty is a guarantee of payment and not of collection and no action need
be brought against Subsidiary as a precondition to the enforcement of this
Guaranty.
This Guaranty shall be binding upon the Guarantor and its successors
and assigns and shall be for the benefit of the person named above, its
successors and assigns. Should any one or more of the provisions of the
Guaranty be determined by a court of competent jurisdiction to be illegal
or unenforceable, all other provisions shall remain effective.
This Guaranty shall be governed by and construed under the laws of the
State of New Jersey.
IN WITNESS WHEREOF, this Guaranty has been duly executed this day
of , 1996.
STEWART & STEVENSON SERVICES, INC.
By: /S/
Title:
33
<PAGE>
Exhibit 10.22.2
CONSENT TO ASSIGNMENT
OF
SYSTEM OPERATING AND MAINTENANCE AGREEMENT
This Consent to Assignment (this "Consent") is entered into as May 1,
1996 by Stewart & Stevenson Operations, Inc., a Delaware Corporation (the
"Company"), NRG Generating (Parlin) Cogeneration Inc. (formerly known as
O'Brien (Parlin) Cogeneration, Inc.), a Delaware Corporation ("NRG
Parlin"), and Credit Suisse, a bank organized and existing under the laws
of Switzerland, acting through its New York branch ("CS") as agent
(hereinafter in such capacity, together with any successors thereto in such
capacity referred to as "Agent") pursuant to the credit Agreement dated as
May 1, 1996 by and among (i) NRG Parlin and NRG Generating (Newark)
Cogeneration Inc. (formerly known as O'Brien (Newark) Cogeneration, Inc.),
a Delaware Corporation ("NRG Newark") (collectively, the "Borrowers"), (ii)
Credit Suisse, as Lender and each additional Lender from time to time party
to the Credit Agreement and_(iii), the Agent, (as to same may be amended,
modified or supplemented from time to time, the "Credit Agreement").
RECITALS
WHEREAS, the Company and NRG Parlin have entered into the System
Operating and Maintenance Agreement, dated as of May 1, 1996 (as the same
may be amended, modified or supplemented from time to time, the "Assigned
Agreement"); and
WHEREAS, NRG Parlin has assigned or will assign to Agent for the
benefit of the Secured Parties (as defined in the Credit Agreement and
referred to herein as "Assignee") all of its rights, title and interest in,
to and under the Assigned Agreement as security for NRG Parlin's
obligations under the Credit Agreement; and
WHEREAS, the Company is willing to consent to such assignment and the
grant of a security interest by NRG Parlin in favor of Assignee as
described above.
NOW, THEREFORE, in consideration of the premises and of other valuable
consideration, the parties hereto agree as follows:
1. Assignment and Security Interest
As security for the due and punctual performance and payment of all of
NRG Parlin's obligations under the Credit Agreement, NRG Parlin has
assigned or will assign to Assignee as collateral security, all of NRG
Parlin's rights to and under the Assigned Agreement upon the terms set
forth in the Security Agreement (as defined in the Credit Agreement).
<PAGE>
2. Consent
The Company hereby (i) irrevocably consents to the assignment
specified in paragraph 1 of this Consent and to any subsequent assignments
by Agent or Assignee upon and after the Agent's or Assignee's exercise of
its rights and remedies under the security Agreement and (ii) agrees that,
following the assumption of the Assigned Agreement by Agent, Assignee or
their nominee, designee or assignee, all representations, warranties,
indemnities and agreements (other than those representations and warranties
expressly made only as of an earlier date) made by the Company under or
pursuant to the Assigned Agreement shall inure to the benefit of such party
and shall be enforceable by such party to the same extent as if such party
were originally, named in the, Assigned Agreement.
3. Default and Cure
(a) If NRG Parlin defaults under the Assigned Agreement the Company
shall, before terminating the Assign Agreement or exercising any other
remedy, give written notice to Agent specifying the default and the steps
necessary to cure the same and Agent or Assignee shall have sixty (60) days
(30 days in the case of a default in payment by NRG Parlin) after receipt
of such notice (or such longer period of time as may be reasonably
necessary under the circumstances, provided that Agent or Assignee is
diligently pursuing such cure) to cure such default or to cause it to be
cured. If Agent and Assignee fail to cure or cause to be cured any such
default within the appropriate period set forth above, the Company shall
have all of its rights and remedies with respect to such default as set
forth in the Assigned Agreement and at law or in equity.
(b) In the event that the Assigned Agreement is terminated by
rejection, or otherwise, during a case in which NRG Parlin is the debtor
under Title 11, United States Code, or other similar federal state statute,
then the Company shall, at the option of Agent and Assignee and so long as
all existing payment defaults by NRG Parlin under the Assigned Agreement
are cured by Agent, Assignee or their nominee or designee, enter into a new
Assigned Agreement with Agent, Assignee or (at the direction of Agent or
Assignee) their nominee or designee having terms substantially identical to
the Assigned Agreement, pursuant to which Agent, Assignee or their nominee
or designee shall have all of the rights and obligations of NRG Parlin
under the Assigned Agreement.
(c) If Agent notifies the Company in writing that NRG Parlin has defaulted
under the Credit Agreement and requests that the Company continue
performance under the Assigned Agreement, the Company shall thereafter
perform under the Assigned Agreement in accordance with its terms, so
long as all existing defaults by NRG Parlin under the Assigned
Agreement are cured by Agent, Assignee or
2
<PAGE>
their nominee or designee and the obligations of NRG Parlin thereunder
shall continue to be paid and performed by NRG Parlin, Agent, Assignee
or their nominee or designee.
4. Payments
The Company agrees that until receipt of written notice from Agent
that all obligations of NRG Parlin under the Credit Agreement have been
fully satisfied, the Company hereby agrees to make all payments due to NRG
Parlin under the Assigned Agreement directly to such account as Agent may
from time to time hereafter specify in writing and the Company will not be
entitled to recover any amount so paid from Agent.
5. Delivery of Notices
The Company agrees that it will promptly notify Agent of any breach by
NRG Parlin of any of the terms of the Assigned Agreement and will deliver
to Agent simultaneously with the delivery thereof to NRG Parlin (i) any
notices delivered pursuant to the Assigned Agreement or otherwise and (ii)
all invoices, budgets, plans and reports delivered pursuant to Article VI
of the Assigned Agreement.
6. Liability of Assignee
The Company acknowledges and agrees that Agent and Assignee have not
assumed and do not have any obligation or liability under or pursuant to
the Assigned Agreement, and that the exercise by Agent or Assignee of its
rights and remedies under the Security Agreement shall not constitute an
assumption of NRG Parlin's obligations under the Assigned Agreement (except
to the extent such obligations shall be expressly assumed by an instrument
in writing executed by the Agent or Assignee).
7. Amendment or Termination of Assigned Agreement
The Company covenants and agrees with Agent that without the prior
written consent of Agent (i) the Company will not materially amend, modify,
terminate (prior to the expiration of the applicable cure periods in
Section 3 hereof) or assign, transfer or encumber any of its interest in
the Assigned Agreement and (ii) no waiver by NRG Parlin of any of the
obligations of the Company under the Assigned Agreement, and no consent,
approval or election made by .NRG Parlin in connection with the Assigned
Agreement shall be effective as against Agent and Assignee.
8. Representations and Warranties
The Company hereby represents and warrants to Agent and Assignee as
follows:
(a) The company is a corporation duly organized, validly
3
<PAGE>
existing and in good standing under the laws of the State of Delaware. The
Company has full power, authority and legal right to incur the obligations
provided for in this Consent and the Assigned Agreement.
(b) The execution, delivery and performance by the Company of this
Consent and the Assigned Agreement have been duly authorized by all
necessary corporate action.
(c) The Assigned Agreement is in full force and effect and has not
been amended, and no default has occurred or exists under the Assigned
Agreement and no event or condition has occurred, or exists and is
continuing which with the lapse of time, the giving of notice, or both
would constitute such a default under the Assigned Agreement.
(d) Each of this Consent and the Assigned Agreement constitutes the
legal, valid and binding obligation of the Company enforceable against, the
Company in accordance with its terms, except as enforceability maybe
limited by general principles of equity and by applicable bankruptcy,
insolvency, moratorium or similar laws affecting creditors rights
generally.
(e) All representations and warranties made by the Company in the
Assigned Agreement were true and correct in all material respects on and as
of the date when made and, except for those that by their terms speak as of
a specific date, are true and correct in all material respects on and as of
this Consent.
(f) No consent, approval, order or authorization of or registration,
declaration of a filing with, or giving of notice to, obtaining of any
license or permit from, or taking any other action with respect to, any
federal, state or local government or public body, authority or agency is
required in connection with the valid authorization, execution, delivery
and performance of this Consent or the Assigned Agreement.
(g) There is no litigation, action, suit, investigation or proceeding
pending or, to the best knowledge of the Company, threatened against the
Company nor any basis therefor, before or by any court, administrative
agency, environmental council, arbitrator or governmental authority, body
or agency, which could adversely affect the performance by the Company of
its obligations hereunder or under the Assigned Agreement or which
questions the validity, binding effect or enforceability hereof or thereof
or any of the transactions contemplated hereby or thereby.
(h) The company is not in violation of its articles of incorporation
or bylaws, and the execution, delivery and performance by the Company of
this Consent and the Assigned Agreement, and the consummation of the
transactions contemplated hereby and thereby, will not result in any
violation of any term of
4
<PAGE>
its articles of . incorporation or bylaws, of any material contract or
agreement applicable to it, or of any license, permit, franchise, judgment,
decree, writ, injunction, order, charter, law, ordinance, rule or
regulation applicable to it or any of its properties or to any obligations
incurred by it or by which it or any of its properties may be bound or
affected, or of any determination or award of any arbitrator applicable to
it, and will not conflict with, or cause a breach of, or default under, any
such .term or result in the creation of any lien upon any of its properties
or assets.
(i) The Company has not received notice of, or consented to the
assignment of any of NRG Parlin's right, title, or interest in the Assigned
Agreement to any person or entity other than Agent and Assignee.
9. Notices
All notices or other communications which are required or permitted
hereunder to be given to any party shall be in writing (including facsimile
communication) and shall be deemed given if delivered personally or sent by
telecopy or by registered or certified mail, return receipt requested to
the address of such party specified below or to such other address as the
addressee may have specified in a notice duly given to the sender as
provided herein:
If to Agent:
Credit Suisse
Tower 49
12 East 49th Street
New York, NY 10071
Attention: Project Finance
Telecopy: (212) 238-5390
If to NRG Parlin:
NRG Generating (Parlin) Cogeneration Inc.
c/o NRG Energy, Inc.
1221 Nicollet Mall Suite 700
Minneapolis, MN 55403
Attention:
Telecopy:
5
<PAGE>
If to the Company:
Stewart & Stevenson Operations, Inc-
2707 North Loop West
Houston, TX 77008
Attention: Vice President - North American
Operations
Telecopy: (713) 863-8047
with a copy to:
Stewart & Stevenson Services, Inc.
2707 North Loop West.
Houston TX 77008
Attention: Group Vice President - EPS
Telecopy: (713) 869-4068
All such notices and communications shall, when mailed, be effective seven
(7) days after being after being deposited in the mail in the manner
aforesaid, or when sent by telecopier, upon receipt thereof.
10. Governing Law
THIS CONSENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES
THEREOF RELATING TO CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW).
11. Successors and Assigns
This Consent shall be binding upon the parties and their successors
and assigns and inure to the benefit of the parties and their respective
successors and assigns (which assigns, in the case of Agent and Assignee,
shall include, without limitation, any nominee or designee of Agent and
Assignee and any purchaser of all or any portion of rights under the
Assigned Agreement in connection with an Event of Default under the Credit
Agreement or a foreclosure by Agent and Assignee.)
12. Waiver
No amendment or waiver of any Provisions of this Consent shall be
effective unless the same shall be in writing and signed by Agent, and then
such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
13. Counterparts
This Consent may be executed in any number of counterparts, all Of
which counterparts shall together constitute one and the same instrument.
6
<PAGE>
14. Further Assurances
The Company will at any time and from time to time, upon the written
request of Agent, execute and deliver such further documents and do such
other acts and things as Agent may reasonably request in order to
effectuate more fully the purposes of this Consent.
15. Conflicts
In the event of a conflict between any provision of this Consent and
the provisions of the Assigned Agreement, the provisions of this Consent
shall prevail.
IN WITNESS WHEREOF, each of the undersigned has duly executed this
Consent as of the date first above written.
STEWART & STEVENSON OPERATIONS, INC.
By: /s/ Harvey Braswell
Name:
Title:
NRG GENERATING (PARLIN) COGENERATION, INC.
By: /s/ Leonard Bluhm
Name:
Title:
Accepted:
CREDIT SUISSE, as Agent
By: /s/ Louis Iaconetti
Name: Louis D. Iaconetti
Title: Associate
By: /s/ Steven Dowe
Name: Steven Dowe
Title: Associate
7
<PAGE>
Exhibit 10.22.3
[Letterhead]
NRG Generating (U.S.) Inc.
1221 Nicollet Mall
Suite 700
Minneapolis, MN 55403-2445
Telephone (612) 373-5305
Fax (612) 373-8833
May 20, 1996
Mr. Harvey A. Braswell
Stewart & Stevenson Operations, Inc.
2707 North Lake West, 2nd Floor
Houston, TX 77008
Re: Auxiliary Boilers - NRG Generating (Parlin) Inc.
Please refer to that certain NRG Generating (Parlin) Inc./Stewart &
Stevenson Operations, Inc. Operating and Maintenance Agreement, dated May
1, 1996 (the "Parlin O&M Agreement") between NRG Generating (Parlin) Inc.
("NRG Parlin") and Stewart & Stevenson Operations Inc. ("SSOI").
This letter is to confirm the mutual understanding and agreement of NRG
Parlin and SSOI that the term "System" as used in the Parlin O&M Agreement
includes any auxiliary boiler (and any replacement boiler) used to meet NRG
Parlin's obligations under the Amended and Restated Power Purchase
Agreement, under the Steam Purchase Contract dated December 8, 1986, as
amended, between NRG Parlin and E.I. duPont de Nemours and Company
("DuPont") and under the Electricity Purchase Contract dated January 18,
1988 between NRG Parlin and DuPont, regardless of whether such boiler is
regarded as owned by NRG Parlin. It is also our mutual understanding and
agreement that SSOI will operate and maintain the Parlin auxiliary boiler
under the terms of the Parlin O&M Agreement.
This letter is intended as a clarifying amendment to the NRG Parlin
Agreement. Accordingly, the NRG Parlin Agreement is hereby amended to
reflect the terms hereof and, except as explicitly stated above, shall
continue in full force and affect in accordance with its provisions.
Additionally, the provisions of Article XIX of the NRG Parlin Agreement are
hereby incorporated into this letter as if they were separately stated
herein.
If this letter accurately sets forth the terms of our understanding, please
so indicate by executing a coy of this letter in the space provided below.
Yours very truly,
NRG GENERATING (PARLIN) COGENERATION
By: /s/ Leonard Bluhm
Name: Leonard A. Bluhm
Title: President
<PAGE>
ACKNOWLEDGED AND AGREED TO:
STEWART & STEVENSON OPERATIONS, INC.
By: /s/ Harvey A. Braswell
Name: Harvey A. Braswell
Title: Vice President - North American Operations
<PAGE>
Exhibit 10.25.3
AMENDMENT AGREEMENT
This Amendment Agreement is made this 31st day of January, 1994, by
and between Grays Ferry Cogeneration Partnership, a partnership with
offices of its managing partner, O'Brien (Schuylkill) Cogeneration, Inc.,
located at 225 South Eighth Street, Philadelphia, Pennsylvania 19106
("SELLER"), and PECO Energy Company, formerly known as Philadelphia
Electric Company, a Pennsylvania corporation with offices located at 2301
Market Street, Philadelphia, Pennsylvania 19101 ("PECO ENERGY").
BACKGROUND
SELLER and PECO ENERGY are parties to an Agreement for Purchase of
Electric Output dated as of July 18, 1992 ("Original Agreement"), pursuant
to which SELLER agreed to sell, and PECO ENERGY agreed to purchase, the net
electric output to be generated by SELLER from a cogeneration facility
("Facility") to be constructed by SELLER on certain property subleased by
SELLER from Philadelphia Thermal Energy Corporation ("PTEC") under a Site
Lease dated November 11, 1991, as amended. The Original Agreement was
approved by the Pennsylvania Public Utility Commission ("PUC") by Order
entered on March 15, 1993. PECO ENERGY, the owner of the property on which
the Facility is to be constructed, consented to the sublease of the
property from PTEC to SELLER (but not the assignment of SELLER's rights
under the Original Agreement to any party other than PECO ENERGY) pursuant
to a letter dated September 16y, 1991 ("Original Consent").
SELLER now has advised PECO ENERGY that the Facility will be
constructed in two phases, the first of which will generate approximately
31 megawatts ("Phase I") and the second of which will generate
approximately 119 megawatts ("Phase II"). Because it is possible that the
construction of Phase II may be delayed or, under certain circumstances, be
undertaken by Philadelphia United Power Corporation, its corporate
successors or under certain conditions its assigns, SELLER and PECO ENERGY
have determined that it would be prudent to restructure the Original
Agreement into two separate agreements, one for each Phase, subject to PUC
approval, and to revise, subject to PUC approval of the Revised Agreements
(as hereinafter defined), the Original Consent.
All capitalized terms not defined herein shall have the meanings
ascribed to them in the Revised Agreements (hereinafter defined).
NOW, THEREFORE, intending to be legally bound hereby, the PARTIES
agree as follows:
1. Attached hereto as Exhibit A is an Agreement for Purchase of
Electric Output (Phase I), covering Phase I of the Facility, and attached
hereto as Exhibit B is an Agreement for
<PAGE>
Purchase of Electric Output (Phase II), covering Phase II of the Facility
(collectively, "Revised Agreements").
2. Attached hereto as Exhibit C is a revised consent to sublease
from PECO ENERGY to PTEC ("Revised Consent").
3. (a) The Revised Agreements shall become effective upon (i) their
execution by authorized representatives of the PARTIES, (ii) the acceptance
by the PARTIES, in the manner specified below, of the terms of a valid,
binding and unappealed final order of a court or the PUC ruling upon PECO
ENERGY's COST, and (iii) approval of the Revised Agreements by the PUC
without modification as a contract with an affiliated interest under 66
Pa.C.S. 2102.
(b) Within thirty (30) days after the execution of this
Amendment Agreement, PECO ENERGY shall prepare and file a COST RECOVERY
PETITION for the Revised Agreements. At the same time, in view of the fact
that Adwin Equipment Company, a wholly owned subsidiary of PECO ENERGY, is
one of the general partners of SELLER, PECO ENERGY shall prepare and file a
petition with the PUC seeking approval of the Revised Agreements without
modification under the affiliated interest provisions of 66 Pa.C.S. 2102.
Within sixty (60) days after (a) the date of entry of an unappealed valid,
binding and final order of the PUC ruling on the COST RECOVERY PETITION,
(b) the filing date of an unappealed valid, binding and final order of a
court on appeal from such a PUC ruling or (c) the date of entry of an
unappealed valid, binding and final order of the PUC ruling on the cost
recovery petition on remand, each PARTY shall provide the other PARTY with
written notice of its acceptance or nonacceptance of the terms and
conditions of the final order ruling upon the COST RECOVERY PETITION.
Neither PARTY, however, shall have the right to reject the terms and
conditions of such a final order if the relief sought in the COST RECOVERY
PETITION is granted without modification. The failure to provide written
notice of acceptance or nonacceptance under this Section 2 within the
required time period shall be deemed to be acceptance of the terms and
conditions of the final order. If the relief sought in the COST RECOVERY
PETITION is granted without modification, the condition precedent set forth
above shall be deemed to be satisfied as of the filing date or date of
entry of the final order ruling upon the COST RECOVERY PETITION. If the
relief sought in the COST RECOVERY PETITION is granted with modification,
and the PARTIES accept the terms and conditions of the final order, the
PARTIES shall promptly execute an appropriate modification to the Revised
Agreements, and the condition precedent set forth above shall be deemed to
be satisfied as of the effective date of such modification.
Notwithstanding the final ruling on the COST RECOVERY PETITION, if the PUC
does not approve the Revised Agreements without modification under the
affiliated interest provisions of 66 Pa.C.S. 2102, the Revised Agreements
shall not become effective.
<PAGE>
4. Upon approval of the Petition regarding the Revised Agreements as
set forth above in Section 3, the Original Agreement shall terminate and
the Revised Agreements shall be in full force and effect. If the Petition
regarding the Revised Agreements is not approved as set forth in Section 3,
the Revised Agreements shall terminate, become null and void, and shall
cease to have any force or effect, and the Original Agreement shall be and
remain in full force effect as if the Revised Agreements did not exist.
5. Upon the Revised Agreements becoming effective as set forth above
in Section 4, the Original Consent shall terminate as set forth above in
Section 4 and the Revised Consent shall be in full force and effect. If
the Revised Agreements shall terminate, the Revised Consent shall
terminate, become null and void, and shall cease to have any force or
effect, and the Original Consent shall be and remain in full force and
effect as if the Revised Consent did not exist.
IN WITNESS WHEREOF, the PARTIES have caused this Amendment Agreement
to be executed as of the day and year first above written.
PECO ENERGY COMPANY, formerly known as
PHILADELPHIA ELECTRIC COMPANY
Attest:/s/ By:/s/ William H. Smith III
William H. Smith, III
GRAYS FERRY COGENERATION
PARTNERSHIP
Attest:/s/ By: /s/ Robert A. Shinn
Robert A. Shinn
Vice President
O'Brien (Schuylkill)
Cogeneration, Inc.
<PAGE>
Exhibit 10.25.4
Grays Ferry
PECO Contract Phase 1 (only)
<PAGE>
EXHIBIT A
AGREEMENT FOR PURCHASE OF ELECTRIC OUTPUT (PHASE I)
<PAGE>
AGREEMENT FOR PURCHASE
OF ELECTRIC OUTPUT
(PHASE I)
between
PECO ENERGY COMPANY
and
GRAYS FERRY COGENERATION PARTNERSHIP
Dated; As of July 28, 1992
<PAGE>
TABLE OF CONTENTS
Page
BACKGROUND 1
ARTICLES
I. DEFINITIONS 2
1.1 Definitions 2
II. EFFECTIVE DATE AND TERM 10
2.1 Effective Date 10
2.2 Cost Recovery 10
2.3 Term 11
III. CERTAIN OBLIGATIONS OF SELLER 12
3.1 Qualifying Facility Status 12
3.2 Completion of Construction 12
IV. PURCHASES 13
4.1 Amount Purchased 13
4.2 Definitions 13
4.3 Output Purchase Payment 14
V. SUSPENSE ACCOUNT 15
5.1 Suspense Account Balance 16
5.2 Projection Payment 16
5.3 Termination Payment 16
5.4 Suspense Account Guarantee 16
VI. CURTAILMENT. REDUCTION OR INTERRUPTION OF PURCHASES 18
6.1 Purchase Disruptions 18
6.2 Selection 19
6.3 Notice 19
6.4 Extent of Disruptions 20
6.5 SELLER's Obligations on Disruption 20
(i)
<PAGE>
ARTICLE
VII. PROJECT OPERATION 21
7.1 Obligation of SELLER 21
7.2 Manner of Delivery 21
7.3 Safe Construction and Operation 21
7.4 Power Factor 23
7.5 Provision of Information 23
7.6 Modifications 24
VIII. SELLER INTERCONNECTION EOUIPMENT 25
8.1 SELLER Interconnection Equipment 25
8.2 Condition Precedent 25
8.3 Design 25
8.4 Construction 27
8.5 Inspection and Access 27
IX. PECO ENERGY INTERCONNECTION EOUIPMENT 29
9.1 PECO ENERGY Interconnection Equipment 29
9.2 Interconnection Design 29
9.3 Consultation with SELLER 29
9.4 Rights and Easements 30
9.5 Acquisition of Permits. Licenses and Approvals 30
9.6 Costs of Acquisition 31
9.7 Notice to Proceed 31
9.8 Reasonable Efforts to Complete Construction 31
9.9 Liability 31
9.10 Design Changes 32
9.11 Notice of Completion 33
9.12 Interconnection Cost Responsibility 33
9.13 Estimated Costs 33
9.14 Payment Schedule 33
9.15 Reconciliation 34
9.16 Suspension 35
9.17 Cancellation Costs 36
X. INITIAL PROJECT OPERATION AND TESTING 37
10.1 Initial Operation 37
10.2 Commercial Operation 38
XI. METERING 38
11.1 Metering Equipment 38
11.2 Meter Charges 39
(ii)
<PAGE>
ARTICLE
11.3 Meter Testing 39
11.4 Meter Error 39
11.5 Payment Adjustment 40
11.6 Meter Failure 40
11.7 Suspense Account Adjustments 41
XII. TELEMETERING 41
12.1 Telemetering Equipment 41
12.2 Cost Responsibility 42
12.3 Telemetering Charges 42
XIII. MODIFICATIONS 43
13.1 PECO ENERGY System Modifications 43
13.2 Payment 44
13.3 Maintenance Costs 44
XIV. PAYMENT AND BILLING 45
14.1 Output Purchase Payment 45
14.2 Metering. Telemetering and Administration Charges45
14.3 Payments 46
14.4 Interest 46
14.5 Billing Disputes 47
XV. ASSIGNMENT 48
15.1 Assignment 48
XVI. BANKRUPTCY AND INSOLVENCY 49
16.1 Remedies 49
XVII. WARRANTIES 50
17.1 SELLER's Warranties 50
XVIII. INDEMNIFICATION 51
18.1 Responsibility 51
18.2 Worker's Compensation Responsibility 52
18.3 Procedure 52
(iii)
<PAGE>
ARTICLE
XIX. TERMINATION 53
19.1 Termination by PECO ENERGY 53
19.2 Termination by SELLER 54
19.3 Effect of Termination 54
XX. BREACH AND DEFAULT 54
20.1 Breach 55
20.2 Cure and Default 55
20.3 Damages 55
20.4 Mitigation 56
20.5 Indemnification 56
XXI. FORCE MAJEURE 56
21.1 Force Majeure 56
21.2 Excuse from Performance 58
XXII. INSURANCE 59
22.1 Insurance 59
XXIII. GOVERNMENT REGULATIONS 59
23.1 State and Federal 59
XXIV. GOVERNING LAW 60
24.1 Interpretation 60
XXV. MISCELLANEOUS 60
25.1 Notices 60
25.2 Indulgences 61
25.3 Captions and Headings 61
25.4 Validity 61
25.5 Agreement Definition 62
25.6 Modifications 62
25.7 Execution in Counterparts 62
25.8 Gender and Number 62
25.9 Number of Days 63
APPENDICES
A. Estimated Metering, Telemetering and Administration Charges
B. Pricing Values
(iv)
<PAGE>
AGREEMENT FOR PURCHASE OF ELECTRIC OUTPUT (PHASE I)
This AGREEMENT is made as of the 28th day of July, 1992, by and
between Grays Ferry Cogeneration Partnership, a partnership with offices of
its managing partner, O'Brien (Schuylkill) Cogeneration, Inc., located at
225 South Eighty Street, Philadelphia, Pennsylvania 19106 ("SELLER"), and
PECO ENERGY COMPANY, formerly known as Philadelphia Electric Company, a
Pennsylvania corporation with offices located at 2301 Market Street,
Philadelphia, Pennsylvania 19101 ("PECO ENERGY").
BACKGROUND
PECO ENERGY is a regulated public utility engaged in, among other
things, the generation, purchase, transmission., distribution and sale of
electric power within the Commonwealth of Pennsylvania.
Under Section 210 of PURPA, 16 U.S.C. S 824A-3, FERC regulations at
18 C.F.R. S S 292.201-292.602, and PUC regulations at 52 Pa. Code SS 57.31-
57.39, PECO ENERGY is required under certain circumstances to purchase
electric power from QUALIFYING FACILITIES.
SELLER intends to design, construct, own and operate an electric
generation facility (the FACILITY as defined in Article I hereof) and
certain associated equipment located at 2600 Christian Street,
Philadelphia, Pennsylvania 19146.
SELLER intends to receive certification from the FERC that the
FACILITY is a QUALIFYING FACILITY, and SELLER intends to and shall maintain
the FACILITY during the term of this
<PAGE>
AGREEMENT in compliance with the requirements for a QUALIFYING FACILITY
established by PURPA and FERC's regulations.
SELLER has requested PECO ENERGY, and PECO ENERGY is willing, to (a)
design, construct, install, operate and maintain certain equipment to
enable the FACILITY to interconnect with the PECO ENERGY SYSTEM (the PECO
ENERGY INTERCONNECTION EQUIPMENT) and (b) purchase the NET ELECTRIC OUTPUT
produced by the FACILITY during the term of the AGREEMENT.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the PARTIES, intending to be legally bound hereby, agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, when used herein with
capitalization, shall have the following meanings:
AGREEMENT means this agreement for Purchase of Electric Output between
PECO ENERGY AND seller, including any extension or amendment thereto.
AUXILIARY SERVICE RIDER means the rider set forth in PECO ENERGY'S
Electric Service Tariff under which PECO ENERGY provides electric service
to customers whose electrical requirements are not wholly provided by PECO
ENERGY-owned facilities, as the rider may be amended from time to time,
BILLING MONTH means the time period, constituting not less than twenty-
eight (28) days and not more than thirty-four (34) days, between two
successive meter readings made for billing purposes.
2
<PAGE>
CANCELLATION COSTS means the costs and liabilities incurred by PECO
ENERGY upon the termination of the AGREEMENT under Sections 19.1 oar 19.2
hereof or upon the expiration of the term of the AGREEMENT specified in
Section 2.3 hereof to 9a) cancel supplier and contractor orders and
agreements entered into to design, construct, install, operate maintain and
own PECO ENERGY INTERCONNECTION EQUIPMENT, (b) remove such PECO ENERGY
INTERCONNECTION EQUIPMENT and restore the PECO ENERGY SYSTEM to its
condition prior to the execution of this AGREEMENT.
COMMERCIAL OPERATION DATE means the date designated by SELLER under
Section 10.2 hereof as the date the FACILITY and the SELLER INTERCONNECTION
EQUIPMENT are ready to deliver NET ELECTRIC OUTPUT to the INTERCONNECTION
POINT on a continuous basis for reasons other than testing.
COST RECOVERY PETITION means a petition by PECO ENERGY to the PUC
seeking authority to collect and recover from PECO ENERGY's customers, on a
full and current basis through the ENERGY COST ADJUSTMENT or such other
mechanism as may replace the ENERGY COST ADJUSTMENT, all payments made to
SELLER under the AGREEMENT for purchases of NET ELECTRIC OUTPUT.
CREDIT means (a) an irrevocable letter or letters of credit (b) a
surety or performance bond or (c) an insurance policy,
DATE OF INITIAL OPERATION means the date, acceptable to
3
<PAGE>
PECO ENERGY, that SELLER synchronizes, for the first time, the FACILITY
with the PECO ENERGY SYSTEM.
DESIGN RELEASE means a written notice from SELLER to PECO ENERGY
authorizing PECO ENERGY to (a) design the PECO ENERGY INTERCONNECTION
EQUIPMENT, (b) estimate the completion date for constructing and installing
the PECO ENERGY INTERCONNECTION EQUIPMENT, (c) prepare an estimate of the
cost of constructing and installing the PECO ENERGY INTERCONNECTION
EQUIPMENT, AND (d) review the design of the SELLER INTERCONNECTION
EQUIPMENT for acceptance.
ENERGY COST ADJUSTMENT means the component of PECO ENERGY's PUC-
approved electric rates, as set forth in PECO ENERGY's Electric Service
Tariff, which enables PECO ENERGY to recover its energy costs not reflected
in its base rates.
FACILITY means all equipment and appurtenant structures, which have an
aggregate nameplate rating of up to 31 megawatts, to be constructed,
installed, operated, maintained and owned by SELLER at the PROJECT SITE for
the purpose of generating electricity, representing Phase I of a two-phase
project which SELLER intends to construct at the PROJECT SITE with a total
aggregate nameplate rating of up to 150 megawatts.
FERC means the Federal Energy Regulatory Commission.
FINAL PROJECTION DATE means the date as defined in Appendix B.
INTERCONNECTION POINT means the point of physical
4
<PAGE>
connection between the SELLER INTERCONNECTION EQUIPMENT and the PECO ENERGY
INTERCONNECTION EQUIPMENT to be determined by PECO ENERGY, after
consultation with SELLER.
ISSUER means, with respect to the CREDIT (a) the commercial bank or
other entity issuing an irrevocable letter or letters of credit, (b) the
company qualified and authorized to issue the surety or performance bond in
the Commonwealth of Pennsylvania, (c) the insurance company authorized to
issue the insurance policy.
LIGHT LOAN CONDITION means a circumstance where (a) the PJM
INTERCONNECTION operators have declared a MINIMUM GENERATION EMERGENCY or
(b) a condition occurs on the PJM INTERCONNECTION or the PECO ENERGY SYSTEM
which, without PECO ENERGY taking action to correct such condition, might
imminently lead to such a declaration. Such actions include, but are not
limited to, (i) a reduction in output from a nuclear unit or (ii) the
removal of an electric generating unit from service which could not be
returned to service during the next anticipated period of peak demand for
power.
METER ERROR CORRECTION PERIOD means the actual time period of a
meter's registration error, if such time period is definitely known, or, if
unknown, a period equal to the lesser of one-half (1/2) the time elapsed
since the last previous test of the meter, or three months, plus, if the
meter has not been tested in accordance with the requirements of 52 Pa.
Code S 57.20, as that provision may be amended from time to time, the
5
<PAGE>
period the meter has been in service beyond the required test period.
METER ERROR PERCENTAGE means the difference, expressed as a
percentage, between actual meter registrations during testing, and the
registrations the meter would have made if it were neither fast nor slow,
at an average purchase level that the PARTIES mutually agree is
representative of the level of NET ELECTRIC OUTPUT purchases made by PECO
ENERGY from the PROJECT during the METER ERROR CORRECTION PERIOD.
MINIMUM GENERATION EMERGENCY means an operational condition declared
by the PJM INTERCONNECTION resulting from a period of low demand for
electricity.
NET ELECTRIC OUTPUT means the total electric output of the FACILITY in
excess of (a) the output SELLER uses to operate the FACILITY, (b) the
output Philadelphia Thermal Energy Corporation uses to operate the steam
generating equipment and related facilities located on land at Schuylkill
Station that it leases from PECO ENERGY under a lease dated January 30,
1987; provided that PECO ENERGY shall not provide facilities or service to
transport or deliver power from the FACILITY to that steam generating
equipment and related facilities, and (c) the output SELLER uses in the
transformation and transmission of electric output to the INTERCONNECTION
POINT.
NOTICE TO PROCEED means written notice provided by SELLER to PECO
ENERGY authorizing PECO ENERGY to construct, purchase and install the PECO
ENERGY INTERCONNECTION EQUIPMENT and agreeing to pay all the costs and
charges incurred and made by
6
<PAGE>
PECO ENERGY under this AGREEMENT in constructing, purchasing and installing
the PECO ENERGY INTERCONNECTION EQUIPMENT.
OPERATIONAL EMERGENCY means a condition or situation which presents,
or is imminently likely to present, a real, substantial and immediate
threat to persons or property, or which impairs or imminently will impair
either (a) PECO ENERGY's ability to furnish and maintain adequate,
efficient, safe, and reliable service to its customers, or (b) the safety,
reliability and stability of the PECO ENERGY SYSTEM.
PARTIES means PECO ENERGY and SELLER.
PARTY means PECO ENERGY or SELLER.
PECO ENERGY means PECO ENERGY COMPANY and its regulated operating
subsidiaries.
PECO ENERGY INTERCONNECTION EQUIPMENT means the equipment, other than
metering equipment, to be designed, constructed, purchased, installed,
owned, and operated by PECO ENERGY under the terms of the AGREEMENT,
including modifications to the PECO ENERGY T&D SYSTEM, too enable PECO
ENERGY to interconnect the PECO ENERGY SYSTEM with, and to receive NET
ELECTRIC OUTPUT from, the PROJECT under the terms and conditions of the
AGREEMENT.
PECO ENERGY SYSTEM means the electric power generation, transmission
and distribution and distribution facilities owned, operated and/or
maintained by PECO ENERGY, which will include, after construction and
installation, the PECO ENERGY INTERCONNECTION EQUIPMENT.
7
<PAGE>
PECO ENERGY T&D SYSTEM means the electric power transmission and
distribution facilities owned, operated and maintained by PECO ENERGY,
which will include, after construction and installation, the PECO ENERGY
INTERCONNECTION EQUIPMENT.
PJM INTERCONNECTION means the Pennsylvania - New Jersey - Maryland
Interconnection, a fully coordinated power pool formed pursuant to the PJM
INTERCONNECTION AGREEMENT.
POWER FACTOR shall have that meaning set forth in the IEEE Standard
Dictionary of Electrical and Electronic Terms (ANSI/IEE) Standard 100-1988,
Fourth Edition).
PROJECT means the Phase I FACILITY, SELLER INTERCONNECTION EQUIPMENT
and associated facilities and equipment to be constructed, installed,
owned, operated and maintained by SELLER at the PROJECT SITE for the
purpose, among other things, of generating electricity.
PROJECT SITE means the property leased by SELLER from Philadelphia
Thermal Energy Corporation under a lease dated November 11, 1991, as
amended as of September 17, 1993, upon which a two-phase project, including
the Phase I FACILITY and associated interconnection equipment will be
situated.
PRUDENT ELECTRICAL PRACTICES means the spectrum of possible
practices, methods and acts which, in the exercise of reasonable judgment
and in light of the facts known at the time
8
<PAGE>
a decision was made, would have been used in prudent electrical engineering
and operations to accomplish the desired result at a reasonable cost
consistent with reliability, safety and expedition, and is not limited to
the optimum practices, methods or acts to the exclusion of all others.
PUC means the Pennsylvania Public Utility Commission.
PURPA means the Public Utility Regulatory Policies Act of 1978.
QUALIFYING FACILITY means a "small power production facility" or
"cogeneration facility" as defined in Section 210 of PURPA, 16 U.S.C.
S 824a-3(j), and meeting the criteria for qualification set forth at 18
C.F.R. S 292.203-292.206.
SELLER means Grays Ferry Cogeneration Partnership.
SELLER INTERCONNECTION EQUIPMENT means the facilities up to and
including the INTERCONNECTION POINT, other than the metering equipment
described in Article XI hereof, to be designed, constructed, installed,
operated and maintained by SELLER to (a) permit the PROJECT to interconnect
and operate in parallel with the PECO ENERGY SYSTEM and (b) permit PECO
ENERGY to receive NET ELECTRIC OUTPUT at the INTERCONNECTION POINT.
SUSPENSE ACCOUNT means an account maintained in PECO's records used
solely to record PECO ENERGY'S PURCHASES OF NET ELECTRIC OUTPUT under the
AGREEMENT and the associated account balances specified in Section 5.1
hereof.
9
<PAGE>
ARTICLE II
EFFECTIVE DATE AND TERM
2.1 Effective Date. The AGREEMENT shall become effective upon (a)
its execution by authorized representatives of the PARTIES, (b) the
acceptance by the PARTIES, in the manner specified in Section 2.2 hereof,
of the terms of a valid, binding and unappealed final order of a court or
the PUC ruling upon PECO ENERGY's COST RECOVERY PETITION and (c) approval
of the AGREEMENT by the PUC without modification as a contract with an
affiliated interest under 66 Pa. C.S. S 2102.
2.2 Cost Recovery. Within sixty (60) days after the execution of the
AGREEMENT, PECO ENERGY shall prepare and file a COST RECOVERY PETITION. At
the same time, in view of the fact that Adwin Equipment Company, a wholly
owned subsidiary of PECO ENERGY, is one of the general partners of SELLER,
PECO ENERGY shall prepare and file a petition with the PUC seeking approval
of the AGREEMENT without modification under the affiliated interest
provisions of 66 Pa.C.S. S 2102. Within sixty (60) days after (a) the date
of entry of an unappealed valid, binding and final order of the PUC ruling
on the COST RECOVERY PETITION, (b) the filing date of an unappealed valid,
binding and final order of a court on appeal from such a PUC ruling or (c)
the date of entry of an unappealed valid, binding and final order of the
PUC ruling on the COST RECOVERY PETITION on remand, each PARTY shall
provide the other PARTY with written notice of its acceptance or
nonacceptance of the terms and conditions of the final order ruling upon
the COST RECOVERY PETITION. Neither
10
<PAGE>
PARTY, however, shall have the right to reject the terms and conditions of
such a final order if the relief sought in the COST RECOVERY PETITION is
granted without modification. The failure to provide written notice of
acceptance or nonacceptance under this Section 2.2 within the required time
period shall be deemed to be acceptance of the terms and conditions of the
final order. If the relief sought in the COST RECOVERY PETITION is granted
without modification, the condition precedent set forth in Section 2.1
hereof shall be deemed to be satisfied as of the filing date or date of
entry of the final order ruling upon the COST RECOVERY PETITION. If the
relief south in the COST RECOVERY PETITION is granted with modification,
and the PARTIES accept the terms and conditions of the final order, the
PARTIES shall promptly execute, in the manner set forth in Section 25.6
hereof, an appropriate modification to the AGREEMENT, and the condition
precedent set forth in Section 2.1 hereof shall be deemed to be satisfied
as of the effective date of such modification. Notwithstanding the final
ruling on the COST RECOVERY PETITION, if the PUC does not approve the
AGREEMENT without modification under the affiliated interest provisions of
66 Pa..C.S.S 2102, the AGREEMENT shall not become effective.
2.3 Term. The AGREEMENT, unless sooner terminated in accordance with
any applicable provision of the AGREEMENT, shall remain in full force and
effect for twenty (20) years after the COMMERCIAL OPERATION DATE. The
applicable provisions of the AGREEMENT, however, shall continue in effect
after the term of the AGREEMENT, including any extensions thereof, to the
extent
11
<PAGE>
necessary to provide for final billings and adjustments, and to
preserve and permit the enforcement or institution of action upon
any right or obligation which accrued during the AGREEMENT and
was not exercised or fulfilled upon termination.
ARTICLE III
CERTAIN OBLIGATIONS OF SELLER
3.1 Qualifying Facility Status. Prior to the DATE OF INITIAL
OPERATION, SELLER shall receive and provide PECO ENERGY with certification
from FERC that the PROJECT is a QUALIFYING FACILITY for the full amount of
NET ELECTRIC OUTPUT to be purchased by PECO ENERGY under the AGREEMENT.
SELLER shall maintain the PROJECT in compliance with the requirements for a
QUALIFYING FACILITY established under PURPA and applicable FERC regulations
for the full amount of NET ELECTRIC OUTPUT to be purchased by PECO ENERGY
under the AGREEMENT, and any failure by SELLER to so maintain the PROJECT
shall be a breach of the AGREEMENT under Section 20.1 hereof.
3.2 Completion of Construction. SELLER shall complete construction of
the FACILITY and the SELLER INTERCONNECTION EQUIPMENT, and take all other
steps necessary to enable the PROJECT to deliver NET ELECTRIC OUTPUT to the
INTERCONNECTION POINT for sale to PECO ENERGY, on or before the fifth (5th)
anniversary of the effective date of the AGREEMENT. Failure by SELLER to
meet this standard shall constitute a default of the AGREEMENT under
Section 20.2 hereof.
12
<PAGE>
ARTICLE IV
PURCHASES
4.1 Amount Purchased. Commencing on the DATE OF INITIAL OPERATION,
and thereafter during the term of the AGREEMENT, SELLER shall sell and
deliver to PECO ENERGY exclusively, and PECO ENERGY shall purchase and
accept delivery of, the PROJECT's NET ELECTRIC OUTPUT; provided, however,
that PECO ENERGY shall not be required to purchase or accept delivery of
NET ELECTRIC OUTPUT from the PROJECT in excess of the lesser of (a) 31
megawatts or (b) the amount of electric output for which the FERC has
certified the FACILITY as a QUALIFYING FACILITY.
4.2 Definitions. The following terms, when used herein with
capitalization, shall have the following meanings:
(a) FINAL PROJECTION DATE means the date as defined in Appendix B.
(b) LEVELIZED PAYMENT means the product of (i) the number of kilowatt-
hours of NET ELECTRIC OUTPUT that PECO ENERGY purchases under the AGREEMENT
during a BILLING MONTH and (ii) the LEVELIZED RATE.
(c) LEVELIZED PAYMENT shall be the rate specified in Appendix B as
determined by when the COMMERCIAL OPERATION DATE for the PROJECT occurs.
(d) PJM VALUE means the sum of the hourly PJM values during a BILLING
MONTH, with each hourly PJM value being the
13
<PAGE>
product of (i) the number of kilowatt-hours of NET ELECTRIC OUTPUT that
PECO ENERGY purchases under the AGREEMENT during that hour and (ii) the PJM
RATE during that hour.
(e) PJM RATE means PECO ENERGY's hourly billing rate per kilowatt-
hour, determined under the PJM INTERCONNECTION AGREEMENT, for interchange
energy; provided, however, that during any hour when said ;billing rate
deviates significantly from the average billing rate for all PJM
INTERCONNECTION interchange energy, that average PJM billing rate shall be
substituted for the PECO ENERGY billing rate. If PECO ENERGY discontinues
its participation in the PJM INTERCONNECTION, or if the method of
calculating the PECO ENERGY billing rate changes, the PARTIES will in good
faith negotiate a substitute for the PJM RATE which reflects PECO ENERGY's
avoided cost for energy as defined by PURPA and federal and state
regulations adopted pursuant to PURPA.
(f) PROJECTED RATE means the rate specified in Appendix B under the
column heading PROJECTED RATE for the applicable BILLING MONTH.
(g) PROJECTED VALUE means the product of (i) the number of kilowatt-
hours of NET ELECTRIC OUTPUT that PECO ENERGY purchases under the AGREEMENT
during a BILLING MONTH and (ii) the applicable PROJECTED RATE.
4.3 Output Purchase Payment. After the end of each BILLING MONTH,
PECO ENERGY shall pay SELLER, in accordance with Section 14.1 hereof, an
Output Purchase Payment computed as follows:
14
<PAGE>
(a) Prior to the COMMERCIAL OPERATION DATE the Output Purchase
Payment shall be the PJM VALUE.
(b) Commencing on the COMMERCIAL OPERATION DATE and through the FINAL
PROJECTION DATE the Output Purchase Payment shall be either (i) the
LEVELIZED PAYMENT or (ii) the PROJECTED VALUE. SELLER shall, within two
(2) years after the effective date of this AGREEMENT, notify PECO ENERGY in
writing of SELLER's one-time, irrevocable election to receive either (i)
the LEVELIZED PAYMENT or (ii) the PROJECTED VALUE for the entire period
from the COMMERCIAL OPERATION DATE through the FINAL PROJECTION DATE. If
SELLER elects to receive the PROJECTED VALUE, then the provisions of
Article V of this AGREEMENT shall not apply. If SELLER fails to notify
PECO ENERGY of its election within tow (2) years of the effective date of
this AGREEMENT, then PECO ENERGY shall have the right to make the election.
(c) After the FINAL PROJECTION DATE and through the remaining term of
the AGREEMENT the Output Purchase Payment shall be ninety percent (90%) of
the PJM VALUE.
ARTICLE V
SUSPENSE - ACCOUNT
5.1 Suspense Account Balance. For any BILLING MONTH in which the
LEVELIZED PAYMENT exceeds the PROJECTED VALUE, the SUSPENSE ACCOUNT will
record a debit equal to the difference between the two. Any debit balance
in the SUSPENSE ACCOUNT shall accrue interest on a monthly basis at the
rate specified in Section 14.4 hereof. For any BILLING MONTH in which the
15
<PAGE>
PROJECTED VALUE exceeds the LEVELIZED PAYMENT, the difference between the
two shall be credited to the SUSPENSE ACCOUNT, but only to the extent
necessary to offset accrued debits and interest from prior BILLING MONTHS.
5.2 Projection Payment. Within thirty (30) days after the FINAL
PROJECTION DATE, SELLER shall pay PECO ENERGY an amount equal to the debit
balance including accrued interest in the SUSPENSE ACCOUNT as of the FINAL
PROJECTION DATE. The SUSPENSE ACCOUNT shall terminate upon SELLER's
payment under this Section 5.2.
5.3 Termination Payment. If the AGREEMENT is terminated prior to the
FINAL PROJECTION DATE, SELLER shall pay PECO ENERGY, within thirty (30)
days after the date of termination, an amount equal to the debit balance
and accrued interest in the SUSPENSE ACCOUNT as of the date of termination;
provided, however, that SELLER shall not be obligated to make such payment
in the event that SELLER terminates the AGREEMENT because of a default by
PECO ENERGY (as defined in Section 20.2 hereof). If any of the events
described in Section 16.1 hereof occur, SELLER shall pay PECO ENERGY an
amount equal to the debit balance and accrued interest in the SUSPENSE
ACCOUNT as of the date of the event.
5.4 Suspense Account Guarantee. The PARTIES shall review the SUSPENSE
ACCOUNT balance at the end of every calendar year during the term of the
AGREEMENT, and SELLER shall provide a CREDIT to PECO ENERGY to ensure
payment of any debit balance in the SUSPENSE ACCOUNT at that time. The
CREDIT provided under
16
<PAGE>
this Section 5.4 shall be payable in the City of Philadelphia by an ISSUER
acceptable to PECO ENERGY on terms and conditions acceptable to PECO
ENERGY; provided, however, that PECO ENERGY shall not unreasonably withhold
approval of any ISSUER or CREDIT. The CREDIT shall be established for and
structured so as to permit PECO ENERGY to make multiple demands for payment
from ISSUER, and shall require the ISSUER, upon PECO ENERGY'S submission of
documents certifying that the SUSPENSE ACCOUNT debit balance is due and
payable, to honor on sight, in immediately available funds, any written
demand by PECO ENERGY for payment. The CREDIT provided under this
Section 5.4 shall be established to be effective not later than the
COMMERCIAL OPERATION DATE, and the CREDIT provided for the period from the
COMMERCIAL OPERATION DATE and thereafter within ninety (90) days after the
end of any calendar year during the term of the AGREEMENT, PECO ENERGY
shall have the right to withhold payments to SELLER for the NET ELECTRIC
OUTPUT SELLER delivers to PECO ENERGY and apply those amounts to decrease
the debit balance until the debit balance has been reduced to the amount
for which SELLER has furnished an acceptable CREDIT.
17
<PAGE>
ARTICLE VI
CURTAILMENT, REDUCTION OR INTERRUPTION OF PURCHASES
6.1 Purchase Disruptions. PECO ENERGY may curtail, reduce or
interrupt its receipt and purchases of NET ELECTRIC OUTPUT from the PROJECT
when:
(a) Such curtailment, reduction or interruption is necessary to
enable PECO ENERGY to maintain system operating reliability and/or to
provide service to its customers without a deterioration in quality.
(b) Such curtailment, reduction or interruption is necessary to
enable PECO ENERGY to discharge its obligations under the PJM
INTERCONNECTION AGREEMENT.
(c) Such curtailment, reduction or interruption is necessary to
enable PECO ENERGY to meet its obligations under the Mid-Atlantic Area
Coordination Agreement, which is the May 25, 1979 agreement between PECO
ENERGY and the other signatories thereto, and any amendments or extensions
thereof, designed to coordinate the efforts of the signatories to maximize
the reliability of electric service in the territory covered by the
agreement, which is the same, electrically and physically, as the territory
covered by the PJM INTERCONNECTION AGREEMENT.
(d) Such curtailment, reduction or interruption is necessary because
of a LIGHT LOAN CONDITION.
(e) The receipt of NET ELECTRIC OUTPUT by PECO ENERGY is causing, or
continued receipt of NET ELECTRIC OUTPUT by PECO ENERGY would create, an
OPERATIONAL EMERGENCY.
18
<PAGE>
(f) Such curtailment, reduction or interruption is necessary for PECO
ENERGY to construct, install, maintain, repair, replace, remove, modify,
investigate or inspect any equipment in the PECO ENERGY SYSTEM which may
affect or be affected by operation of the PROJECT.
(g) Such curtailment, reduction or interruption is necessary because
PECO ENERGY is experiencing an event of Force Majeure (as defined in
Section 21.01 hereof).
(h) Such curtailment, reduction or interruption is necessary to
protect the integrity of the PECO ENERGY SYSTEM or any system with which
the PECO ENERGY SYSTEM is directly or indirectly interconnected, or to aid
in the restoration of service on the PECO ENERGY SYSTEM or any system with
which the PECO ENERGY SYSTEM is directly or indirectly interconnected.
(i) Such curtailment, reduction or interruption is necessary because
SELLER has failed to fulfill its obligations under Sections 6.5, 7.3 or 7.6
hereof.
6.2 Selection. PECO ENERGY shall, in its sole discretion reasonably
applied, determine which of the sources of electrical power interconnected
with the PECO ENERGY SYSTEM, including the PROJECT, to curtail, reduce or
interrupt to eliminate a condition requiring a curtailment, reduction or
interruption for one or more of the reasons set forth in Section 6.1
hereof.
6.3 Notice. PECO ENERGY will attempt to notify SELLER of the
circumstances which necessitate the curtailment, reduction or interruption
of purchases of NET ELECTRIC OUTPUT,
19
<PAGE>
and the projected duration thereof, as far in advance of such event as
practicable. The PARTIES recognize that such advance notice may not be
possible in the event of an OPERATIONAL EMERGENCY, in which event PECO
ENERGY shall provide notice to SELLER of the circumstances and projected
duration of the curtailment, reduction or interruption as soon as is
practicable after the curtailment, reduction or interruption. PECO ENERGY
shall not, however, be liable to SELLER for the cost of purchases of NET
ELECTRIC OUTPUT which would have been made but for the curtailment,
reduction or interruption in the event PECO ENERGY fails to provide notice
to SELLER under this Section 6.3.
6.4 Extent of Disruptions. PECO ENERGY shall use reasonable efforts
to minimize the time during which its purchases of NET ELECTRIC OUTPUT are
curtailed, reduced or interrupted. PECO ENERGY shall use reasonable
efforts to resume purchases of NET ELECTRIC OUTPUT under the AGREEMENT
promptly after the conditions described in Section 6.1 hereof have ended,
and any necessary modifications, repairs or replacements have been made,
including any modifications, repairs or replacements made to decrease the
likelihood of a recurrence of the condition causing the curtailment,
reduction or interruption.
6.5 SELLER's Obligation on Disruption. If a curtailment, reduction or
interruption under Section 6.1 hereof is due to a condition of or defect in
the FACILITY, SELLER INTERCONNECTION EQUIPMENT or other PROJECT equipment,
SELLER shall subject to PECO ENERGY a written proposed plan to rectify the
condition or defect. When PECO ENERGY has accepted such
20
<PAGE>
plan, or a revised version thereof, SELLER shall, at its own expense,
repair the condition or defect. When SELLER has made such repairs it shall
notify PECO ENERGY, and PECO ENERGY shall inspect the repaired, modified or
replaced equipment. Following such inspection PECO ENERGY shall notify
SELLER whether the condition or defect has been remedied to PECO ENERGY's
satisfaction. If PECO ENERGY is satisfied that the condition or defect has
been properly remedied, it shall promptly terminate the curtailment,
reduction or interruption. If PECO ENERGY is not satisfied that the
condition or defect has been properly remedied, it shall provide SELLER
with a written explanation of why the remedy is not satisfactory.
ARTICLE VII
PROJECT OPERATION
7.1 Obligation of SELLER. SELLER shall take all necessary actions to
coordinate the operation of the PROJECT with the operation of the PECO
ENERGY SYSTEM, including, but not limited to, those actions specified in
Sections 7.2-7.4 hereof.
7.2 Manner of Delivery. SELLER shall deliver NET ELECTRIC OUTPUT to
the INTERCONNECTION POINT in the form of three (3) phase, sixty (60) hertz,
alternating current at a nominal voltage to be specified by PECO ENERGY.
7.3 Safe Construction and Operation. At its own cost, SELLER shall
design, construct, install, operate and maintain the PROJECT:
21
<PAGE>
(a) Using equipment and facilities of sufficient quality to operate
the PROJECT in parallel with the PECO ENERGY SYSTEM without causing:
(1) any damage to the PECO ENERGY SYSTEM,
(2) any impairment of or deterioration in the quality of the
service PECO ENERGY renders to its customers,
(3) any damage to the integrity of the PECO ENERGY SYSTEM, or
(4) unreasonable risk of damage to property, of injury or death
to persons, or of an OPERATIONAL EMERGENCY.
(b) In a manner that is safe and that will not cause any of the
events or conditions listed in (a) above, and
(c) In accordance and conformance with the following as they may be
amended from time to time:
(1) those Standards for System Safety and Reliability filed by
PECO ENERGY with the PUC and entitled "Requirements for Parallel Operation
of Non-Utility Generators,"
(2) PECO ENERGY's published "Electric Service Requirements,"
(3) the AUXILIARY SERVICE RIDER,
(4) the National Electrical Code,
(5) the National Electrical Safety Code,
(6) applicable local, state and federal laws and regulations,
and regulations, and
(7) PRUDENT ELECTRICAL PRACTICES.
SELLER shall install, own and maintain, as part of the SELLER
INTERCONNECTION EQUIPMENT, relays and associated protective and
22
<PAGE>
control equipment and equipment to control voltage and frequency
regulation, all of which it shall operate in a manner acceptable to PECO
ENERGY.
7.4 Power Factor. SELLER shall install and have available automatic
generator field excitation regulators or an alternative regulator system
suitable to PECO ENERGY. SELLER shall operate this equipment to regulate
the FACILITY's reactive (MVAR) output so that at the INTERCONNECTION POINT
the FACILITY's POWER FACTOR is within the range of ninety-five percent
(95%) lagging and one hundred percent (100%) when measured as a generator.
This requirement is applicable over a normal operating voltage range to be
defined by PECO ENERGY based on the voltage specified by PECO ENERGY under
Section 7.2 hereof. Below this range the POWER FACTOR shall be allowed to
go below ninety-five percent (95%) into lagging. Above this range the
POWER FACTOR shall be allowed to go past one hundred percent (100%) into
leading.
7.5 Provision of Information. As of the COMMERCIAL OPERATION DATE
and annually thereafter SELLER shall provide PECO ENERGY with (a) a
schedule of planned PROJECT maintenance and repair activities for the
following thirty-six (36) months and (b) an estimate of the amount of NET
ELECTRIC OUTPUT it intends to deliver to the INTERCONNECTION POINT during
each of the following twelve (12) months. Upon written request from PECO
ENERGY, SELLER shall also maintain and classify outage statistics in
accordance with the then-current PJM
23
<PAGE>
INTERCONNECTION outage classification procedures, and SELLER shall supply
such statistics to PECO ENERGY.
7.6 Modifications. In the event SELLER fails to meet, satisfy or
discharge its obligations under this AGREEMENT, and, as a consequence
thereof, a condition arises, a practice exists or an event occurs at the
PROJECT which, although it has not yet created any of the conditions or
caused any of the events specified under Section 6.1 hereof, if permitted
to continue or recur may, in PECO ENERGY's judgment reasonably exercised,
result in the creation of such a condition or cause such an event, PECO
ENERGY shall notify SELLER of the occurrence or existence thereof and
afford SELLER an opportunity to correct or remedy the problem. SELLER
shall have thirty (30) days from receipt of PECO ENERGY's notice to correct
or remedy the problem. In the event SELLER cannot identify, remedy or
correct the problem within such thirty (30) days, SELLER shall submit to
PECO ENERGY, for PECO ENERGY's acceptance, a plan setting forth the
specific actions SELLER intends to take to correct or remedy the problem
and a time schedule for the implementation thereof. In the event SELLER
cannot identify, remedy or correct the problem within such thirty (30)
days, and (a) SELLER fails to submit a plan within such period to correct
or remedy the problem, (b) SELLER submits a plan within such period but
fails to exercise reasonable and good faith efforts thereafter to implement
such plan or (c) PECO ENERGY does not accept SELLER's proposed plan and
SELLER fails to submit a revised plan within fifteen (15) days, then PECO
ENERGY shall have the right
24
<PAGE>
thereafter, upon reasonable notice to SELLER, to curtail, reduce or
interrupt purchases of NET ELECTRIC OUTPUT; provided, however, that if
during the pendency of any such cure afforded to SELLER pursuant to this
Section 7.6 the problem creates any of the conditions or causes any of the
events specified under Section 6.1, PECO ENERGY may curtail, reduce or
interrupt its purchases of NET ELECTRIC OUTPUT pursuant to and in
accordance with the provisions of Article VI hereof.
ARTICLE VIII
SELLER INTERCONNECTION EQUIPMENT
8.1 SELLER Interconnection Equipment. At its own cost, SELLER shall
design, construct, install, operate and maintain the SELLER INTERCONNECTION
EQUIPMENT on its side of and at the INTERCONNECTION POINT to (a) permit the
PROJECT to interconnect and operate in parallel with the PECO ENERGY SYSTEM
and (b) permit PECO ENERGY to receive NET ELECTRIC OUTPUT at the
INTERCONNECTION POINT.
8.2 Condition Precedent. SELLER shall not commence construction of
the SELLER INTERCONNECTION EQUIPMENT until PECO ENERGY accepts SELLER's
proposed design of such equipment under the procedure specified in Section
8.3 hereof.
8.3 Design. PECO ENERGY shall perform an interconnection study, from
which PECO ENERGY will determine the INTERCONNECTION POINT, and SELLER will
reimburse PECO ENERGY for the costs PECO ENERGY incurs in performing that
study. PECO ENERGY will complete the interconnection study within sixty
(60) days after receiving from SELLER a $5,000 advance payment for
25
<PAGE>
the costs of the study. After PECO ENERGY completes the interconnection
study and determines the INTERCONNECTION POINT, SELLER shall submit to PECO
ENERGY, along with (a) the DESIGN RELEASE and (b) the initial payment
specified in "Section 9.2, plans and specifications for the design of the
SELLER INTERCONNECTION EQUIPMENT. Within sixty (60) days after the
submission of such plans and specifications, PECO ENERGY shall notify
SELLER (a) that the proposed design of the SELLER INTERCONNECTION EQUIPMENT
is acceptable, (b) that the proposed design of the SELLER INTERCONNECTION
EQUIPMENT is unacceptable or (c) that additional information is needed.
PECO ENERGY shall not unreasonably withhold acceptance of a proposed
design. PECO ENERGY's failure to provide such notification to SELLER
within sixty (60) days of the submission of such plans and specifications
shall be deemed an acceptance by PECO ENERGY. If PECO ENERGY notifies
SELLER that additional information is needed or that the proposed design of
the SELLER INTERCONNECTION EQUIPMENT is unacceptable, SELLER may submit to
PECO ENERGY revised plans and specifications. Within thirty (30) days of
the submission of such revised plans and specifications, PECO ENERGY shall
notify SELLER whether additional information is needed, or whether the
proposed design is accepted or rejected. If additional information is
requested, or the revised design is rejected, SELLER may submit further
revised plans and specifications which PECO ENERGY shall review within a
reasonable time period. Thereafter, SELLER may submit revised plans and
specifications to PECO ENERGY as many times as is
26
<PAGE>
necessary to obtain PECO ENERGY's acceptance of a proposed design. PECO
ENERGY's acceptance of SELLER's proposed design of the SELLER
INTERCONNECTION EQUIPMENT shall not be construed as a warranty or
representation to SELLER, or any other person or entity, of the adequacy,
suitability, safety or reliability of the design, construction,
installation or operation of the SELLER INTERCONNECTION EQUIPMENT. PECO
ENERGY shall periodically render a statement of charges to SELLER for the
costs PECO ENERGY incurs pursuant to this Section 8.3, and SELLER shall
reimburse PECO ENERGY for all the costs that PECO ENERGY incurs pursuant to
this Section 8.3.
8.4 Construction. Upon PECO ENERGY's acceptance of SELLER's
proposed design, SELLER shall construct the SELLER INTERCONNECTION
EQUIPMENT in accordance with the design accepted by PECO ENERGY. If,
subsequent to PECO ENERGY's acceptance, any design modification affecting
the electrical arrangement of the SELLER INTERCONNECTION EQUIPMENT becomes
necessary, SELLER shall notify PECO ENERGY and obtain PECO ENERGY's prior
acceptance of the design modification. PECO ENERGY, in its sole
discretion, shall decide and inform SELLER whether any such modification in
the proposed design of the SELLER INTERCONNECTION EQUIPMENT requires an
amendment of the AGREEMENT. SELLER shall bear all costs, including
additional construction and installation costs, associated with any such
design modification.
8.5 Inspection and Access. Upon the completion of the construction
and installation of the SELLER INTERCONNECTION EQUIPMENT and related
portions of the FACILITY, SELLER shall
27
<PAGE>
have the SELLER INTERCONNECTION EQUIPMENT and related portions of the
FACILITY inspected by an authorized electrical inspection agency and shall
provide PECO ENERGY with a copy of such agency's inspection certificate.
PECO ENERGY shall, within five (5) working days after receipt of such
certificate, inspect the FACILITY and SELLER INTERCONNECTION EQUIPMENT and
advise SELLER, within five (5) working days after the completion of its
inspection, whether the FACILITY and SELLER INTERCONNECTION EQUIPMENT may
interconnect and operate in parallel with the PECO ENERGY SYSTEM as
contemplated in Section 10.2 hereof. SELLER shall reimburse PECO ENERGY
for all the costs PECO ENERGY incurs pursuant to this Section 8.5. PECO
ENERGY employees, agents and contractors shall have the right to enter the
PROJECT SITE at any time upon reasonable notice to SELLER, or without
notice in the event of an OPERATIONAL EMERGENCY, for the purposes of
(a) inspecting the PECO ENERGY INTERCONNECTION EQUIPMENT or SELLER
INTERCONNECTION EQUIPMENT, (b) reading meters or (c) making tests to insure
the safe operation of the PECO ENERGY INTERCONNECTION EQUIPMENT and SELLER
INTERCONNECTION EQUIPMENT. Any such inspection, however, shall not relieve
SELLER from its sole obligation to operate and maintain the SELLER
INTERCONNECTION EQUIPMENT in accordance with Section 7.3 hereof at all
times.
28
<PAGE>
ARTICLE IX
PECO ENERGY INTERCONNECTION EQUIPMENT
9.1 PECO Interconnection Equipment. PECO ENERGY shall design,
construct, purchase, install, operate, maintain and own the PECO ENERGY
INTERCONNECTION EQUIPMENT.
9.2 Interconnection Design. Upon receiving from the SELLER the
DESIGN RELEASE and an initial advance payment specified by PECO ENERGY in
accordance with Section 9.14 hereof, PECO ENERGY shall (a) design the PECO
ENERGY INTERCONNECTION EQUIPMENT, (b) prepare and provide to SELLER an
estimated completion date for constructing, purchasing and installing the
PECO ENERGY INTERCONNECTION EQUIPMENT, and (c) prepare an estimate of the
cost of constructing, purchasing and installing the PECO ENERGY
INTERCONNECTION EQUIPMENT, and (d) review for acceptance the design of the
SELLER INTERCONNECTION EQUIPMENT.
9.3 Consultation with SELLER. After the submission by PECO ENERGY to
SELLER of the plans and specifications for the design of the PECO ENERGY
INTERCONNECTION EQUIPMENT, PECO ENERGY shall periodically meet with and
inform SELLER of the design, costs, scheduling and other factors which
could affect the construction of the PECO ENERGY INTERCONNECTION EQUIPMENT.
Such discussions shall be promptly completed, and shall not be deemed to
preclude changes or create any warranty for the benefit of or
representation to SELLER, or any other person, as to the plans,
specifications, cost estimates, time schedules or other factors relating to
the proposed construction, purchase, installation,
29
<PAGE>
operation or maintenance of the PECO ENERGY INTERCONNECTION EQUIPMENT.
9.4 Rights and Easements. SELLER shall cause to be granted to PECO
ENERGY and its successors and assigns in perpetuity, or for a shorter
period as the PARTIES may agree, but not less than the term of this
AGREEMENT, at no cost to PECO ENERGY, all necessary rights and easements to
construct, purchase, install, operate, maintain, repair, renew, replace,
remove and relocate (a) PECO ENERGY INTERCONNECTION EQUIPMENT, (b) the
metering and telemetering equipment described in Articles XI and XII hereof
and (c) any PECO ENERGY facilities affected by the PROJECT. SELLER shall
execute and deliver to PECO ENERGY, in recordable form, such instruments as
PECO ENERGY may request with respect to the foregoing. SELLER also shall
obtain all necessary rights and easements to construct, install, own,
operate, and maintain the PROJECT.
9.5 Acquisition of Permits, Licenses and Approvals. PECO ENERGY
shall make applications to obtain from appropriate governmental bodies any
permit, license or approval required to construct, purchase, install, own,
operate and maintain PECO ENERGY INTERCONNECTION EQUIPMENT. SELLER shall
provide any assistance reasonably requested by PECO ENERGY to enable PECO
ENERGY to obtain any such permit, license or approval. SELLER shall also
obtain from appropriate governmental bodies any permit, license or approval
required to construct, install, own operate and maintain the PROJECT.
30
<PAGE>
9.6 Costs of Acquisition. SELLER shall pay, as a cost or expense
associated with the design, construction, purchase and installation of PECO
ENERGY INTERCONNECTION EQUIPMENT under Sections 9.13-9.917 hereof, any
reasonable cost of expense associated with PECO ENERGY's obtaining any
permit, license or approval pursuant to Section 9.5 hereof, or any
reasonable cost or expense associated with defending the issuance of any
such required permit, license or approval.
9.7 Notice to Proceed. PECO ENERGY shall commence construction,
purchase and installation of the PECO ENERGY INTERCONNECTION EQUIPMENT
following receipt from SELLER of the NOTICE TO PROCEED and the payment
specified by PECO ENERGY in accordance with Section 9.14 hereof.
9.8 Reasonable Efforts to Complete Construction. PECO ENERGY shall
use reasonable efforts to complete the construction of the PECO ENERGY
INTERCONNECTION EQUIPMENT on or before the estimated completion date;
provided, however, that the PARTIES understand and agree that PECO
ENERGY's reasonable efforts to complete the construction of the PECO ENERGY
INTERCONNECTION EQUIPMENT on or before the estimated completion date shall
be subordinate and subject to PECO ENERGY's primary obligations to furnish
and maintain adequate, efficient, safe, and reliable service and facilities
to its customers and to operate and maintain its plant, property and
equipment in such condition as to enable it to do so.
9.9 Liability. PECO ENERGY shall not be liable to SELLER for any
direct or incurred costs, expenses, losses,
31
<PAGE>
liabilities or damages which SELLER may incur or sustain and which arise
out of, relate to or result from any delay in the completion of
construction of the PECO ENERGY INTERCONNECTION EQUIPMENT, except where the
delay in the completion of the construction of the PECO ENERGY
INTERCONNECTION EQUIPMENT results from PECO ENERGY's failure to use
reasonable efforts, as qualified in Section 9.8 hereof. SELLER shall
indemnify and hold harmless PECO ENERGY and each and every of its officers,
agents, servants, employees, successors and assigns from and against any
and all claims, demands, suits, actions, liabilities, damages, or
judgments, as well as against any fees, costs, charges or expenses which
PECO ENERGY, its officers, agents, servants, employees, successors and
assigns incur in the defense of any such claims, demands, suits, actions or
judgments, made or filed by any third party to the extent such claims,
demands, suits, actions or judgments arise out of, or relate to, any delay
in the completion of the construction of the PECO ENERGY INTERCONNECTION
EQUIPMENT, except where such delay results from PECO ENERGY'S FAILURE TO
UTILIZE REASONABLE EFFORTS AS QUALIFIED IN Section 9.8 hereof.
9.10 Design Changes. PECO ENERGY shall construct the PECO ENERGY
INTERCONNECTION EQUIPMENT reasonably in accordance with its proposed
design. PECO ENERGY shall have the right, however, to make changes in such
proposed design when it determines, in its judgment reasonably exercised
and after consultation with SELLER, that such changes are necessary to
enable the PROJECT to interconnect and operate in parallel with
32
<PAGE>
the PECO ENERGY SYSTEM in a safe and reliable manner. PECO ENERGY shall
provide SELLER with notice of any design change which would require a
change in the SELLER INTERCONNECTION EQUIPMENT; provided, however, that the
failure of PECO ENERGY to provide such notice shall not relieve SELLER of
its sole obligation to pay the cost of constructing the PECO ENERGY
INTERCONNECTION EQUIPMENT.
9.11 Notice of Completion. PECO ENERGY shall notify SELLER when it
has completed the construction of the PECO ENERGY INTERCONNECTION
EQUIPMENT.
9.12 Interconnection Cost Responsibility. SELLER shall be responsible
for, and shall pay to PECO energy, all reasonable costs and charges PECO
ENERGY incurs and makes in designing, constructing, purchasing and
installing the PECO ENERGY INTERCONNECTION EQUIPMENT.
9.13 Estimated Costs. PECO ENERGY shall, in accordance with Section
9.2 hereof, estimate the total costs it expects to incur in designing,
constructing, purchasing and installing the PECO ENERGY INTERCONNECTION
EQUIPMENT. The provision by PECO ENERGY to SELLER of this or any other
such cost estimate shall not diminish, change or affect SELLER's
responsibility and obligation to pay to PECO ENERGY all costs PECO ENERGY
actually incurs in designing, constructing, purchasing and installing the
PECO ENERGY INTERCONNECTION EQUIPMENT.
9.14 Payment Schedule. PECO ENERGY and SELLER agree that SELLER shall
prepay PECO ENERGY for all costs PECO ENERGY incurs in designing,
constructing purchasing and installing the
33
<PAGE>
PECO ENERGY INTERCONNECTION EQUIPMENT in accordance with this Section 9.14.
With the submission of the DESIGN RELEASE under Section 9.2 hereof, SELLER
shall make a payment specified by PECO ENERGY to cover the costs PECO
ENERGY expects to incur pursuant to Section 9.2. Upon completion of the
cost estimate to be developed pursuant to Section 9.2(c), PECO ENERGY and
SELLER shall develop a payment schedule, acceptable to PECO ENERGY, for
SELLER to advance funds sufficient to cover the costs PECO ENERGY expects
to incur for the specified work. The first payment on that schedule shall
be made with the NOTICE TO PROCEED issued by SELLER in accordance with
Section 9.7. SELLER shall thereafter make payments in accordance with the
agreed schedule, PECO ENERGY shall not commence the construction, purchase
or installation of any PECO ENERGY INTERCONNECTION EQUIPMENT until a
payment schedule acceptable to PECO ENERGY is developed.
9.15 Reconciliation. Following completion of the construction of the
PECO ENERGY INTERCONNECTION EQUIPMENT, PECO ENERGY shall provide the SELLER
final reconciliation setting forth the nature and amount of the costs and
charges PECO ENERGY actually incurred or made in (a) designing,
constructing, purchasing and installing the PECO ENERGY INTERCONNECTION
EQUIPMENT and (b) performing its obligations under Section 8.3, 8.5 and 9.2
hereof. In the event that the total of such costs and charges PECO ENERGY
actually incurred or made exceeds the total payments made by SELLER to
PECO ENERGY under Sections 9.2, 9.7 and 9.14 hereof, SELLER shall be
responsible for and shall
34
<PAGE>
pay to PECO ENERGY any such differential within thirty (30) days of the
date of delivery to SELLER of the final reconciliation. In the event that
the total payments made by SELLER to PECO ENERGY pursuant to Sections 9.2,
9.7 and 9.14 hereof exceed such costs PECO ENERGY actually incurred or
made, PECO ENERGY shall refund to SELLER, within thirty (30) days of the
final reconciliation, any such overpayment.
9.16 Suspension. In the event SELLER fails to remit any payment
specified in Section 9.14 or 9.15 hereof on or before the day such payment
is due, PECO ENERGY may, in addition to any other remedy or right PECO
ENERGY may have under the AGREEMENT, immediately suspend performance of its
obligations under this AGREEMENT. PECO ENERGY shall provide SELLER with
notice of any such suspension of performance. In the event PECO ENERGY
suspends performance of its obligations under this AGREEMENT pursuant to
this Section 9.16, SELLER may, after curing the precipitating cause
thereof, request PECO ENERGY to resume the tasks associated with the
design, construction and installation of the PECO ENERGY INTERCONNECTION
EQUIPMENT. Upon receipt of any such request PECO ENERGY shall, as soon
thereafter as practicable, review its work commitments and shall establish
and submit to SELLER, as applicable: (a) a revised estimated construction
completion date and (b) a revised payment schedule. If SELLER accepts the
revised estimated construction completion date and the revised payment
schedule, PECO ENERGY shall resume the construction and installation of the
PECO ENERGY INTERCONNECTION EQUIPMENT.
35
<PAGE>
9.17 Cancellation Costs. If PECO ENERGY is not in default (as defined
in Section 20.2 hereof), SELLER shall be liable to pay to PECO ENERGY all
CANCELLATION COSTS which PECO ENERGY incurs. In the event PECO ENERGY
incurs CANCELLATION COSTS for which SELLER is responsible under this
AGREEMENT, PECO ENERGY shall provide SELLER with a written demand for
payment. SELLER shall be obligated to make payment to PECO ENERGY for any
CANCELLATION COSTS immediately upon PE's presentation of the written
demand. If the AGREEMENT is terminated under Sections 19.1 or 19.2 hereof
before PECO ENERGY has completed the construction and installation of the
PECO ENERGY INTERCONNECTION EQUIPMENT, PECO ENERGY shall have the right
to cancel or terminate any supplier and contractor agreements and orders
entered into in connection with discharging its obligations to design,
construct and install the PECO ENERGY INTERCONNECTION EQUIPMENT. In the
event PECO ENERGY terminates or cancels any supplier or contractor
agreements or orders as permitted in this Section 9.17, PECO ENERGY shall
consult with SELLER but retain final discretion relative to the manner of
resolving any such claim or demand by any contractor or supplier, and PECO
ENERGY shall be the sole judge of the acceptability of any compromise in
settlement or resolution of an such claim or demand. Additionally, PECO
ENERGY shall be the sole judge as to what is necessary to maintain the
safety, integrity or reliability of the PECO ENERGY SYSTEM relative to any
removal or completion of PECO ENERGY INTERCONNECTION EQUIPMENT. PECO
ENERGY shall exercise reasonable care in
36
<PAGE>
resolving contractor and supplier claims and demands and in effecting any
required removal or completion of PECO ENERGY INTERCONNECTION EQUIPMENT so
as to mitigate the dollar amount paid in effecting the resolution of such
claims and demands or the dollar amount expended in completing such removal
or completion tasks; provided, however, that PECO ENERGY shall have no
liability to SELLER for or on account of the dollar amounts paid in
effecting such removal or completion tasks except where PECO ENERGY
effects the resolution of any such claims and demands or the completion of
such tasks in a manner which is in willful disregard of its obligation to
mitigate.
ARTICLE X
INITIAL PROJECT OPERATION AND TESTING
10.1 Initial Operation. Upon (a) PECO ENERGY 's inspection and
acceptance of the SELLER INTERCONNECTION EQUIPMENT under Section 8.5 hereof
and (b) PECO ENERGY 's notification of SELLER under Section 9.11 hereof of
the completion of the installation and construction of the PECO ENERGY
INTERCONNECTION EQUIPMENT, SELLER shall select and notify PECO ENERGY of a
DATE OF INITIAL OPERATION, which must be acceptable to PECO ENERGY . PECO
ENERGY will promptly notify SELLER whether the DATE OF INITIAL OPERATION
it has selected is acceptable. As of the DATE OF INITIAL OPERATION, PECO
ENERGY shall permit any electric generation unit at the PROJECT to
interconnect and synchronize with the PECO ENERGY SYSTEM for
37
<PAGE>
testing purposes. SELLER shall, at PECO ENERGY 's request, inform PECO
ENERGY of the results of any such testing.
10.2 Commercial Operation. Following the DATE OF INITIAL OPERATION
and the PROJECT testing specified in Section 10.1, SELLER shall select and
notify PECO ENERGY of a COMMERCIAL OPERATION DATE.
ARTICLE XI
METERING
11.1 Metering Equipment. PECO ENERGY shall determine the design of
the metering installation for the purpose of registering and recording the
quantity of NET ELECTRIC OUTPUT purchased by PECO ENERGY from SELLER.
Such metering equipment shall be capable, among other things, of providing
the data required to determine the kilowatt-hours purchased during each
hour of the BILLING MONTH, as well as total NET ELECTRIC OUTPUT purchased
during each BILLING MONTH, under the terms of the AGREEMENT and shall
permit continuous reading by SELLER and PECO ENERGY . PECO ENERGY and
SELLER shall have the respective responsibilities for metering set forth
below:
(a) PECO ENERGY shall own and maintain all metering equipment.
(b) PECO ENERGY shall provide SELLER with all required voltage and
current transformers, which SELLER shall install.
(c) SELLER shall provide and install metering enclosures, mounting
equipment and overcurrent protection as required.
38
<PAGE>
(d) PECO ENERGY shall make secondary connections to metering
transformers.
(e) SELLER shall make primary connections to metering transformers.
11.2 Meter Charges. SELLER shall pay to PECO ENERGY , in the manner
specified in Section 14.2 hereof, monthly metering equipment carrying and
maintenance charges, which are estimated in Appendix A hereto.
11.3 Meter Testing. PECO ENERGY shall verify the accuracy of PECO
ENERGY 's recording meter by performing the meter tests and conforming to
the other standards set forth in the PUC's regulations at 52 Pa. Code
57.20-57.25 and any amendments or modifications thereto. The metering
equipment shall be sealed, and SELLER shall be informed in advance and may
have a representative present when such seals are broken or when a
recording meter is inspected, tested or adjusted. SELLER may, at any time,
request a test of the accuracy of a recording meter installed pursuant
hereto and shall bear the cost thereof, except that PECO ENERGY shall bear
the cost of any such test when the test establishes a METER ERROR
PERCENTAGE in excess of two percent (2%). In the event SELLER elects to
have a representative present at a test of the accuracy of a recording
meter, the accuracy test and any associated adjustments to the recording
meter shall be made in the presence of and observed by SELLER's
representative.
11.4 Meter Error. If, as a result of an accuracy test, a recording
meter is found to have a METER ERROR PERCENTAGE of
39
<PAGE>
more than two percent (2%), PECO ENERGY shall, at its own expense, restore
the recording meter to a condition of accuracy or replace it.
11.5 Payment Adjustment. If, as a result of an accuracy test, the
recording meter is found to have a METER ERROR PERCENTAGE of more than two
percent (2%) fast, PECO ENERGY shall render a bill or take a credit for
any associated overpayment equal to the product of (a) the total NET
ELECTRIC OUTPUT purchased during the METER ERROR CORRECTION PERIOD, (b) the
LEVELIZED RATE, the PROJECTED VALUE or ninety percent (90%) of the PJM RATE
as applicable under Section 4.3 hereof for the BILLING MONTHS during the
METER ERROR CORRECTION PERIOD and (c) the METER ERROR PERCENTAGE. If, as a
result of an accuracy test, the recording meter is found to have a METER
ERROR PERCENTAGE of more than two percent (2.0%) slow, PECO ENERGY shall
pay SELLER for any associated underpayment; which payment shall equal the
product of (a) the total NET ELECTRIC OUTPUT purchased during the METER
ERROR CORRECTION PERIOD, (b) the LEVELIZED RATE, the PROJECTED VALUE or
ninety percent (90%) of the PJM RATE as applicable under Section 4.3 hereof
for the BILLING MONTHS during the METER ERROR CORRECTION PERIOD and (c) the
METER ERROR PERCENTAGE.
11.6 Meter Failure. Should the recording meter installed pursuant to
Section 11.1 hereof fail to register during any period of time, the NET
ELECTRIC OUTPUT purchased by PECO ENERGY during such period shall be
estimated by PECO ENERGY . SELLER shall cooperate in making such estimates
by
40
<PAGE>
providing to PECO ENERGY , upon PECO ENERGY 's request, registration data
from any recording meter maintained by SELLER at the PROJECT SITE or other
relevant data.
11.7 Suspense Account Adjustments. If a refund is issued, bill
rendered or payment reduced under Sections 11.5 or 11.6 hereof because of
meter inaccuracy or failure, an appropriate adjustment, if any, shall be
made to the SUSPENSE ACCOUNT to reflect the credits or debits that would
have been made to the SUSPENSE ACCOUNT to reflect the credits or debits
that would have been made to the SUSPENSE ACCOUNT during the METER ERROR
CORRECTION PERIOD if the meter had been neither fast nor slow.
ARTICLE XII
TELEMETERING
12.1 Telemetering Equipment. SELLER shall provide telemetering
equipment to enable PECO ENERGY to monitor the PROJECT's NET ELECTRIC
OUTPUT and reactive power on a continuous basis. PECO ENERGY shall specify
the telemetering equipment design to record SELLER's breaker position, the
output of the FACILITY, THE NET ELECTRIC OUTPUT of the PROJECT, and any
other requirements needed to maintain the reliability and stability of the
PECO ENERGY SYSTEM. PECO ENERGY and the SELLER shall have the respective
responsibilities for telemetering set forth below:
(a) PECO ENERGY shall specify all telemetering equipment and
installation standards.
(b) SELLER hall furnish, own and install all telemetering equipment
on the PROJECT SITE in accordance with the standards specified by PECO
ENERGY.
41
<PAGE>
(c) PECO ENERGY shall maintain all telemetering equipment except the
voltage and current transformers.
(d) SELLER shall maintain voltage and current transformers.
(e) PECO ENERGY shall install wiring inside the remote terminal and
termination cabinet.
(f) PECO ENERGY shall specify and order telephone pairs as required.
(g) SELLER shall lease a telephone circuit or otherwise establish a
telecommunications link to PECO ENERGY's operations center at 2301 Market
Street, Philadelphia, Pennsylvania 19101, capable of permitting PECO ENERGY
to receive the telemetering data specified in this Section 12.1 by means of
both digital data links and analog signals.
12.2 Cost Responsibility. Any costs incurred by PECO ENERGY in
designing, designating, selecting, specifying, or installing telemetering
equipment shall be paid to PECO ENERGY by SELLER pursuant to the provisions
of Article IX hereof as a cost associated with the design, construction and
installation of the PECO ENERGY INTERCONNECTION EQUIPMENT. SELLER shall
bear all the costs it incurs under Section 12.1.
12.3 Telemetering Charges. SELLER shall pay to PECO ENERGY, in a
manner set forth in Section 14.2 hereof, all costs PECO ENERGY incurs in
maintaining and operating telemetering equipment pursuant to the AGREEMENT,
which costs are estimated in Appendix A hereto.
42
<PAGE>
ARTICLE XIII
MODIFICATIONS
13.1 PECO ENERGY System Modifications. The PARTIES hereto recognize
that PECO ENERGY may determine during the term of the AGREEMENT that
certain modifications, including, without limitation, repairs, additions,
replacements or other changes, on or to the PECO ENERGY SYSTEM are
necessary to:
(a) to accommodate or meet changing patterns of demand and usage of
electric power and energy or other changes in the PECO ENERGY SYSTEM,
(b) to meet revised safety and operating standards and procedures,
(c) to maintain the quality of the initial interconnection
installations required by this AGREEMENT, OR,
(d) to satisfy any applicable law, regulation or order. If such
modifications, improvements, repairs, additions, replacements or other
changes on or to the PECO ENERGY SYSTEM require, in PECO ENERGY's sole
judgment reasonably exercised, associated changes to the PECO ENERGY
INTERCONNECTION EQUIPMENT, the SELLER INTERCONNECTION EQUIPMENT or the
metering and telemetering equipment described in Articles XI and XII
hereof, PECO ENERGY shall provide SELLER with a description of the required
changes and an estimate of the cost of such required changes. Thereafter,
SELLER shall make the required modifications to the SELLER INTERCONNECTION
EQUIPMENT, and PECO ENERGY shall make the designated modifications to the
PECO
43
<PAGE>
ENERGY INTERCONNECTION EQUIPMENT and the metering and telemetering
equipment described in Articles XI and XII hereof.
13.2 Payment. SELLER shall be responsible for and shall pay to
PECO ENERGY any costs and expenses PECO ENERGY incurs associated with the
required changes described in Section 13.1 hereof. Unless other billing
and payment arrangements are mutually agreed upon by the PARTIES, SELLER
shall pay to PECO ENERGY the estimated cost set forth in the estimate
provided by PECO ENERGY to SELLER pursuant to Section 13.1 hereof within
thirty (30) days of its receipt of such cost estimate. Within ninety (90)
days of completion of the modifications to the PECO ENERGY INTERCONNECTION
EQUIPMENT and/or metering and telemetering equipment described in
Articles XI and XII hereof, PECO ENERGY shall provide SELLER with a final
reconciliation setting forth the nature and amount of the costs PECO ENERGY
actually incurred in performing the modifications. In the event that the
total costs actually incurred by PECO ENERGY exceed the payment made by
SELLER to PECO ENERGY pursuant to this Section 13.2 exceeds the costs PECO
ENERGY actually incurred in ;making the modifications, PECO ENERGY shall
refund to SELLER, with the final reconciliation, any such overpayment.
13.3 Maintenance Costs. PECO ENERGY shall maintain the PECO ENERGY
INTERCONNECTION EQUIPMENT during the term of the
44
<PAGE>
AGREEMENT according to PECO ENERGY's sole judgment reasonably applied and
based on common practices for the PECO ENERGY T&D SYSTEM. SELLER shall be
responsible for and pay to PECO ENERGY all reasonable costs PECO ENERGY
incurs associated with such maintenance. PECO ENERGY shall periodically
render a reasonably detailed maintenance bill to SELLER, covering
maintenance expenses incurred over the time period since the last
maintenance bill. SELLER shall pay to PECO ENERGY the amount of each such
bill within thirty (30)) days after its receipt. A maintenance bill not
paid within thirty (30) days shall accrue interest as provided in Section
14.4 hereof.
ARTICLE XIV
PAYMENT AND BILLING
14.1 Output Purchase Payment. Within thirty days after the DATE OF
INITIAL OPERATION, and at the conclusion of each BILLING MONTH thereafter,
PECO ENERGY shall read the recording meter at the PROJECT SITE for billing
purposes. Within thirty (30) days after such meter reading PECO ENERGY
shall remit to SELLER an amount equal to the Output Purchase Payment
(calculated in accordance with Section 4.3 hereof) less any offsets and
reductions authorized under the AGREEMENT.
14.2 Metering, Telemetering and Administration Charges. The Output
Purchase Payment made by PECO ENERGY to SELLER for each BILLING MONTH shall
be reduced by monthly metering, telemetering, and associated administration
charges. Estimates of such charges are set forth in Appendix A hereto.
The administration charges shall be updated and increased
45
<PAGE>
periodically by a percentage equal to PECO ENERGY's annual percentage
change in its wages for regular and probationary employees as of the date
each such change becomes effective. In the event the metering,
telemetering and associated administration charges are greater than the
Output Purchase Payment for a BILLING MONTH, SELLER shall be responsible
for and shall pay to PECO ENERGY the difference within thirty (30) days of
the ; issuance of a bill or invoice by PECO ENERGY.
14.3 Payments. Except as otherwise specifically provided in the
AGREEMENT, all payments or reimbursements required to be made under the
AGREEMENT shall be due and payable by the appropriate PARTY to the other
PARTY within thirty (30) days of the sending of a bill or invoice. With
respect to payments to be made by SELLER to PECO ENERGY, if at the end of
such a thirty (30) day period PECO ENERGY has not received payment from
SELLER, PECO ENERGY may, without limitation, reduce any future Output
Purchase Payment by an amount equal to the amount owed by SELLER to PECO
ENERGY plus interest as provide din Section 14.4 hereof.
14.4 Interest. In the event a PARTY fails to pay all or part of any
amount it owes the other PARTY under the terms of the AGREEMENT when such
payment is due, interest shall accrue on the unpaid portion from the due
date at a rate equal to the lesser of
(a) three (3) points above the per annum interest rate publicly
announced from time to time by the First Pennsylvania
46
<PAGE>
Bank, N.A., or by its successor or survivor in the event of a bank merger,
as the prime interest rate currently being charged to its most credit-
worthy borrowers for ninety (90) unsecured commercial loans, or, if the
prime rate should be discontinued or no longer quoted, a comparable rate
designated by PECO ENERGY in the reasonable exercise of its sold
discretion, or
(b) the current rate of PECO ENERGY's most recent issue of long-term
debt, provided it issued such debt within the preceding twenty-four (24)
months.
14.5 Billing Disputes. PECO ENERGY's shall provide to SELLER, upon a
timely request therefor, documentation and data available to PECO ENERGY to
enable SELLER to verify the accuracy of any Output Purchase Payment made by
PECO ENERGY to SELLER, or any amount billed by PECO ENERGY to SELLER
pursuant to the AGREEMENT; provided, however, that any such request by
SELLER shall not extend, postpone or otherwise affect SELLER'S obligation
to pay any amounts billed by PECO ENERGY to SELLER under the AGREEMENT by
the due date. In the event SELLER disputes any amount billed by PECO
ENERGY to SELLER under the AGREEMENT, SELLER shall pay to PECO ENERGY the
entire amount thereof, when due, and shall together with the payment
thereof (a) identify and present the dispute in writing to PECO ENERGY, and
(b) submit to PECO ENERGY documentation substantiating any claim made
relative to the dispute. Upon receipt of notice of the dispute and the
supporting documentation, PECO ENERGY shall have thirty (30) days to
attempt to resolve the dispute with
47
<PAGE>
SELLER. In the event the dispute is not resolved within such thirty (30)
day period, either PARTY may pursue any legal or other remedy.
ARTICLE XI
ASSIGNMENT
15.1 Assignment. (a) Neither PARTY shall assign or assign the
AGREEMENT or any claims or interests therein without the prior written
consent of the other PARTY, which consent shall not unreasonably be
withheld. Either PARTY, however, shall have the right to assign the
AGREEMENT to an affiliated entity without the consent of the other PARTY,
provided such assignment does not impair performance of the PARTIES'
respective obligations under the AGREEMENT. All covenants, stipulations,
terms, conditions and provisions of the AGREEMENT shall be binding upon the
PARTIES and shall extend to and be binding upon the successors and assigns
of the PARTIES permitted under this Section 15.1.
(b) Notwithstanding the first sentence of this Section 165.1, PECO
ENERGY hereby consents to the assignment by SELLER of all of SELLER's
right, title and interest in and to this AGREEMENT, and any addendums and
amendments thereto, too Philadelphia United Power Corporation, a
Pennsylvania corporation ("PUPCO"). The foregoing consent is expressly
intended to permit SELLER to fulfill its obligations under certain
agreements among SELLER, PUPCO and its affiliate, Philadelphia Thermal
Energy Corporation. This consent is conditioned on SELLER and PUPCO
providing PECO ENERGY at least
48
<PAGE>
thirty (30) days written notice pursuant to Section 25.1 prior to PUPCO
accepting any formal assignment of this AGREEMENT. As provided in
subsection (as) of this Section 15.1, upon the assignment of this AGREEMENT
to PUPCO, all covenants, stipulations, terms, conditions and provisions of
this AGREEMENT shall be binding upon PUPCO as SELLER'S assigned, and PUPCO
shall be entitled to all of the rights of SELLER hereunder, provided that
PUPCO shall have no right, title or interest in this Agreement prior to the
effectiveness of the assignment to PUPCO. PECO ENERGY will not be
obligated to permit the assignment of SELLER's rights under this AGREEMENT
to any party other than PUPCO or its corporate successors (but not
assigns), provided that, so long as PUPCO remains fully liable to PECO
ENERGY for performance of this AGREEMENT, and provided that such assignment
does not impair the performance of the PARTIES' respective obligations
under this AGREEMENT, PUPCO may, upon the prior written consent of PECO
ENERGY which shall not be unreasonably withheld, subcontract for FACILITY
electric production under this AGREEMENT.
ARTICLE XVI
BANKRUPTCY AND UNSOLVENCY
16.1 Remedies. In the event of
(a) the filing of a petition seeking the involuntary reorganization
or liquidation of SELLER under any applicable federal or state bankruptcy,
insolvency, reorganization or similar law, and such petition or action is
not actively contested within sixty (60) days after the filing thereof, or
49
<PAGE>
the granting of such petition, whether contested or appealed or not;
(b) the commencement of an action seeking the appointment of a
receiver, trustee or other similar official for SELLER, of for any
substantial part of SELLER's property, and such petition or action is not
actively contested within sixty 960) days after the filing thereof, or the
appointment of such a receiver, trustee or other similar official, whether
contested or appealed or not;
(c) the filing of a petition by SELLER seeking the voluntary
reorganization or liquidation of SELLER under any applicable federal or
state bankruptcy, insolvency or similar law; or
(d) the placement of SELLER's affairs in the hands of any court or
governmental agency for administration, including under any financially
distressed municipalities law if SELLER is a political subdivision or
municipal corporation or similar entity under applicable law;
PECO ENERGY may, in addition to any other remedies it may have under the
AGREEMENT, including, in particular, under Sections 5.3 and 5.4,
immediately suspend its performance hereunder unless and until SELLER
provides PECO ENERGY with assurance, which PECO ENERGY in its sole
discretion determines is adequate, that SELLER's obligations under the
AGREEMENT will be met.
ARTICLE XVII
WARRANTIES
17.1 SELLER's Warranties. SELLER warrants it will have
50
<PAGE>
good title to, and the right to deliver, all NET ELECTRIC OUTPUT it
delivers to the INTERCONNECTION POINT for purchase by PECO ENERGY under the
AGREEMENT. SELLER agrees to indemnify and hold PECO ENERGY harmless
against any and all claims, demands, suits, actions, costs, liabilities,
damages, losses or judgments arising out of, relating to or resulting from
any adverse claim to the NET ELECTRIC OUTPUT purchased by PECO ENERGY
pursuant to the AGREEMENT, as well as against all fees, costs, charges, and
expenses which PECO ENERGY might incur in a defense of any such claim,
suit, action or similar such demand made or filed by any person. In
effecting the right of or obligation to indemnify under this Section 17.1
the procedural provisions of Article XVIII of the AGREEMENT shall govern.
In addition, SELLER represents and warrants that the partners of SELLER
have authorized Robert A. Shinn, Vice President of O'Brien (Schuylkill)
Cogeneration, Inc., the managing partner of SELLER, to execute this
AGREEMENT in the name of SELLER.
ARTICLE XVIII
INDEMNIFICATION
18.1 Responsibility. Each PARTY shall indemnify the other PARTY, its
officers, agents, and employees against all loss, damages, expense, and
liability for injury to or death of persons or injury to property
proximately caused by the indemnifying PARTY's construction, ownership,
operation, or maintenance of, or by failure of, any of such PARTY's works
or facilities used directly in connection with this AGREEMENT. The
indemnifying PARTY shall, at the other PARTY's request, defend
51
<PAGE>
any suit asserting a claim covered by this indemnity. The indemnifying
PARTY shall pay all costs that may be incurred by the other PARTY in
enforcing this indemnity.
18.2 Worker's Compensation Responsibility. Each PARTY shall indemnify
and hold harmless the other PARTY, and each and every of its officers,
agents, servants, employees, successors and assigns, from any and all
claims of the other PARTY's employees arising from any worker's
compensation laws.
18.3 Procedure. If a claim is asserted or action brought against an
indemnitee (PECO ENERGY or SELLER as applicable), and the indemnitee
believes that he is entitled to indemnification under this ARTICLE XVIII,
the indemnitee shall promptly notify the indemnitor (the other PARTY), in
writing, of such claim or action. Such notice shall be provided in
sufficient time to enable the indemnitor to assert and prosecute
appropriate defenses to the claim or action. If the indemnitee fails to
give the indemnitor sufficiently prompt notice, the indemnitor shall have
no further obligation to indemnify the indemnitee pursuant to this ARTICLE
XVIII. Upon receipt of such notice, the indemnitor shall make a prompt
determination of whether it believes it is required to indemnify the
indemnitee, and shall promptly notify the indemnitee, in writing, of its
determination. If the indemnitor determines that it is required to
indemnify, it shall assume the defense of the indemnitee, including the
employment of counsel, and shall thereafter pay all costs and expenses
relative to the defense of the claim or action. The indemnitee shall
cooperate with the indemnitor in
52
<PAGE>
all reasonable respects in this defense. The indemnitee shall also have
the right, at its own expense to employ separate counsel in any such action
and to participate in the defense thereof. The indemnitor shall not be
liable for any settlement of any claim or action made without its consent.
Conversely, before settling any claim or action, the indemnitor shall
demonstrate to the indemnitee that the indemnitor has sufficient financial
,means, or has made adequate arrangements, to make all settlement payments
as and when due.
ARTICLE XIX
TERMINATION
19.1 Termination by PECO ENERGY. PECO ENERGY may terminate the
AGREEMENT:
(a) if SELLER is in default of the AGREEMENT,
(b) if the PUC, or any other governmental agency, issues a binding
order during the term of the AGREEMENT denying, over the objections of PECO
ENERGY and SELLER, PECO ENERGY authority to collect on a full and current
basis from its customers through the ENERGY COST ADJUSTMENT the costs PECO
ENERGY incurs in purchasing NET ELECTRIC OUTPUT pursuant to the AGREEMENT;
provided, however, that PECO ENERGY shall not have the right to terminate
the AGREEMENT if SELLER agrees within twenty (20) days of the date of
issuance of such a binding order to modify the AGREEMENT to accept payments
for NET ELECTRIC OUTPUT at any lower rate which PECO ENERGY is authorized
to recover on a full and current basis from its customers through the
ENERGY COST ADJUSTMENT, or
53
<PAGE>
19.2 Termination by SELLER. SELLER may terminate the AGREEMENT:
(a) if PECO ENERGY is in default of the AGREEMENT, OR
(b) if, prior to the COMMERCIAL OPERATION DATE, SELLER permanently
terminates FACILITY operations and permanently abandons the FACILITY.
SELLER shall, upon any termination by it, pay to PECO ENERGY any
amounts due and owing under the AGREEMENT, including, if applicable, any
debit balances and accrued interest in the SUSPENSE ACCOUNT pursuant to
Section 5.3 and including an amount determined by PECO ENERGY, in its sole
discretion, to be sufficient to cover PECO ENERGY's CANCELLATION COSTS.
19.3 Effect of Termination. A termination of the AGREEMENT under
Sections 19.1 or 19.2 hereof shall not be deemed to be a breach or default
under Article XX hereof.
ARTICLE XX
BREACH AND DEFAULT
20.1 Breach. A breach of the AGREEMENT shall occur upon the
occurrence of any of the following conditions or events:
(a) The failure of a PARTY to pay any amount due to the other PARTY
under the AGREEMENT, which failure continues for a period of thirty (30)
days after the due date for such payment as determined under the AGREEMENT.
(b) The failure by a PARTY to perform or observe any material term or
condition of the AGREEMENT.
54
<PAGE>
20.2 Cure and Default. In the event that any PARTY breaches the
AGREEMENT, the other PARTY shall provide the breaching PARTY with a written
notice of the breach. Thereafter, if the breach is not rectified or cured
within forty-five (45) days after receipt of such notice the breaching
PARTY shall be deemed to be in default of the AGREEMENT; provided, however,
that, except where there has been a failure to make a payment within
thirty (30) days after the due date for such payment as determined under
the AGREEMENT, if such breach cannot be reasonably cured within such forty-
five (45) day period, then the breaching PARTY shall have an additional
reasonable period, not to exceed one (1) year, to effect such cure, and
shall not be deemed to be in default of the AGREEMENT provided that the
breaching PARTY commences to effect such cure within forty-five (45) days
of its receipt of notice of the breach, and at all times thereafter
proceeds diligently in effecting such cure.
20.3 Damages. In the event a PARTY is in breach or default of the
AGREEMENT, then the other PARTY, in addition to any other remedy it may
have under the AGREEMENT, shall be entitled to all direct damages caused by
such breach or default, but in no event shall either PARTY be liable to the
other PARTY for any indirect, special or consequential damages resulting
from such breach or default, and in no event shall PECO ENERGY be liable
for damages in excess of twenty-five million dollars ($25,000,000). In
addition, upon termination of the AGREEMENT SELLER shall pay PECO ENERGY,
pursuant to Section 5.3, an amount
55
<PAGE>
equal to the debit balance and accrued interest in the SUSPENSE ACCOUNT as
of the date of termination.
20.4 Mitigation. Each PARTY shall mitigate damages in the event of a
breach or default by the other PARTY to the AGREEMENT.
20.5 Indemnification. Nothing in this Article XX shall in any way
affect the obligations of the PARTIES to indemnify each other as provided
in Articles XVII and XVIII hereof.
ARTICLE XXI
FORCE MAJEURE
21.1 Force Majeure. Subject to the provisions of Section 21.2 hereof,
either PARTY hereto shall be excused from performance hereunder, other than
the obligation to make payments of amounts already due and the payment of
the Projection Payment or Termination Payment under
Sections 5.2 and 5.3 hereof, and shall not be liable in damages or
otherwise if, and to the extent that, it shall be unable to perform fully
or is prevented from performing fully by any act, event, cause or condition
that is beyond its reasonable control, that is not caused by its fault or
negligence, and that by the exercise of reasonable diligence it is unable
to overcome or prevent, including but not limited to the following:
(a) An act of God, flood, earthquake, storm, fire, explosion,
lightning, landslide, epidemic or damages by the elements.
(b) The failure of any subcontractor or supplier to perform for
reasons other than nonpayment of undisputed claims.
56
<PAGE>
(c) The ;entry of a valid and enforceable injunctive or restraining
order or judgment, order or decree of any federal or state court or
administrative agency or governmental officer or body having or purporting
to have jurisdiction thereof, or any change in or adoption of any
constitute, charter, act, statute, law, ordinance, code, rule, regulation
or order, or other legislative or administrative action of the ;United
States or the Commonwealth of Pennsylvania, or any agency, department,
authority, political subdivision or other instrumentality of either
thereof; provided, however, that the contesting in good faith of any order,
judgment or action shall not constitute or be construed as the lack of
reasonable diligence or efforts, or failure to act, of the non-performing
PARTY; and provided further that Force Majeure shall not include any
actions or orders of any governmental body insofar as such actions or
orders (i) result in any loss of QUALIFYING FACILITY status, (ii) require
specific changes or modifications to the AGREEMENT, or (iii) pertain to the
extent of PECO ENERGY's recovery from its customers of payments to SELLER
hereunder.
(e) The discovery at the PROJECT SITE of an archaeological find of
significance.
57
<PAGE>
(f) Strikes, walkouts, slowdowns, lockouts or other labor disputes or
industrial disturbances.
(g) Acts of the public enemy, wars, blockages, boycotts,
insurrections or riots.
(h) Loss, diminution or impairment of PECO ENERGY's electrical
supply.
(i) A break or fault in the PECO ENERGY T&D SYSTEM.
(j) Any other cause beyond the reasonable control of and without the
fault or negligence of the PARTY that is unable to perform and which, by
the exercise of reasonable diligence, that PARTY is unable to overcome or
prevent.
21.2 Excuse from Performance. The PARTY claiming Force Majeure shall
be excused from performance only if:
(a) It promptly gives the other PARTY oral notification of the
existence of any Force Majeure
(b) The suspension of performance on account of the Force Majeure is
of no greater scope and of no longer duration than is required by the Force
Majeure.
(c) It uses reasonable efforts under the circumstances to remedy the
inability to perform, but neither PARTY shall be required to settle any
strike, walkout, lockout or other labor dispute on terms which, in its sole
judgment, is contrary to its best interests, and
(d) It gives the other PARTY prompt oral notification of the
cessation of the Force Majeure, and thereafter provides
58
<PAGE>
confirmation in writing within five (5) days of said oral notification.
ARTICLE XXII
INSURANCE
22.1 Insurance. SELLER shall, at a minimum, carry general liability
insurance with a combined single limit for bodily injury and property
damage (including broad form contractual liability) of at least ten million
dollars ($10,000,000). SELLER shall forward a certificate evidencing such
insurance to PECO ENERGY, at the address listed in Section 25.1, prior to
PECO ENERGY's inspection of the FACILITY and the SELLER INTERCONNECTION
EQUIPMENT pursuant to Section 8.5 hereof. SELLER shall provide annually
thereafter a certificate evidencing such ongoing insurance coverage.
ARTICLE XXIII
GOVERNMENT REGULATIONS
23.1 State and Federal. The AGREEMENT and all rights and obligations
of the PARTIES hereunder are subject to all applicable state and federal
laws and all duly promulgated orders and regulations and duly authorized
action taken by the executive, legislative, or judicial branches of
government or any of their respective agencies, departments, authorities or
other instrumentalities. In the event that any such statute, ordinance,
order, rule, regulation or other action shall increase PECO ENERGY's cost
of performance under the AGREEMENT, SELLER shall pay or reimburse PECO
ENERGY for such costs.
59
<PAGE>
ARTICLE XXIV
GOVERNING LAW
24.1 Interpretation. The interpretation and performance of the
AGREEMENT shall be in accordance with and controlled by the laws and
regulations of the Commonwealth of Pennsylvania and the United States of
America.
ARTICLE XXV
MISCELLANEOUS
25.1 Notices. Except as otherwise specifically provided herein, any
notice, request, demand, statement and/or payment provided herein shall be
in writing and shall be sent to the PARTIES at the following addresses:
PECO ENERGY:
PECO Energy Company
Attn: Interconnection Arrangements
2301 Market Street
Philadelphia, PA 19101
Telecopy: (215) 841-4234
SELLER:
O'Brien (Schuylkill) Cogeneration, Inc.
225 South Eighth Street
Philadelphia, PA 19106
Telecopy: (215) 922-5227
PUPCO (after an assignment pursuant to Article XV):
Philadelphia United Power Corporation
2600 Christian Street
Philadelphia, PA 19146
Telecopy: (215) ;875-6910
Such notices shall be deemed to have been given and received when (a)
personally delivers, (b) ninety-six (96) hours after
60
<PAGE>
deposit in the U.S. Mail, postage prepaid, properly addressed to the
appropriate PARTY, or (c) twenty-four 24) hours after a telecopy is
properly sent and received. Oral notification under Section 21.2 shall be
made by telephone to the following numbers:
PECO ENERGY: (215) 841-4236
SELLER: (215) 627-5500
PUPCO: (215) 875-6900
Either PARTY may change the address, telecopy number, or telephone number
to which notice is to be given by written notice to the other PARTY.
Nothing in this Section 25.1 shall be deemed to require PECO ENERGY to
provide prior notice of any kind in the event of an OPERATIONAL EMERGENCY.
25.2 Indulgences. Neither the failure nor the delay on the part of
either PARTY to exercise any right, remedy, power or privilege under the
AGREEMENT shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same, nor shall any waiver of any right,
remedy, power or privilege with respect to any other occurrence be
construed as a waiver of such right, remedy, power or privilege with
respect to any other occurrence.
25.3 Captions and Headings. Captions and ;headings in the AGREEMENT
are for convenience only, do not constitute a part of the AGREEMENT, and
shall not affect its interpretation.
25.4 Validity. Except as otherwise specifically provided in the
AGREEMENT, if any portion of the AGREEMENT is
61
<PAGE>
invalid or illegal, it shall not affect the validity or enforceability of
any other portion of the AGREEMENT.
25.5 Agreement Definition. The AGREEMENT with Appendices A and B
hereto constitutes the entire AGREEMENT between the PARTIES relating to the
subject matter hereof, and all previous and contemporaneous agreements,
understandings, discussions, inducements, conditions, communications and
correspondence, whether oral or written, express or implied, with respect
to the subject matter hereof are superseded by the execution of the
AGREEMENT.
25.6 Modifications. The AGREEMENT may not be modified or amended
except in writing signed by or on behalf of both PARTIES by their duly
authorized officers with the same formality that as followed in the
execution of the AGREEMENT.
25.7 Execution in Counterparts. The AGREEMENT may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against the PARTY whose signature appears thereon, and all of which shall
together constitute one and the same instrument. The AGREEMENT shall
become binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of the PARTIES reflected hereon as the
signatories.
25.8 Gender and Number. Words ;used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context indicates is appropriate.
62
<PAGE>
25.9 Number of Days. In computing the number of days for purposes of
the AGREEMENT, all days shall be counted, including, Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
IN WITNESS WHEREOF, the PARTIES have caused the AGREEMENT to be
executed as of the day and year first above written.
PECO ENERGY COMPANY, formerly known as
PHILADELPHIA ELECTRIC COMPANY
Attest:/s/ By:/s/ William H. Smith III
SECRETARY William H. Smith, III
Vice President
GRAYS FERRY COGENERATION
PARTNERSHIP
Attest:/s/ By:/s/ Robert A. Shinn
Robert A. Shinn
Vice President (Schuylkill)
Cogeneration, Inc.
JOINDER
The undersigned hereby acknowledges and agrees to be bound by the
terms of this Agreement in accordance with the terms of Section 15.1(b)
hereof.
PHILADELPHIA UNITED POWER
By:/s/ S. G. Smith
Attest:/s/ Robert A. Shinn
63
<PAGE>
APPENDIX A
ESTIMATED METERING, TELEMETERING AND ADMINISTRATION CHARGES
Estimated Monthly Metering Charge* $150
Estimated Monthly Telemetering Charge** $500
Monthly Administration Charge*** $750
* Includes carrying and maintenance charges.
** Includes only maintenance and operating charges.
*** To be updated periodically in accordance with Section 114.2 of
this AGREEMENT.
<PAGE>
APPENDIX B
PRICING VALUES
The One LEVELIZED RATE (Cents)
If the COMMERCIAL OPERATION per Kilowatt-hour) is, until
DATE occurs the FINAL PROJECTION DATE
Dec. 26, 1991 - Dec. 25, 1992 3.49
Dec. 26, 1992 - Dec. 25, 1993 3.65
Dec. 26, 1993 - Dec. 25, 1994 3.82
Dec. 26, 1994 - Dec. 25, 1995 4.02
Dec. 26, 1995 - Dec. 25, 1996 4.23
Dec. 26, 1996 - Dec. 25, 1997 4.43
Dec. 26, 1997 - Dec. 25, 1998 4.64
Dec. 26, 1998 - Dec. 25, 1999 4.81
Dec. 26, 1999 - Dec. 25, 2000 4.95
PROJECTED RATE
Calendar Year (Cents per Kilowatt-hour)
1992 2.58
1993 2.77
1994 2.92
1995 3.18
1996 3.57
1997 3.91
1998 4.33
1999 4.68
2000 4.95
FINAL PROJECT DATE - December 31, 2000
<PAGE>
Exhibit 10.25.5
EXHIBIT B
AGREEMENT FOR PURCHASE OF ELECTRIC OUTPUT (PHASE II)
<PAGE>
AGREEMENT FOR PURCHASE
OF ELECTRIC OUTPUT
(PHASE II)
between
PECO ENERGY COMPANY
and
GRAYS FERRY COGENERATION PARTNERSHIP
Dated: As of July 28, 1992
<PAGE>
TABLE OF CONTENTS
Page
BACKGROUND 1
ARTICLES
I. DEFINITIONS 2
1.1 Definitions 2
II. EFFECTIVE DATE AND TERM 10
2.1 Effective Date 10
2.2 Cost Recovery 10
2.3 Term 10
III. CERTAIN OBLIGATIONS OF SELLER 12
3.1 Qualifying Facility Status 12
3.2 Completion of Construction 13
IV. PURCHASES 13
4.1 Amount Purchased 13
4.2 Definitions 14
4.3 Output Purchase Payment 15
V. SUSPENSE ACCOUNT 16
5.1 Suspense Account Balance 16
5.2 Projection Payment 16
5.3 Termination Payment 17
5.4 Suspense Account Guarantee 17
VI. CURTAILMENT. REDUCTION OR INTERRUPTION OF PURCHASES 18
6.1 Purchase Disruptions 18
6.2 Selection 20
6.3 Notice 20
6.4 Extent of Disruptions 21
6.5 SELLER's Obligations on Disruption 21
(i)
<PAGE>
ARTICLE
VII. PROJECT OPERATION 22
7.1 Obligation of SELLER 22
7.2 Manner of Delivery 22
7.3 Safe Construction and Operation 22
7.4 Power Factor 24
7.5 Provision of Information 24
7.6 Modifications 25
VIII. SELLER INTERCONNECTION EOUIPMENT 26
8.1 SELLER Interconnection Equipment 26
8.2 Condition Precedent 27
8.3 Design 27
8.4 Construction 28
8.5 Inspection and Access 29
IX. PECO ENERGY INTERCONNECTION EOUIPMENT 30
9.1 PECO ENERGY Interconnection Equipment 30
9.2 Interconnection Design 30
9.3 Consultation with SELLER 31
9.4 Rights and Easements 31
9.5 Acquisition of Permits. Licenses and Approvals 32
9.6 Costs of Acquisition 32
9.7 Notice to Proceed 32
9.8 Reasonable Efforts to Complete Construction 33
9.9 Liability 33
9.10 Design Changes 34
9.11 Notice of Completion 35
9.12 Interconnection Cost Responsibility 35
9.13 Estimated Costs 35
9.14 Payment Schedule 35
9.15 Reconciliation 36
9.16 Suspension 37
9.17 Cancellation Costs 38
X. INITIAL PROJECT OPERATION AND TESTING 39
10.1 Initial Operation 39
10.2 Commercial Operation 40
XI. METERING 40
11.1 Metering Equipment 40
11.2 Meter Charges 41
(ii)
<PAGE>
ARTICLE
11.3 Meter Testing 41
11.4 Meter Error 42
11.5 Payment Adjustment 42
11.6 Meter Failure 43
11.7 Suspense Account Adjustments 43
XII. TELEMETERING 43
12.1 Telemetering Equipment 43
12.2 Cost Responsibility 45
12.3 Telemetering Charges 45
XIII. MODIFICATIONS 45
13.1 PECO ENERGY System Modifications 45
13.2 Payment 46
13.3 Maintenance Costs 47
XIV. PAYMENT AND BILLING 48
14.1 Output Purchase Payment 48
14.2 Metering. Telemetering and Administration Charges48
14.3 Payments 49
14.4 Interest 49
14.5 Billing Disputes 50
XV. ASSIGNMENT 51
15.1 Assignment 51
XVI. BANKRUPTCY AND INSOLVENCY 52
16.1 Remedies 52
XVII. WARRANTIES 54
17.1 SELLER's Warranties 54
XVIII. INDEMNIFICATION 54
18.1 Responsibility 54
18.2 Worker's Compensation Responsibility 55
18.3 Procedure 55
(iii)
<PAGE>
ARTICLE
XIX. TERMINATION 56
19.1 Termination by PECO ENERGY 56
19.2 Termination by SELLER 57
19.3 Effect of Termination 57
XX. BREACH AND DEFAULT 58
20.1 Breach 58
20.2 Cure and Default 58
20.3 Damages 59
20.4 Mitigation 59
20.5 Indemnification 59
XXI. FORCE MAJEURE 60
21.1 Force Majeure 60
21.2 Excuse from Performance 62
XXII. INSURANCE 63
22.1 Insurance 63
XXIII. GOVERNMENT REGULATIONS 63
23.1 State and Federal 63
XXIV. GOVERNING LAW 64
24.1 Interpretation 64
XXV. MISCELLANEOUS 64
25.1 Notices 64
25.2 Indulgences 65
25.3 Captions and Headings 66
25.4 Validity 66
25.5 Agreement Definition 66
25.6 Modifications 66
25.7 Execution in Counterparts 66
25.8 Gender and Number 67
25.9 Number of Days 67
APPENDICES
A. Estimated Metering, Telemetering and Administration Charges
B. Pricing Values
(iv)
<PAGE>
AGREEMENT FOR PURCHASE OF ELECTRIC OUTPUT (PHASE II)
This AGREEMENT is made as of the 28th day of July, 1992, by and
between Grays Ferry Cogeneration Partnership, a partnership with offices of
its managing partner, O'Brien (Schuylkill) Cogeneration, Inc., located at
225 South Eighth Street, Philadelphia, Pennsylvania 19106 ("SELLER"), and
PECO Energy Company, formerly known as Philadelphia Electric Company, a
Pennsylvania corporation with offices located at 2301 Market Street,
Philadelphia, Pennsylvania 19101 ("PECO ENERGY").
BACKGROUND
PECO is a regulated public utility engaged in, among other things, the
generation, purchase, transmission, distribution and sale of electric power
within the Commonwealth of Pennsylvania.
Under Section 210 of PURPA, 16 U.S.C. 824a-3, FERC regulations at 18
C.F.R. 292.201-292.602, and PUC regulations at 52 Pa. Code 57.31-
57.39, PECO ENERGY is required under certain circumstances to purchase
electric power from QUALIFYING FACILITIES.
SELLER intends to design, construct, own and operate an electric
generation facility (the FACILITY in Article I hereof) and certain
associated equipment located at 2600 Christian Street, Philadelphia,
Pennsylvania 19146.
SELLER intends to receive certification from the FERC that the
FACILITY is a QUALIFYING FACILITY, and SELLER intends to and shall maintain
the FACILITY during the term of this
<PAGE>
AGREEMENT in compliance with the requirements for a QUALIFYING FACILITY
established by PURPA and FERC's regulations.
SELLER has requested PECO ENERGY, and PECO ENERGY is willing, to (a)
design, construct, install, operate and maintain certain equipment to
enable the FACILITY to interconnect with the PECO ENERGY SYSTEM (the PECO
ENERGY INTERCONNECTION EQUIPMENT) and (b) purchase the NET ELECTRIC OUTPUT
produced by the FACILITY during the term of the AGREEMENT.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the PARTIES, intending to be legally bound hereby, agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms, when used herein with
capitalization, shall have the following meanings:
AGREEMENT means this agreement for Purchase of Electric Output between
PECO ENERGY and SELLER, including any extension or amendment thereto.
AUXILIARY SERVICE RIDER means the rider set forth in PECO ENERGY's
Electric Service Tariff under which PECO ENERGY provides electric service
to customers whose electrical requirements are not wholly provided by PECO
ENERGY-owned facilities, as the rider may be amended from time to time.
BILLING MONTH means the time period, constituting not less than twenty-
eight (28) days and not more than thirty-four (34) days, between two
successive meter readings made for billing purposes.
2
<PAGE>
CANCELLATION COSTS means the costs and liabilities incurred by PECO
ENERGY upon the termination of the AGREEMENT under Sections 19.1 or 19.2
hereof or upon the expiration of the term of the AGREEMENT specified in
Section 2.3 hereof to (a) cancel supplier and contractor orders and
agreements entered into to design, construct, install, operate, maintain
and own PECO ENERGY INTERCONNECTION EQUIPMENT, (b) remove such PECO ENERGY
INTERCONNECTION EQUIPMENT and (c) restore the PECO ENERGY SYSTEM to its
condition prior to the execution of this AGREEMENT.
COMMERCIAL OPERATION DATE means the date designated by SELLER under
Section 10.2 hereof as the date the FACILITY and the SELLER INTERCONNECTION
EQUIPMENT are ready to deliver NET ELECTRIC OUTPUT to the INTERCONNECTION
POINT on a continuous basis for reasons other than testing.
COST RECOVERY PETITION means a petition by PECO ENERGY to the PUC
seeking authority to collect and recover from PECO ENERGY's customers, on a
full and current basis through the ENERGY COST ADJUSTMENT or such other
mechanism as may replace the ENERGY COST ADJUSTMENT, all payments made to
SELLER under the Agreement for purchases of NET ELECTRIC OUTPUT.
CREDIT means (a) an irrevocable letter or letters of credit (b) a
surety or performance bond or (c) an insurance policy, any of which to be
issued by ISSUER on behalf of SELLER
3
<PAGE>
to PECO ENERGY as beneficiary in a form and on terms and conditions
acceptable to PECO ENERGY.
DATE OF INITIAL OPERATION means the date, acceptable to PECO ENERGY,
that SELLER synchronizes, for the first time, the FACILITY with the PECO
ENERGY SYSTEM.
DESIGN RELEASE means a written notice from SELLER to PECO ENERGY
authorizing PECO ENERGY to (a) design the PECO ENERGY INTERCONNECTION
EQUIPMENT, (b) estimate the completion date for constructing and installing
the PECO ENERGY INTERCONNECTION EQUIPMENT, (c) prepare an estimate of the
cost of constructing and installing the PECO ENERGY INTERCONNECTION
EQUIPMENT, and (d) review the design of the SELLER INTERCONNECTION
EQUIPMENT for acceptance.
ENERGY COST ADJUSTMENT mean the component of PECO ENERGY's PUC-
approved electric rates, as set forth in PECO ENERGY's Electric Service
Tariff, which enables PECO ENERGY to recover its energy costs not reflected
in its base rates.
FACILITY means all equipment and appurtenant structures, which have an
aggregate nameplate rating of up to 119 megawatts, to be constructed,
installed, operated, maintained and owned by SELLER at the PROJECT SITE for
the purpose of generating electricity, representing Phase II of a two-phase
project which SELLER intends to construct at the PROJECT SITE with a total
aggregate nameplate rating of up to 150 megawatts.
FERC means the Federal Energy Regulatory Commission.
4
<PAGE>
FINAL PROJECTION DATE means the date as defined in Appendix B.
INTERCONNECTION POINT means the point of physical connection between
the SELLER INTERCONNECTION EQUIPMENT and the PECO ENERGY INTERCONNECTION
EQUIPMENT to be determined by PECO ENERGY, after consultation with SELLER.
ISSUER means, with respect to the CREDIT (a) the commercial bank or
other entity issuing an irrevocable letter or letters of credit, (b) the
company qualified and authorized to issue the surety or performance bond in
the Commonwealth of Pennsylvania, (c) the insurance company authorized to
issue the insurance policy.
LIGHT LOAD CONDITION means a circumstance where (a) the PJM
INTERCONNECTION operators have declared a MINIMUM GENERATION EMERGENCY or
(b) a condition occurs on the PJM INTERCONNECTION or the PECO ENERGY SYSTEM
which, without PECO ENERGY taking action to correct such condition, might
imminently lead to such a declaration. Such actions include, but are not
limited to, (i) a reduction in output from a nuclear unit or (ii) the
removal of an electric generating unit from service which could not be
returned to service during the next anticipated period of peak demand for
power.
METER ERROR CORRECTION PERIOD means the actual time period of a
meter's registration error, if such time period is definitely known, or, if
unknown, a period equal to the lesser
5
<PAGE>
of one-half (1/2) of the meter, or three months, plus, if the meter has not
been tested in accordance with the requirements of 52 Pa. Code 57.20, as
that provision may be amended from time to time, the period the meter has
been in service beyond the required test period.
METER ERROR PERCENTAGE means the difference, expressed as a
percentage, between actual meter registrations during testing, and the
registrations the meter would have made if it were neither fast nor slow,
at an average purchase level that the PARTIES mutually agree is
representative of the level of NET ELECTRIC OUTPUT purchases made by PECO
ENERGY from the PROJECT during the METER ERROR CORRECTION PERIOD.
MINIMUM GENERATION EMERGENCY means an operational condition declared
by the PJM INTERCONNECTION resulting from a period of low demand for
electricity.
NET ELECTRIC OUTPUT means the total electric output of the FACILITY in
excess of (a) the output SELLER uses to operate the FACILITY, (b) the
output Philadelphia Thermal Energy Corporation uses to operate the steam
generating equipment and related facilities located on land at Schuylkill
Station that it leases from PECO ENERGY under a lease dated January 30,
1987; provided that PECO ENERGY shall not provide facilities or service to
transport or deliver power from the FACILITY to that steam generating
equipment and related facilities, and (c) the
6
<PAGE>
output SELLER uses in the transformation and transmission of electric
output to the INTERCONNECTION POINT.
NOTICE TO PROCEED means written notice provided by SELLER to PECO
ENERGY authorizing PECO ENERGY to construct, purchase and install the PECO
ENERGY INTERCONNECTION EQUIPMENT and agreeing to pay all the costs and
charges incurred and made by PECO ENERGY under this AGREEMENT in
constructing, purchasing and installing the PECO ENERGY INTERCONNECTION
EQUIPMENT.
OPERATIONAL EMERGENCY means a condition or situation which presents,
or is imminently likely to present. a real, substantial and immediate
threat to persons or property. or which impairs or imminently will impair
either (a) PECO ENERGY's ability to furnish and maintain adequate,
efficient. safe, and reliable service to its customers, or (b) the safety,
reliability and stability of the PECO ENERGY SYSTEM.
PARTIES means PECO ENERGY and SELLER.
PARTY means PECO ENERGY or SELLER.
PECO ENERGY means PECO Energy Company and its regulated operating
subsidiaries.
PECO ENERGY INTERCONNECTION EQUIPMENT means the equipment, other than
metering equipment, to be designed, constructed, purchased, installed,
owned, and operated by PECO ENERGY under the terms of the AGREEMENT,
including modifications to the PECO ENERGY T&D SYSTEM, to enable PECO
ENERGY to interconnect the PECO ENERGY SYSTEM with, and to receive NET
7
<PAGE>
ELECTRIC OUTPUT from, the PROJECT under the terms and conditions of the
AGREEMENT.
PECO ENERGY SYSTEM means the electric power generation, transmission
and distribution facilities owned, operated and/or maintained by PECO
ENERGY, which will include, after construction and installation, the PECO
ENERGY INTERCONNECTION EQUIPMENT.
PECO ENERGY T&D SYSTEM means the electric power transmission and
distribution facilities owned, operated and maintained by PECO ENERGY,
which will include, after construction and installation, the PECO ENERGY
INTERCONNECTION EQUIPMENT.
PJM INTERCONNECTION means the Pennsylvania - New Jersey - Maryland
Interconnection, a fully coordinated power pool formed pursuant to the PJM
INTERCONNECTION AGREEMENT.
PJM INTERCONNECTION AGREEMENT means the agreement executed by and
among the members of the PJM INTERCONNECTION, and any amendments thereto,
on file with the FERC.
POWER FACTOR shall have that meaning set forth in the IEEE Standard
Dictionary of Electrical and Electronic Terms (ANSI/IEEE Standard 100-1988,
Fourth Edition).
PROJECT means the Phase II FACILITY, SELLER INTERCONNECTION EQUIPMENT
and associated facilities and equipment to be constructed, installed,
owned, operated and
8
<PAGE>
maintained by SELLER at the PROJECT SITE for the purpose, among other
things, of generating electricity.
PROJECT SITE means the property leased by SELLER from Philadelphia
Thermal Energy Corporation under a lease dated November 11, 1991, as
amended as of September 17, 1993, upon which a two-phase project, including
the Phase II FACILITY and associated interconnection equipment. will be
situated.
PRUDENT ELECTRICAL PRACTICES means the spectrum of possible practices,
methods and acts which, in the exercise of reasonable judgment and in light
of the facts known at the time a decision was made, would have been used in
prudent electrical engineering and operations to accomplish the desired
result at a reasonable cost consistent with reliability, safety and
expedition, and is not limited to the optimum practices, methods or acts to
the exclusion of all others.
PUC means the Pennsylvania Public Utility Commission.
PURPA means the Public Utility Regulatory Policies Act of 1978.
QUALIFYING FACILITY means a "small power production facility" or
"cogeneration facility" as defined in Section 210 of PURPA, 16 U.S.C. SS
824a-3(j), and meeting the criteria for qualification set forth at 18
C.F.R. SS SS 292.203-292.206.
SELLER means Grays Ferry Cogeneration Partnership.
SELLER INTERCONNECTION EQUIPMENT means the facilities up to and
including the INTERCONNECTION POINT, other than the
9
<PAGE>
metering equipment described in Article XI hereof, to be designed,
constructed, installed, operated and maintained by SELLER to (a) permit the
PROJECT to interconnect and operate in parallel with the PECO ENERGY SYSTEM
and (b) permit PECO ENERGY to receive NET ELECTRIC OUTPUT at the
INTERCONNECTION POINT.
SUSPENSE ACCOUNT means an account maintained in PECO ENERGY's records
used solely to record PECO ENERGY'S purchases of NET ELECTRIC OUTPUT under
the AGREEMENT and the associated account balances specified in Section 5.1
hereof.
ARTICLE II
EFFECTIVE DATE AND TERM
2.1 Effective Date. The AGREEMENT shall become effective upon (a)
its execution by authorized representatives of the PARTIES, (b) the
acceptance by the PARTIES, in the manner specified in Section 2.2 hereof,
of the terms of a valid, binding and unappealed final order of a court or
the PUC ruling upon PECO ENERGY's COST RECOVERY PETITION and (c) approval
of the AGREEMENT by the PUC without modification as a contract with an
affiliated interest under 66 Pa.C.S. SS 2102.
2.2 Cost Recovery. Within sixty (60) days after the execution of the
AGREEMENT, PECO ENERGY shall prepare and file a COST RECOVERY PETITION. At
the same time, in view of the fact that Adwin Equipment Company, a wholly
owned subsidiary of PECO ENERGY, is one of the general partners of SELLER,
PECO ENERGY
10
<PAGE>
shall prepare and file a petition with the PUC seeking approval of the
AGREEMENT without modification under the affiliated interest provisions of
66 Pa.C.8. S 2102. Within sixty (60) days after (a) the date of entry of
an unappealed valid, binding and final order of the PUC ruling on the COST
RECOVERY PETITION, (b) the filing date of an unappealed valid, binding and
final order of a court on appeal from such a PUC ruling or (c) the date of
entry of an unappealed valid, binding and final order of the PUC ruling on
the COST RECOVERY PETITION on remand, each PARTY shall provide the other
PARTY with written notice of its acceptance or nonacceptance of the terms
and conditions of the final order ruling upon the COST RECOVERY PETITION.
Neither PARTY, however, shall have the right to reject the terms and
conditions of such a final order if the relief sought in the COST RECOVERY
PETITION is granted without modification. The failure to provide written
notice of acceptance or nonacceptance under this Section 2.2 within the
required time period shall be deemed to be acceptance of the terms and
conditions of the final order. If the relief sought in the COST RECOVERY
PETITION is granted without modification, the condition precedent set forth
in Section 2.1 hereof shall be deemed to be satisfied as of the filing date
or date of entry of the final order ruling upon the COST RECOVERY PETITION.
If the relief sought in the COST RECOVERY PETITION is granted with
modification, and the PARTIES accept the terms and conditions of the final
order, the PARTIES
11
<PAGE>
shall promptly execute, in the manner set forth in Section 25.6 hereof, an
appropriate modification to the AGREEMENT. and the condition precedent set
forth in Section 2.1 hereof shall be deemed to be satisfied as of the
effective date of such modification. Notwithstanding the final ruling on
the COST RECOVERY PETITION, if the PUC does not approve the AGREEMENT
without modification under the affiliated interest provisions of 66 Pa.C.S.
SS 2102, the AGREEMENT shall not become effective.
2.3 Term. The AGREEMENT, unless sooner terminated in accordance with
any applicable provision of the AGREEMENT, shall remain in full force and
effect for twenty (20) years after the COMMERCIAL OPERATION DATE. The
application provisions of the AGREEMENT, however, shall continue in effect
after the term of the AGREEMENT, including any extensions thereof, to the
extent necessary to provide for final billings and adjustments, and to
preserve and permit the enforcement or institution of action upon any right
or obligation which accrued during the AGREEMENT and was not exercised or
fulfilled upon termination.
ARTICLE III
CERTAIN OBLIGATIONS OF SELLER
3.1 Qualifying Facility Status. Prior to the DATE OF INITIAL
OPERATION, SELLER shall receive and provide PECO ENERGY with certification
from FERC that the PROJECT is a QUALIFYING FACILITY for the full amount of
NET ELECTRIC OUTPUT to be purchased by PECO ENERGY under the AGREEMENT.
SELLER shall maintain the PROJECT in compliance with the requirements for a
QUALIFYING FACILITY established under PURPA and applicable FERC regulations
for the full amount of NET ELECTRIC OUTPUT to be
12
<PAGE>
purchased by PECO ENERGY under the AGREEMENT, and any failure by SELLER to
so maintain the PROJECT shall be a breach of the AGREEMENT under Section
20.1 hereof.
3.2 Completion of Construction. SELLER shall complete construction of
the FACILITY and the SELLER' INTERCONNECTION EQUIPMENT, and take all other
steps necessary to enable the PROJECT to deliver NET ELECTRIC OUTPUT to the
INTERCONNECTION POINT for sale to PECO ENERGY1 on or before the fifth (5th)
anniversary of the effective date of the AGREEMENT. Failure by SELLER to
meet this standard shall constitute a default of the AGREEMENT under
Section 20.2 hereof.
ARTICLE IV
PURCHASES
4.1 Amount Purchased. Commencing on the DATE OF INITIAL OPERATION,
and thereafter during the term of the AGREEMENT, SELLER shall sell and
deliver to PECO ENERGY exclusively, and PECO ENERGY shall purchase and
accept delivery of, the PROJECT' S NET ELECTRIC OUTPUT; provided, however,
that PECO ENERGY shall not be required to purchase or accept delivery of
NET ELECTRIC OUTPUT from the PROJECT in excess of the lesser of (a) 119
megawatts or (b) the amount of electric output for
13
<PAGE>
which the FERC has certified the FACILITY as a QUALIFYING FACILITY.
4.2 Definitions. The following terms1 when used herein with
capitalization, shall have the following meanings:
(a) FINAL PROJECTION DATE means the date as defined in Appendix B.
(b) LEVELIZED PAYMENT means the product of (i) the number of kilowatt-
hours of NET ELECTRIC OUTPUT that PECO ENERGY purchases under the AGREEMENT
during a BILLING MONTH and (ii) the LEVELIZED RATE.
(c) LEVELIZED RATE shall be the rate specified in Appendix B as
determined by when the COMMERCIAL OPERATION DATE for the PROJECT occurs.
(d) PJM VALUE means the sum of the hourly PJM values during a BILLING
MONTH with each hourly PJM value being the product of (i) the number of
kilowatt-hours of NET ELECTRIC OUTPUT that PECO ENERGY purchases under the
AGREEMENT during that hour and (ii) the PJM RATE during that hour.
(e) PJM RATE means PECO ENERGY's hourly billing rate per kilowatt-
hour, determined under the PJM INTERCONNECTION AGREEMENT, for interchange
energy; provided, however, that during any hour when said billing rate
deviates significantly from the average billing rate for all PJM
INTERCONNECTION interchange energy, that average PJM billing rate shall be
substituted for the PECO ENERGY billing rate. If PECO ENERGY
14
<PAGE>
discontinues its participation in the PJM INTERCONNECTION, or if the method
of calculating the PECO ENERGY billing rate changes, the PARTIES will in
good faith negotiate a substitute for the PJM RATE which reflects PECO
ENERGY's avoided cost for energy as defined by PURPA and federal and state
regulations adopted pursuant to PURPA.
(f) PROJECTED RATE means the rate specified in Appendix B under the
column heading PROJECTED RATE for the applicable BILLING MONTH.
(g) PROJECTED VALUE means the product of (i) the number of kilowatt-
hours of NET ELECTRIC OUTPUT that PECO ENERGY purchases under the AGREEMENT
during a BILLING MONTH and (ii) the applicable PROJECTED RATE.
4.3 Output Purchase Payment. After the end of each BILLING MONTHD
PECO ENERGY shall pay SELLER, in accordance with Section 14.1 hereof; an
Output Purchase Payment computed as follows:
(a) Prior to the COMMERCIAL OPERATION DATE the Output Purchase
Payment shall be the PJM VALUE.
(b) Commencing on the COMMERCIAL OPERATION DATE and through the FINAL
PROJECTION DATE the Output Purchase Payment shall be either (i) the
LEVELIZED PAYMENT or (ii) the PROJECTED VALUE. SELLER shall1 within two
(2) years after the effective date of this AGREEMENT, notify PECO ENERGY in
writing of SELLER's one-time, irrevocable election to receive either (i)
15
<PAGE>
the LEVELIZED PAYMENT or (ii) the PROJECTED VALUE for the entire period
from the COMMERCIAL OPERATION DATE through the FINAL PROJECTION DATE. If
SELLER elects to receive the PROJECTED VALUE, then the provisions of
Article V of this AGREEMENT shall not apply. If SELLER fails to notify
PECO DIERGY of its election within two (2) years of the effective date of
this AGREEMENT1 then PECO ENERGY shall have the right to make the election.
(c) After the FINAL PROJECTION DATE and through the remaining term of
the AGREEMENT the Output Purchase Payment shall be ninety percent (90%) of
the PJM VALUE.
ARTICLE V
SUSPENSE ACCOUNT
5.1 Suspense Account Balance. For any BILLING MONTH in which the
LEVELIZED PAYMENT exceeds the PROJECTED VALUE, the SUSPENSE ACCOUNT will
record a debit equal to the difference between the two. Any debit balance
in the SUSPENSE ACCOUNT shall accrue interest on a monthly basis at the
rate specified in Section 14.4 hereof. For any BILLING MONTH in which the
PROJECTED VALUE exceeds the LEVELIZED PAYMENT, the difference between the
two shall be credited to the SUSPENSE ACCOUNT, but only to the extent
necessary to offset accrued debits and interest from prior BILLING MONTHS.
5.2 Projection Payment. Within thirty (30) days after
16
<PAGE>
the FINAL PROJECTION DATE, SELLER shall pay PECO ENERGY an amount equal to
the debit balance including accrued interest in the SUSPENSE ACCOUNT as of
the FINAL PROJECTION DATE. The SUSPENSE ACCOUNT shall terminate upon
SELLER'S payment under this Section 5.2.
5.3 Termination Payment. If the AGREEMENT is terminated prior to the
FINAL PROJECTION DATE, SELLER shall pay PECO ENERGY, within thirty (30)
days after the date of termination, an amount equal to the debit balance
and accrued interest in the SUSPENSE ACCOUNT as of the date of termination;
provided, however, that SELLER shall not be obligated to make such payment
in the event that SELLER terminates the AGREEMENT because of a default by
PECO ENERGY (as defined in Section 20.2 hereof). If any of the events
described in Section 16.1 hereof occur, SELLER shall pay PECO ENERGY an
amount equal to the debit balance and accrued interest in. the SUSPENSE
ACCOUNT as of the date of the event.
5.4 Suspense Account Guarantee. The PARTIES shall review the
SUSPENSE ACCOUNT balance at the end of every calendar year during the term
of the AGREEMENT, and SELLER shall provide a CREDIT to PECO ENERGY to
ensure payment of any debit balance in the SUSPENSE ACCOUNT at that time.
The CREDIT provided under this Section 5.4 shall be payable in the City of
Philadelphia by an ISSUER acceptable to PECO ENERGY on terms and conditions
acceptable to PECO ENERGY; provided, however, that PECO ENERGY
17
<PAGE>
shall not unreasonably withhold approval of any ISSUER or CREDIT. The
CREDIT shall be established for and structured so as to permit PECO ENERGY
to make multiple demands for payment from ISSUER, and shall require the
ISSUER, upon PECO ENERGY's submission of documents certifying that the
SUSPENSE ACCOUNT debit balance is due and payable, to honor on sight, in
immediately available funds, any written demand by PECO ENERGY for payment.
The CREDIT provided under this Section 5.4 shall be established to be
effective not later than the COMMERCIAL OPERATION DATE, and the CREDIT
provided for the period from the COMMERCIAL OPERATION DATE until the
adjustment at the en".. of the first calendar year shall be two million
dollars ($2,000,000). Upon the failure of SELLER to provide such CREDIT
upon the COMMERCIAL OPERATION DATE and thereafter within ninety (90) days
after the end of any calendar year during the term of the AGREEMENT PECO
ENERGY shall have the right to withhold payments to SELLER for the NET
ELECTRIC OUTPUT SELLER delivers to PECO ENERGY and apply those amounts to
decrease the debit balance until the debit balance has been reduced to the
amount for '6hich SELLER has furnished an acceptable CREDIT.
ARTICLE VI
CURTAILMENT. REDUCTION OR INTERRUPTION OF PURCHASES
6.1 Purchase Disruptions. PECO ENERGY may curtail, reduce or
interrupt its receipt and purchases of NET ELECTRIC OUTPUT from the PROJECT
when:
18
<PAGE>
(a) Such curtailment, reduction or interruption is necessary to
enable PECO ENERGY to maintain system operating reliability and/or to
provide service to its customers without a deterioration in quality.
(b) Such curtailment, reduction or interruption is necessary to
enable PECO ENERGY to discharge its obligations under the PJM
INTERCONNECTION AGREEMENT.
(c) Such curtailment, reduction or interruption is necessary to
enable PECO ENERGY to meet its obligations under the Mid-Atlantic Area
Coordination Agreement. which is the May 25, l979 agreement between PECO
ENERGY and the other signatories thereto, and any amendments or extensions
thereof, designed to coordinate the efforts of the signatories to maximize
the reliability of electric service in the territory covered by the
agreement, which is the same, electrically and physically1 as the territory
covered by the PJM INTERCONNECTION AGREEMENT.
(d) Such curtailment, reduction or interruption is necessary because
of a LIGHT LOAD CONDITION.
(e) The receipt of NET ELECTRIC OUTPUT by PECO ENERGY is causing, or
continued receipt of NET ELECTRIC OUTPUT by PECO ENERGY would create, an
OPERATIONAL EMERGENCY.
(f) Such curtailment, reduction or interruption is necessary for PECO
ENERGY to construct, install, maintain, repair, replace, remove, modify,
investigate or inspect any
19
<PAGE>
equipment in the PECO ENERGY SYSTEM which may affect or be affected by
operation of the PROJECT.
(g) Such curtailment, reduction or interruption is necessary because
PECO ENERGY is experiencing an event of Force Majeure Case defined in
Section 21.1 hereof).
(h) Such curtailment, reduction or interruption is necessary to
protect the integrity of the PECO ENERGY SYSTEM or any system with which
the PECO ENERGY SYSTEM is directly or indirectly interconnected, or to aid
in the restoration of service on the PECO ENERGY SYSTEM or any system with
which the. PECO ENERGY SYSTEM is directly or indirectly interconnected.
(i) Such curtailment, reduction or interruption is necessary because
SELLER has failed to fulfill its obligations under Sections 6.5, 7.3 or 7.5
hereof.
6.2 Selection. PECO ENERGY shall, in its sole discretion reasonably
applied, determine which of the sources of electrical power interconnected
with the PECO ENERGY SYSTEM, including the PROJECT, to curtail, reduce or
interrupt to eliminate a condition requiring a curtailment, reduction or
interruption for one or more of the reasons set forth in Section 6.l
hereof.
6.3 Notice. PECO ENERGY will attempt to notify SELLER of the
circumstances which necessitate the curtailment, reduction or interruption
of purchases of NET ELECTRIC OUTPUT, and the projected duration thereof, as
far in advance of such
20
<PAGE>
event as practicable. The PARTIES recognize that such advance notice may
not be possible in the event of an OPERATIONAL EMERGENCY1 in which event
PECO ENERGY shall provide notice to SELLER of the circumstances and
projected duration of the curtailment, reduction or interruption as soon as
is practicable after the curtailment, reduction or interruption. PECO
ENERGY shall not, however, be liable to SELLER for the cost of purchases of
NET ELECTRIC OUTPUT which would have been made but for the curtailment,
reduction or interruption in the event PECO ENERGY fails to provide notice
to SELLER under this Section 6.3.
6.4 Extent of Disruptions. PECO ENERGY shall use reasonable efforts
to minimize the time during which its purchases of NET ELECTRIC OUTPUT are
curtailed, reduced or interrupted. 'PECO ENERGY shall use reasonable
efforts to resume purchases of NET ELECTRIC OUTPUT under the AGREEMENT
promptly after the conditions described in Section 6.1 hereof have ended,
and any necessary modifications, repairs or replacements have been made,
including any modifications, repairs or replacements made to decrease the
likelihood of a recurrence of the condition causing the curtailment,
reduction or interruption.
6.5 SELLER's Obligations on Disruption. If a curtailment, reduction
or interruption under Section 6.1 hereof is due to a condition of or defect
in the FACILITY, SELLER INTERCONNECTION EQUIPMENT or other PROJECT
equipment, SELLER shall submit to PECO ENERGY a written proposed plan to
rectify
21
<PAGE>
the condition or defect. when PECO ENERGY has accepted such plan1 or a
revised version thereof , SELLER shall, at its own expense, repair the
condition or defect. when SELLER has made such repairs it shall notify PECO
ENERGY, and PECO ENERGY shall inspect the repaired, modified or replaced
equipment. Following such inspection PECO ENERGY shall notify SELLER
whether the condition or defect has been remedied to PECO ENERGY's
satisfaction. If PECO ENERGY is satisfied that the condition or defect has
been properly remedied, it shall promptly terminate the curtailment,
reduction or interruption. If PECO ENERGY is not satisfied that the
condition or defect has been properly remedied1 it shall provide SELLER
with a written explanation of why the remedy is not satisfactory.
ARTICLE VII
PROJECT OPERATION
7.1 Obligation of SELLER. SELLER shall take all necessary actions to
coordinate the operation of the PROJECT with the operation of the PECO
ENERGY SYSTEM1 including, but not limited to, those actions specified in
Sections 7.2-7.4 hereof.
7.2 Manner of Delivery. SELLER shall deliver NET ELECTRIC OUTPUT to
the INTERCONNECTION POINT in the form of three (3) phase, sixty (60) hertz,
alternating current at a nominal voltage to be specified by PECO ENERGY.
7.3 Safe Construction and Operation. At its own cost,
22
<PAGE>
SELLER shall design, construct, install, operate and maintain the PROJECT:
(a) Using equipment and facilities of sufficient quality to operate
the PROJECT in parallel with the PECO ENERGY SYSTEM without causing:
(1) any damage to the PECO ENERGY SYSTEM,
(2) any impairment of or deterioration in the quality of the
service PECO ENERGY renders to its customers,
(3) any damage to the integrity of the PECO ENERGY SYSTEM, or
(4) unreasonable risk of damage to property, of injury or death
to persons, or of an OPERATIONAL EMERGENCY.
(b) In a manner that is safe and that will not cause any of the
events or conditions listed in (a) above, and
(c) In accordance and conformance with the following as they may be
amended from time to time:
(1) those Standards for System Safety and Reliability filed by
PECO ENERGY with the PUC and entitled "Requirements for Parallel Operation
of Non-Utility Generators,"
(2) PECO ENERGY's published "Electric Service Requirements,"
(3) the AUXILIARY SERVICE RIDER,
(4) the National Electrical Code,
(5) the National Electrical Safety Code,
(6) applicable local, state and federal laws and
23
<PAGE>
regulations, and
(7) PRUDENT ELECTRICAL PRACTICES. SELLER shall install, own and
maintain, as part of the SELLER INTERCONNECTION EQUIPMENT, relays and
associated protective and control equipment and equipment to control
voltage and frequency regulation, all of which it shall operate in a manner
acceptable to PECO ENERGY.
7.4 Power Factor. SELLER shall install and have available automatic
generator field excitation regulators or an alternative regulator system
suitable to PECO ENERGY. SELLER shall operate this equipment to regulate
the FACILITY's reactive (MVAR) output so that at the INTERCONNECTION POINT
the FACILITY's POWER FACTOR is within the range of ninety-five percent
(95%) lagging and one hundred percent (100%) when measured as a generator.
This requirement is applicable over a normal operating voltage range to be
defined by PECO ENERGY based on the voltage specified by PECO ENERGY under
Section 7.2 hereof. Below this range the POWER FACTOR shall be allowed to
go below ninety-five percent (95%) into lagging. Above this range the POWER
FACTOR shall be allowed to go past one hundred percent (100%) into leading.
7.5 Provision of Information. As of the COMMERCIAL OPERATION DATE and
annually thereafter SELLER shall provide PECO ENERGY with (a) a schedule of
planned PROJECT maintenance and repair activities for the following thirty-
six (36) months and
24
<PAGE>
(b) an estimate of the amount of NET ELECTRIC OUTPUT it intends to deliver
to the INTERCONNECTION POINT during each of the following twelve (12)
months. Upon written request from PECO ENERGY, SELLER shall also maintain
and classify outage statistics in accordance with the then-current PJM
INTERCONNECTION outage classification procedures, and SELLER shall supply
such statistics to PECO ENERGY.
7.6 Modifications. In the event SELLER fails to meet, satisfy or
discharge its obligations under this AGREEMENT, and, as a consequence
thereof, a condition arises, a practice exists or an event occurs at the
PROJECT which, although it has not yet created any of the conditions or
caused any of the events specified under Section 6.1 hereof, if permitted
to continue or recur may, in PECO ENERGY's judgment reasonably exercised,
result in the creation of such a condition or cause such an event, PECO
ENERGY shall notify SELLER of the occurrence or existence thereof and
afford SELLER an opportunity to correct or remedy the problem. SELLER
shall have thirty C30) 4ays from receipt of PECO ENERGY's notice to correct
or remedy the problem. In the event SELLER cannot identify, remedy or
correct the problem within such thirty C30) days, SELLER shall submit to
PECO ENERGY, for PECO ENERGY's acceptance, a plan setting forth the
specific actions SELLER intends to take to correct or remedy the problem
and a time schedule for the implementation thereof. In the event SELLER
cannot identify, remedy or correct the
25
<PAGE>
problem within such thirty (30) days, and (a) SELLER fail. to submit a plan
within such period to correct or remedy the problem, (b) SELLER submits a
plan within such period but fails to exercise reasonable and good faith
efforts thereafter to implement such plan or (c) PECO ENERGY does not
accept SELLER's proposed plan and SELLER fails to submit a revised plan
within fifteen (15) days, then PECO ENERGY shall have the right thereafter,
upon reasonable notice to SELLER, to curtail, reduce or interrupt purchases
of NET ELECTRIC OUTPUT; provided, however, that if during the pendency of
any such cure afforded to SELLER pursuant to this Section 7.6 the problem
creates any of the conditions or causes any of the events specified under
Section 6.1, PECO ENERGY may curtail, reduce or interrupt its purchases of
NET ELECTRIC OUTPUT pursuant to and in accordance with the provisions of
Article VI hereof.
ARTICLE VIII
SELLER INTERCONNECTION EOUIPMENT
8.1 SELLER Interconnection Equipment. At its own cost, SELLER shall
design, construct, install, operate and maintain the SELLER INTERCONNECTION
EQUIPMENT on its side of and at the INTERCONNECTION POINT to (a) permit the
PROJECT to interconnect and operate in parallel with the PECO ENERGY SYSTEM
and (b) permit PECO ENERGY to receive NET ELECTRIC OUTPUT at the
INTERCONNECTION POINT.
26
<PAGE>
8.2 Condition Precedent. SELLER shall not commence construction of
the SELLER INTERCONNECTION EQUIPMENT until PECO ENERGY accepts SELLER's
proposed design of such equipment under the procedure specified in Section
8.3 hereof.
8.3 Design. PECO ENERGY shall perform an interconnection study, from
which PECO ENERGY will determine the INTERCONNECTION POINT, and SELLER will
reimburse PECO ENERGY for the costs PECO ENERGY incurs in performing that
study. PECO ENERGY will complete the interconnection study within sixty
(60) days after receiving from SELLER a $5,000 advance payment for the
costs of the study. After PECO ENERGY completes the interconnection study
and determines the INTERCONNECTION POINT, SELLER shall submit to PECO
ENERGY, along with (a) the DESIGN RELEASE and (b) the initial payment
specified in Section 9.2, plans and specifications for the design of the
SELLER INTERCONNECTION EQUIPMENT. Within sixty (60) days after the
submission of such plans and specifications, PECO ENERGY shall notify
SELLER (a) that the proposed design of the SELLER INTERCONNECTION EQUIPMENT
is acceptable, (b) that the proposed design of the SELLER INTERCONNECTION
EQUIPMENT is unacceptable or (c) that additional information is needed.
PECO ENERGY shall not unreasonably withhold acceptance of a proposed
design. PECO' ENERGY's failure to provide such notification to SELLER
within sixty (60) days of the submission of such plans and specifications
shall be deemed an acceptance by PECO ENERGY. If
27
<PAGE>
PECO ENERGY notifies SELLER that additional information is needed or that
the proposed design of the SELLER INTERCONNECTION EQUIPMENT is
unacceptable, SELLER may submit to PECO ENERGY revised plans and
specifications. Within thirty (30) days of the submission of such revised
plans and specifications, PECO ENERGY shall notify SELLER whether
additional information is needed, or whether the proposed design is
accepted or rejected. If additional information is requested, or the
revised design is rejected, SELLER may submit further revised plans and
specifications which PECO ENERGY shall review within a reasonable time
period. Thereafter, SELLER may submit revised plans and specifications to
PECO ENERGY as many times as is necessary to obtain PECO ENERGY's
acceptance of a proposed design. PECO ENERGY's acceptance of SELLER's
proposed design of the SELLER INTERCONNECTION EQUIPMENT shall not be
construed as a warranty or representation to SELLER, or any other person or
entity, of the adequacy, suitability, safety or reliability of the design,
construction, installation or operation of the SELLER INTERCONNECTION
EQUIPMENT. PECO ENERGY shall periodically render a statement of charges to
SELLER for the costs PECO ENERGY incurs pursuant to this Section 8.3, and
ELLER shall reimburse PECO ENERGY for all the costs that PECO ENERGY incurs
pursuant to this Section 8.3.
8.4 Construction. Upon PECO ENERGY's acceptance of SELLER's proposed
design, SELLER shall construct the SELLER
28
<PAGE>
INTERCONNECTION EQUIPMENT in accordance with the design accepted by PECO
ENERGY. If, subsequent to PECO ENERGY's acceptance, any design
modification affecting the electrical arrangement of the SELLER
INTERCONNECTION EQUIPMENT becomes necessary, SELLER shall notify PECO
ENERGY and obtain PECO ENERGY's prior acceptance of the design
modification. PECO ENERGY, in its sole discretion, shall decide and inform
SELLER whether any such modification in the proposed design of the SELLER
INTERCONNECTION EQUIPMENT requires an amendment of the AGREEMENT. SELLER
shall bear all costs, including additional construction and installation
costs, associated with any such design modification.
8.5 Inspection and Access. Upon the completion of the construction
and installation of the SELLER INTERCONNECTION EQUIPMENT and related
portions of the FACILITY, SELLER shall have the SELLER INTERCONNECTION
EQUIPMENT and related portions of the FACILITY inspected by an authorized
electrical inspection agency and shall provide PECO ENERGY with a copy of
such agency's inspection certificate. PECO ENERGY shall, within five (5)
working days after receipt of such certificate, inspect the FACILITY and
SELLER INTERCONNECTION EQUIPMENT and advise SELLER, within five (5) working
days after the completion of its inspection, whether the FACILITY and
SELLER INTERCONNECTION EQUIPMENT may interconnect and operate in parallel
with the PECO ENERGY SYSTEM as contemplated in Section 10.2 hereof. SELLER
shall reimburse PECO ENERGY for all the costs PECO ENERGY incurs
29
<PAGE>
pursuant to this Section 8.5. PECO ENERGY employees. agents and contractors
shall have the right to enter the PROJECT SITE at any time upon reasonable
notice to SELLER, or without notice in the event of an OPERATIONAL
EMERGENCY, for the purposes of (a) inspecting the PECO ENERGY
INTERCONNECTION EQUIPMENT or SELLER INTERCONNECTION EQUIPMENT, (b) reading
meters or (c) making tests to insure the safe operation of the PECO ENERGY
INTERCONNECTION EQUIPMENT and SELLER INTERCONNECTION EQUIPMENT. Any such
inspection, however, shall not relieve SELLER from its sole obligation to
operate and maintain the SELLER INTERCONNECTION EQUIPMENT in accordance
with Section 7.3 hereof at all times.
ARTICLE IX
PECO ENERGY INTERCONNECTION EOUIPMENT
9.1 PECO ENERGY Interconnection Equipment. PECO ENERGY shall design,
construct, purchase, install, operate, maintain and own the PECO ENERGY
INTERCONNECTION EQUIPMENT.
9.2 Interconnection Design. Upon receiving from the SELLER the
DESIGN RELEASE and an initial advance payment specified by PECO ENERGY in
accordance with Section .9.14 hereof 1 PECO ENERGY shall (a) design the
PECO ENERGY INTERCONNECTION EQUIPMENT, (b) prepare and provide to SELLER an
estimated completion date for constructing, purchasing and installing the
PECO ENERGY INTERCONNECTION EQUIPMENT, and (c) prepare an estimate of the
cost of constructing, purchasing and installing
30
<PAGE>
the PECO ENERGY INTERCONNECTION EQUIPMENT, and (d) review for acceptance
the design of the SELLER INTERCONNECTION EQUIPMENT.
9.3 Consultation with SELLER. After the submission by PECO ENERGY to
SELLER of the plans and specifications for the design of the PECO ENERGY
INTERCONNECTION EQUIPMENT, PECO ENERGY shall periodically meet with and
inform SELLER of the design, costs, scheduling and other factors which
could affect the construction of the PECO ENERGY INTERCONNECTION EQUIPMENT.
Such discussions shall be promptly completed, and shall not be deemed to
preclude changes or create any warranty for the benefit of or
representation to SELLER, or any other person, as to the plans,
specifications, cost estimates, time schedules or other factors relating to
the proposed construction, purchase, installation, operation or maintenance
of the PECO ENERGY INTERCONNECTION EQUIPMENT.
9.4 Rights and Easements. SELLER shall cause to be granted to PECO
ENERGY and its successors and assigns in perpetuity, or for a shorter
period as the PARTIES may agree, but not less than the term of this
AGREEMENT, at no cost to PECO ENERGY, all necessary rights and easements to
construct, purchase, install, operate, maintain, repair, renew, replace,
remove and relocate (a) PECO ENERGY INTERCONNECTION EQUIPMENT, (b) the
metering and telemetering equipment described in Articles XI and XII hereof
and (c) any PECO ENERGY facilities affected by the PROJECT. SELLER shall
execute and deliver to
31
<PAGE>
PECO ENERGY, in recordable form, such instruments as PECO ENERGY may
request with respect to the foregoing. SELLER also shall obtain all
necessary rights and easements to construct, install, own, operate, and
maintain the PROJECT.
9.5 Acquisition of Permits. Licenses and Approvals. PECO ENERGY
shall make applications to obtain from appropriate governmental bodies any
permit, license or approval required to construct, purchase, install, own,
operate and maintain PECO ENERGY INTERCONNECTION EQUIPMENT. SELLER shall
provide any assistance reasonably requested by PECO ENERGY to enable PECO
ENERGY to obtain any such permit, license or approval. SELLER shall also
obtain from appropriate governmental bodies any permit, license or approval
required to construct, install, own, operate and maintain the PROJECT.
9.6 Costs of Acquisition. SELLER shall pay, as a cost or expense
associated with the design, construction, purchase and installation of PECO
ENERGY INTERCONNECTION EQUIPMENT under Sections 9.13-9.17 hereof, any
reasonable cost or expense associated with PECO ENERGY's obtaining any
permit, license or approval pursuant to Section 9.5 hereof, or any
reasonable cost or expense associated with defending the issuance of any
such required permit, license or approval.
9.7 Notice to Proceed. PECO ENERGY shall commence construction,
purchase and installation of the PECO ENERGY INTERCONNECTION EQUIPMENT
following receipt from SELLER of the
32
<PAGE>
NOTICE TO PROCEED and the payment specified by PECO ENERGY in accordance
with Section 9.14 hereof.
9.8 Reasonable Efforts to Complete Construction. PECO ENERGY shall
use reasonable efforts to complete the construction of the PECO ENERGY
INTERCONNECTION EQUIPMENT on or before the estimated completion date;
provided, however, that the PARTIES understand and agree that PECO ENERGY's
reasonable efforts to complete the construction of the PECO ENERGY
INTERCONNECTION EQUIPMENT on or before the estimated completion date shall
be subordinate and subject to PECO ENERGY'S primary obligations to furnish
and maintain adequate, efficient, safe, and reliable service and facilities
to its customers and to operate and maintain its plant, property and
equipment in such condition as to enable it to do so.
9.9 Liability. PECO ENERGY shall not be liable to SELLER for any
direct or indirect costs, expenses, losses, liabilities or damages which
SELLER may incur or sustain and which arise out of, relate to or result
from any delay in the completion of construction of the PECO ENERGY
INTERCONNECTION EQUIPMENT, except where the delay in the completion of the
construction of the PECO ENERGY INTERCONNECTION EQUIPMENT results from PECO
ENERGY's failure to use reasonable efforts, as qualified in Section 9.8
hereof. SELLER shall indemnify and hold harmless PECO ENERGY and each and
every of its officers,
33
<PAGE>
agents, servants, employees, successors and assigns from and against any
and all claims, demands, suits, actions, liabilities, damages, or
judgments, as well as against any fees, costs, charges or expenses which
PECO ENERGY, its officers, agents, servants, employees, successors and
assigns incur in the defense of any such claims, demands, suits, actions or
judgments, made or filed by any third party to the extent such claims,
demands, suits, actions or judgments arise out of, or relate to, any delay
in the completion of the construction of the PECO ENERGY INTERCONNECTION
EQUIPMENT, except where such delay results from PECO ENERGY's failure to
utilize reasonable efforts as qualified in Section 9.8 hereof.
9.10 Design Changes. PECO ENERGY shall construct the PECO ENERGY
INTERCONNECTION EQUIPMENT reasonably in accordance with its proposed
design. PECO ENERGY shall have the right, however, to make changes in such
proposed design when it determines, in its judgment reasonably exercised
and. after consultation with SELLER, that such changes are necessary to
enable the PROJECT to interconnect and operate in parallel with the PECO
ENERGY SYSTEM in a safe and reliable manner. PECO ENERGY shall provide
SELLER with notice of any design change which would require a change 'in
the SELLER INTERCONNECTION EQUIPMENT; provided, however, that the failure
of PECO ENERGY to provide such notice shall not relieve SELLER of its sole
obligation to pay the cost of constructing the PECO ENERGY
34
<PAGE>
INTERCONNECTION EQUIPMENT.
9.11 Notice of Completion. PECO ENERGY shall notify SELLER when it
has completed the construction of the PECO ENERGY INTERCONNECTION
EQUIPMENT.
9.12 Interconnection Cost Responsibility. SELLER shall be responsible
for, and shall pay to PECO ENERGY1 all reasonable costs and charges PECO
ENERGY incurs and makes in designing, constructing, purchasing and
installing the PECO ENERGY INTERCONNECTION EQUIPMENT.
9.13 Estimated Costs. PECO ENERGY shall, in accordance with Section
9.2 hereof, estimate the total costs it expects to incur in designing,
constructing, purchasing and installing the PECO ENERGY INTERCONNECTION
EQUIPMENT. The provision by PECO ENERGY to SELLER of this or any other such
cost estimate shall not diminish, change or affect SELLER's responsibility
and obligation to pay to PECO ENERGY all costs PECO ENERGY actually incurs
in designing, constructing, purchasing and installing the PECO ENERGY
INTERCONNECTION EQUIPMENT.
9.14 Payment Schedule. PECO ENERGY and SELLER agree that SELLER shall
prepay PECO ENERGY for all costs PECO ENERGY incurs in designing,
constructing, purchasing and installing the PECO ENERGY INTERCONNECTION
EQUIPMENT in accordance with this Section 9.14. With the submission of the
DESIGN RELEASE under Section 9.2 hereof, SELLER shall make a payment
specified by PECO ENERGY to cover the costs PECO ENERGY expects to incur
35
<PAGE>
pursuant to Section 9.2. Upon completion of the cost estimate to be
developed pursuant to Section 9.2(c), PECO ENERGY and SELLER shall develop
a payment schedule, acceptable to PECO ENERGY, for SELLER to advance funds
sufficient to cover the costs PECO ENERGY expects to incur for the
specified work. The first payment on that schedule shall be made with the
NOTICE TO PROCEED issued by SELLER in accordance with Section 9.7. SELLER
shall thereafter make payments in accordance with the agreed schedule.
PECO ENERGY shall not commence the construction, purchase or installation
of any PECO ENERGY INTERCONNECTION EQUIPMENT until a payment schedule
acceptable to PECO ENERGY is developed.
9.15 Reconciliation. Following completion of the construction of the
PECO ENERGY INTERCONNECTION EQUIPMENT, PECO ENERGY shall provide to SELLER
a final reconciliation setting forth the nature and amount of the costs and
charges PECO ENERGY actually incurred or made in (a) designing,
constructing, purchasing and installing the PECO ENERGY INTERCONNECTION
EQUIPMENT and (b) performing its obligations under Sections 8.3, 8.5 and
9.2 hereof. In the event that the total of such costs and charges PECO
ENERGY actually incurred or made exceeds the total payments made by SELLER
to PECO ENERGY under Sections 9.2, 9.7 and 9.14 hereof, SELLER shall be
responsible for and shall pay to PECO ENERGY any such differential within
thirty (30) days of the date of delivery to SELLER of the final
reconciliation.
36
<PAGE>
In the event that the total payments made by SELLER to PECO ENERGY pursuant
to Sections 9.2, 9.7 and 9.14 hereof exceed such costs PECO ENERGY actually
incurred or made, PECO ENERGY shall refund to SELLER, Within thirty (30)
days of the final reconciliation, any such overpayment.
9.16 Suspension. In the event SELLER fails to remit any payment
specified in Sections 9.14 or 9.15 hereof on or before the day such payment
is due, PECO ENERGY may, in addition to any other remedy or right PECO
ENERGY may have under the AGREEMENT, immediately suspend performance of its
obligations under this AGREEMENT. PECO ENERGY shall provide SELLER with
notice of any such suspension of performance. In the event PECO ENERGY
suspends performance of its obligations under this AGRED(ENT pursuant to
this Section 9.16, SELLER may, after curing the precipitating cause
thereof, request PECO ENERGY to resume the tasks associated with the
design, construction and installation of the PECO ENERGY INTERCONNECTION
EQUIPMENT. Upon receipt of any such request PECO ENERGY shall, as soon
thereafter as practicable, review its work commitments and shall establish
and submit to SELLER, as applicable: (a) a revised estimated construction
completion date and (b) a revised payment schedule. If SELLER accepts the
revised estimated construction completion date and the revised payment
schedule, PECO ENERGY shall resume the construction and installation of the
PECO ENERGY INTERCONNECTION EQUIPMENT.
37
<PAGE>
9.17 Cancellation Costs. If PECO ENERGY is not in default (as defined
in Section 20.2 hereof), SELLER shall be liable to pay to PECO ENERGY all
CANCELLATION COSTS which PECO ENERGY incurs. In the event PECO ENERGY
incurs CANCELLATION COSTS for which SELLER is responsible under this
AGREEMENT, PECO ENERGY shall provide SELLER with a written demand for
payment. SELLER shall be obligated to make payment to PECO ENERGY for any
CANCELLATION COSTS immediately upon PECO ENERGY's presentation of the
written demand. If the AGREEMENT is terminated under Sections 19.1 or 19.2
hereof before PECO ENERGY has completed the construction and installation
of the PECO ENERGY INTERCONNECTION EQUIPMENT, PECO ENERGY shall have the
right to cancel or terminate any supplier and contractor agreements and
orders entered into in connection with discharging its obligations to
design, construct and install the PECO ENERGY INTERCONNECTION EQUIPMENT.
In the event PECO ENERGY terminates or cancels any supplier or contractor
agreements or orders as permitted in this Section 9.17, PECO ENERGY shall
consult with SELLER but retain final discretion relative to the manner of
resolving any such claim or demand ~y any contractor or supplier, and PECO
ENERGY shall be the sole judge of the acceptability of any compromise in
settlement or resolution of any such claim or demand. Additionally, PECO
ENERGY shall be the sole judge as to what is necessary to maintain the
safety, integrity or reliability of the PECO ENERGY SYSTEM relative to
38
<PAGE>
any removal or completion of PECO ENERGY INTERCONNECTION EQUIPMENT. PECO
ENERGY shall exercise reasonable care in resolving contractor and supplier
claims and demands and in effecting any required removal or completion of
PECO ENERGY INTERCONNECTION EQUIPMENT so as to mitigate the dollar amount
paid in effecting the resolution of such claims and demands or the dollar
amount expended in completing such removal or completion tasks; provided,
however, that PECO ENERGY shall have no liability to SELLER for or on
account of the dollar amounts paid in effecting the resolution of any such
claims and demands or in effecting such removal or completion tasks except
where PECO ENERGY effects the resolution of any such claims and demands or
the completion of such tasks in a manner which is in willful disregard of
its obligation to mitigate.
ARTICLE X
INITIAL PROJECT OPERATION AND TESTING
10.1 Initial Operation. Upon (a) PECO ENERGY's inspection and
acceptance of the SELLER INTERCONNECTION EQUIPMENT under Section 8.5 hereof
and (b) PECO ENERGY's notification of SELLER under Section 9.11 hereof of
the completion of the installation and construction of the PECO ENERGY
INTERCONNECTION EQUIPMENT, SELLER shall select and notify PECO ENERGY of a
DATE OF INITIAL OPERATION, which must be acceptable to PECO ENERGY. PECO
ENERGY will promptly notify SELLER whether the DATE OF INITIAL OPERATION it
has selected is
39
<PAGE>
acceptable. As of the DATE OF INITIAL OPERATION, PECO ENERGY shall permit
any electric generation unit at the PROJECT to interconnect and synchronize
with the PECO ENERGY SYSTEM for testing purposes. SELLER shall, at PECO
ENERGY's request, inform PECO ENERGY of the results of any such testing.
10.2 Commercial Operation. Following the DATE OF INITIAL OPERATION
and the PROJECT testing specified in Section 10.1, SELLER shall select and
notify PECO ENERGY of a COMMERCIAL OPERATION DATE.
ARTICLE XI
METERING
11.1 Metering Equipment. PECO ENERGY shall determine the design of
the metering installation for the purpose of registering and recording the
quantity of NET ELECTRIC OUTPUT purchased by PECO ENERGY from SELLER. Such
metering equipment shall be capable, among other things, of providing the
data required to determine the kilowatt-hours purchased during each hour of
the BILLING MONTH, as well as total NET ELECTRIC OUTPUT purchased during
each BILLING MONTH, under the terms of the AGREEMENT and shall permit
continuous reading by SELLER and PECO ENERGY. PECO ENERGY and SELLER shall
have the respective responsibilities for metering set forth below:
(a) PECO ENERGY shall own and maintain all metering equipment.
40
<PAGE>
(b) PECO ENERGY shall provide SELLER with all required current
transformers, which SELLER shall install.
(c) SELLER shall provide and install metering enclosures, mounting
equipment and overcurrent protection as required.
(d) PECO ENERGY shall make secondary connections to metering
transformers.
(e) SELLER shall make primary connections to metering transformers.
11.2 Meter Charges. SELLER shall pay to PECO ENERGY, in the manner
specified in Section 14.2 hereof, monthly metering equipment carrying and
maintenance charges, which are estimated in Appendix A hereto.
11.3 Meter Testing. PECO ENERGY shall verify the accuracy of PECO
ENERGY's recording meter by performing the meter tests and conforming to
the other standards set forth in the PUC's regulations at 52 Pa. Code 55
57.20-57.25 and any amendments or modifications thereto. The metering
equipment shall be sealed, and SELLER shall be informed in advance and may
have a representative present when such seals are broken or when a
recording meter is inspected, tested or adjusted. SELLER may, at any time,
request a test of the accuracy of a recording meter installed pursuant
hereto and shall bear the cost thereof, except that PECO ENERGY shall bear
the cost of any such test when the test establishes a METER ERROR
PERCENTAGE in excess of
41
<PAGE>
two percent (21). In the event SELLER elects to have a representative
present at a test of the accuracy of a recording meter, the accuracy test
and any associated adjustments to the recording meter shall be made in the
presence of and observed by SELLER's representative.
11.4 Meter Error. If, as a result of an accuracy test, a recording
meter is found to have a METER ERROR PERCENTAGE of more than two percent
(2%), PECO ENERGY shall, at its own expense, restore the recording meter to
condition of accuracy or replace it.
11.5 Payment Adjustment. If , as a result of an accuracy test, the
recording meter is found to nave a METER ERROR PERCENTAGE of more than two
percent (2.0%) fast, PECO ENERGY shall render a bill or take a credit for
any associated overpayment equal to the product of (a) the total NET
ELECTRIC OUTPUT purchased during the METER ERROR CORRECTION PERIOD, (b) the
LEVELIZED RATE, the PROJECTED VALUE or ninety percent (90%) of the PJM RATE
as applicable under Section 4.3 hereof for the BILLING MONTHS during the
METER ERROR CORRECTION PERIOD and (c) the METER ERROR PERCENTAGE. If, as a
result of an accuracy test, the recording meter is found to have a METER
ERROR PERCENTAGE of more than two percent (2.0%) slow, PECO ENERGY shall
pay SELLER for any associated underpayment, which payment shall equal the
product of (a) the total NET ELECTRIC OUTPUT purchased during the METER
ERROR CORRECTION PERIOD, (b) the
42
<PAGE>
LEVELIZED RATE, the PROJECTED VALUE or ninety percent (90%) of the PJN RATE
as applicable under Section 4.3 hereof for the BZLLING MONTHS during the
METER ERROR CORRECTION PERIOD and (c) the METER ERROR PERCENTAGE.
11.6 Meter Failure. Should the recording meter installed pursuant to
Section 11.1 hereof fail to register during any period of time. the NET
ELECTRIC OUTPUT purchased by PECO ENERGY during such period shall be
estimated by PECO ENERGY. SELLER shall cooperate in making such estimates
by providing to PECO ENERGY, upon PECO ENERGY's request, registration data
from any recording meter maintained by SELLER at the PROJECT SITE or other
relevant data.
11.7 Suspense Account Adjustments. If a refund is issued, bill
rendered or payment reduced under Sections 11.5 or 11.6 hereof because of
meter inaccuracy or failure, an appropriate adjustment, if any, shall be
made to the SUSPENSE ACCOUNT to reflect the credits or debits that would
have been made to the SUSPENSE ACCOUNT during the METER ERROR CORRECTION
PERIOD if the meter had been neither fast nor slow.
ARTICLE XII
TELEMETERING
12.1 Telemetering Equipment. SELLER shall provide telemetering
equipment to enable PECO ENERGY to monitor the PROJECT's NET ELECTRIC
OUTPUT and reactive power on a continuous basis. PECO ENERGY shall specify
the telemetering equipment
43
<PAGE>
design to record SELLER's breaker position, the output of the FACILITY1 the
NET ELECTRIC OUTPUT of the PROJECT, and any other requirements needed to
maintain the reliability and stability of the PECO ENERGY SYSTEM. PECO
ENERGY and the SELLER shall have the respective responsibilities for
telemetering set forth below:
(a) PECO ENERGY shall specify all telemetering equipment and
installation standards.
(b) SELLER shall furnish, own and install all telemetering equipment
on the PROJECT SITE in accordance with the standards specified by PECO
ENERGY.
(c) PECO ENERGY shall maintain all telemetering equipment except the
voltage and current transformers.
(d) SELLER shall maintain voltage and current transformers.
(e) PECO ENERGY shall install wiring inside the remote terminal and
termination cabinet.
(f) PECO ENERGY shall specify and order telephone pairs as required.
(g) SELLER shall lease a telephone circuit or otherwise establish a
telecommunications link to PECO ENERGY's operations center at 2301 Market
Street, Philadelphia, Pennsylvania 19101, capable of permitting PECO ENERGY
to receive the telemetering data specified in this Section 12.1 by means of
both digital data links and analog signals.
44
<PAGE>
12.2 Cost Responsibility. Any costs incurred by PECO ENERGY in
designing1 designating, selecting, specifying, or installing telemetering
equipment shall be paid to PECO ENERGY by SELLER pursuant to the provisions
of Article IX hereof as a cost associated with the design1 construction and
installation of the PECO ENERGY INTERCONNECTION EQUIPMENT. SELLER shall
bear all the costs it incurs under Section 12.1.
12.3 Telemetering Charges. SELLER shall pay to PECO ENERGY, in a
manner set forth in Section 14.2 hereof, all costs PECO ENERGY incurs in
maintaining and operating telemetering equipment pursuant to the AGREEMENT,
which costs are estimated in Appendix A hereto.
ARTICLE XIII
MODIFICATIONS
13.1 PECO ENERGY System Modifications. The PARTIES hereto recognize
that PECO ENERGY may determine during the term of the. AGREEMENT that
certain modifications, including, without limitation1 repairs, additions,
replacements or other changes, on or to the PECO ENERGY SYSTEM are
necessary to:
(a) to accommodate or meet changing patterns of demand and usage of
electric power and energy or other changes in the PECO ENERGY SYSTEM,
(b) to meet revised safety and operating standards and procedures,
(c) to maintain the quality of the initial
45
<PAGE>
interconnection installations required by this AGREEMENT, or,
(d) to satisfy any applicable law, regulation or order. If such
modifications, improvements, repairs, additions, replacements or other
changes on or to the PECO ENERGY SYSTEM require, in PECO ENERGY's sole
judgment reasonably exercised, associated changes to the PECO ENERGY
INTERCONNECTION 'EQUIPMENT, the SELLER INTERCONNECTION EQUIPMENT or the
metering and telemetering equipment described. in Articles XI and XII
hereof, PECO ENERGY shall provide SELLER with a description of the required
changes and an estimate of the cost of such required changes. Thereafter,
SELLER shall make the required modifications to the SELLER INTERCONNECTION
EQUIPMENT, and PECO ENERGY shall make the designated modifications to the
PECO ENERGY INTERCONNECTION EQUIPMENT and the metering and telemetering
equipment described in Articles XX and XII hereof.
13.2 Payment. SELLER shall be responsible for and shall pay to PECO
ENERGY any costs and expenses PECO ENERGY incurs associated with the
required changes described in Section 13 1 hereof. Unless other billing
and payment arrangements are mutually agreed upon by the PARTIES, SELLER
shall pay to PECO ENERGY the estimated cost set forth in the estimate
provided by PECO ENERGY to SELLER pursuant to Section 13.1 hereof within
thirty (30) days of its receipt of such cost estimate. within ninety (90)
days of completion of the modifications to the-PECO ENERGY INTERCONNECTION
EQUIPMENT and/or metering and
46
<PAGE>
telemetering equipment described in Articles XI and XII hereof, PECO ENERGY
shall provide SELLER with a final reconciliation setting forth the nature
and amount of the costs PECO ENERGY actually incurred in performing the
modifications. In the event that the total costs actually incurred by PECO
ENERGY exceed the payment made by SELLER to PECO ENERGY pursuant to this
Section 13.2, SELLER shall be responsible for and shall pay to PECO ENERGY
any such differential within thirty (30) days of the date of delivery to
SELLER of the final reconciliation. In the event that the payment made by
SELLER to PECO ENERGY pursuant to this Section 13.2 exceeds the costs PECO
ENERGY actually incurred in making the modifications, PECO ENERGY :hall
refund to SELLER, with the final reconciliation, any such overpayment.
13.3 Maintenance Costs. PECO ENERGY shall maintain the PECO ENERGY
INTERCONNECTION EQUIPMENT during the term of the AGREEMENT according to
PECO ENERGY's sole judgment reasonably applied and based on common
practices for the PECO ENERGY T&D SYSTEM. SELLER shall be responsible for
and pay to PECO ENERGY all reasonable costs PECO ENERGY incurs associated
with such maintenance. PECO ENERGY shall periodically render a reasonably
detailed maintenance bill to SELLER, covering maintenance expenses incurred
over the time period since the last maintenance bill. SELLER shall pay to
PECO ENERGY the amount of each such bill within thirty (30) days after its
receipt. A
47
<PAGE>
maintenance bill not paid within thirty (30) days shall accrue interest as
provided in Section 14.4 hereof.
ARTICLE XIV
PAYMENT AND BILLING
14.1 Output Purchase Payment. Within thirty (30) days after the DATE
OF INITIAL OPERATION, and at the conclusion of each BILLING MONTH
thereafter, PECO ENERGY shall read the recording meter at the PROJECT SITE
for billing purposes. Within thirty (30) days after such meter reading PECO
ENERGY shall remit to SELLER an amount equal to the Output Purchase Payment
(calculated in accordance with Section 4.3 hereof) less any offsets and
reductions authorized under the AGREEMENT.
14.2 Metering. Telemetering and Administration Charges. The Output
Purchase Payment made by PECO ENERGY to SELLER for each BZLLING MONTH shall
be reduced by monthly metering. telemetering, and associated administration
charges. Estimates of such charges are set forth in Appendix A hereto.
The administration charges shall be updated and increased periodically by a
percentage equal to PECO ENERGY's annual percentage change in its wages for
regular and probationary employees as of the date each such change becomes
effective. In the event the metering, telemetering and associated
administration charges are greater than the Output Purchase Payment for a
BILLING MONTH, SELLER shall be responsible for and
48
<PAGE>
shall pay to PECO ENERGY the difference within thirty (30) days of the
issuance of a bill or invoice by PECO ENERGY.
14.3 Payments. Except as otherwise specifically provided in the
AGREEMENT, all payments or reimbursements required to be made under the
AGREEMENT shall be due and payable by the appropriate PARTY to the other
PARTY within thirty (30) days of the sending of a bill or invoice. With
respect t~ payments to be made by SELLER to PECO ENERGY1 if at the end of
such a thirty (30) day period PECO ENERGY has not received payment from
SELLER, PECO ENERGY may, without limitation, reduce any future Output
Purchase Payment by an amount equal to the account owed by SELLER to PECO
ENERGY plus interest as provided in Section 14.4 hereof.
14.4 Interest. In the event a PARTY fails to pay all or part of any
amount it owes the other PARTY under the terms of the AGREEMENT when such
payment is due, interest shall accrue on the unpaid portion from the due
date at a rate equal to the lesser of
(a) three (3) points above the per annum interest rate publicly
announced from time to time by the First Pennsylvania Bank, N.A., or by its
successor or survivor in the event of a bank merger, as the prime interest
rate currently being charged to its most credit-worthy borrowers for ninety
(90) day unsecured commercial loans, or, if the prime rate should be
discontinued or no longer quoted, a comparable rate designated by
49
<PAGE>
PECO ENERGY in the reasonable exercise of its sole discretion, or
(b) the current rate of PECO ENERGY '5 most recent issue of long-term
debt, provided it issued such debt within the preceding twenty-four (24)
months.
14.5 Billing Disputes. PECO ENERGY shall provide to SELLER, upon a
timely request therefor, documentation and data available to PECO ENERGY to
enable SELLER to verify the accuracy of any Output Purchase Payment made by
PECO ENERGY to SELLER, or any amount billed by PECO ENERGY to SELLER
pursuant to the AGREEMENT; provided, however, that any such request by
SELLER shall not extend. postpone or otherwise affect SELLER's obligation
to pay any amounts billed by PECO ENERGY to SELLER under the AGREEMENT by
the due date. In the event SELLER disputes any amount billed by PECO ENERGY
to SELLER under the AGREEMENT, SELLER shall pay to PECO ENERGY the entire
amount thereof, when due1 and shall together with the payment thereof (a)
identify and present the dispute in writing to PECO ENERGY, and (b) submit
to PECO ENERGY documentation substantiating any claim made relative to the
dispute. Upon receipt of notice of the dispute and the supporting
documentation1 PECO ENERGY shall have thirty (30) days to attempt to
resolve the dispute with SELLER. In the event the dispute is not resolved
within such thirty (30) day period, either PARTY may pursue any legal or
other remedy.
50
<PAGE>
ARTICLE XV
ASSIGNMENT
15.1 Assignment. (a) Neither PARTY shall assign or transfer the
AGREEMENT or any claim or interests therein without the prior written
consent of the other PARTY, which consent shall not unreasonably be
withheld. Either PARTY, however, shall have the right to assign the
AGREEMENT to an affiliated entity without the consent of the other PARTY,
provided such assignment does not impair performance of the PARTIES'
respective obligations under the AGREEMENT. All covenants, stipulations,
terms, conditions and provisions of the AGREEMENT shall be binding upon the
PARTIES and shall extend to and be binding upon the successors and assigns
of the PARTIES permitted under this Section 15.1.
(b) Notwithstanding the first sentence of this Section l5.l~ PECO
ENERGY hereby consents to the assignment by SELLER of all of SELLER's
right, title and interest in and to this AGREEMENT, and any addendums and
amendments thereto, to Philadelphia United Power Corporation, a
Pennsylvania corporation ("PUPCO"). The foregoing consent is expressly
intended to permit SELLER to fulfill its obligations under certain
agreements among SELLER, PUPCO and its affiliate, Philadelphia Thermal
Energy corporation. This consent is conditioned on Seller and PUPCO
providing PECO ENERGY at least thirty (30) days written notice pursuant to
Section 25.1 prior
51
<PAGE>
to PUPCO accepting any formal assignment of this AGREEMENT. As provided in
subsection (a) of this Section 15.1. upon the assignment of this AGREEMENT
to PUPCO, all covenants, stipulations, terms, conditions and provisions of
this AGREEMENT shall be binding upon PUPCO as SELLER's assignee, and PUPCO
shall be entitled to all of the rights of SELLER hereunder, provided that
PUPCO shall have no right, title or interest in this Agreement prior to the
effectiveness of the assignment to PUPCO. PECO ENERGY will not be
obligated to permit the assignment of SELLER's rights under this AGREEMENT
to any party other than PUPCO or its corporate successors (but not
assigns), provided that, so long as PUPCO remains fully liable to PECO
ENERGY for performance of this AGREEMENT, and provided that such assignment
does not impair the performance of the PARTIES' respective obligations
under this Agreement, PUPCO may, upon the prior written consent of PECO
ENERGY which shall not be unreasonably withheld, subcontract for FACILITY
electric production under this Agreement.
ARTICLE XVI
BANKRUPTCY AND INSOLVENCY
16.1 Remedies. In the event of
(a) the filing of a. petition seeking the involuntary reorganization
or liquidation of SELLER under any applicable federal or state bankruptcy,
insolvency, reorganization or similar law, and such petition or action is
not actively
52
<PAGE>
contested within sixty (60) days after the filing thereof, or the granting
of such petition, whether contested or appealed or not;
(b) the commencement of an action seeking the appointment of a
receiver, trustee or other similar official for SELLER, of for any
substantial part of SELLER's property, and such petition or action is not
actively contested within sixty (60) days after the filing thereof, or the
appointment of such a receiver, trustee or other similar official, whether
contested or appealed or not;
(c) the filing of a petition by SELLER seeking the voluntary
reorganization or liquidation of SELER under any applicable federal or
state bankruptcy, insolvency or similar law; or
(d) the placement of SELLER's affairs in the hands of any court or
governmental agency for administration, including under any financially
distressed municipalities law if SELLER is a political subdivision or
municipal corporation or similar entity under applicable law;
PECO ENERGY may, in addition to any other remedies it may have under the
AGREEMENT, including, in particular, under Sections 5.3 and 5.4,
immediately suspend its performance hereunder unless and until SELLER
provides PECO ENERGY with assurance, which PECO ENERGY in its sole
discretion determines is adequate, that SELLER's obligations under the
AGREEMENT will be met.
53
<PAGE>
ARTICLE XVII
WARRANTIES
17.1 SELLER's Warranties. SELLER warrants it will have good title to1
and the right to deliver, all MET ELECTRIC OUTPUT it delivers to the
INTERCONNECTION POINT for purchase by PECO ENERGY under the AGREEMENT.
SELLER agrees to indemnify and hold PECO ENERGY harmless against any and
all claims, demands, suits, actions, costs, liabilities, damages, losses or
judgments arising out of, relating to or resulting from any adverse claim
to the NET ELECTRIC OUTPUT purchased by PECO ENERGY pursuant to the
AGREEMENT, as well as against all fees, costs, charges, and expenses which
PECO ENERGY might incur in a defense of any such claim, suit, action or
similar such demand made or filed by any person. In effecting the right of
or obligation to indemnify under this Section 17.1 the procedural
provisions of Article XVIZI of the AGREEMENT shall govern. In addition,
SELLER represents and warrants that the partners of SELLER have authorized
Robert A. Shinn, Vice President of O'Brien (Schuylkill) Cogeneration, Inc.,
the managing partner of SELLER, to execute this AGREEMENT in the name of
SELLER.
ARTICLE XVIII
INDEMNIFICATION
18.1 Responsibility. Each PARTY shall indemnify the other PARTY, its
officers, agents, and employees against all loss, damages, expense, and
liability for injury to or death of
54
<PAGE>
persons or injury to property proximately caused by the indemnifying.
PARTY's construction, ownership, operation, or maintenance of, or by
failure of, any of such PARTY's works or facilities used directly in
connection with this AGREEMENT. The indemnifying PARTY shall, at the other
PARTY's request, defend any suit asserting a claim covered by this
indemnity. The indemnifying PARTY shall pay all costs that may be incurred
by the other PARTY in enforcing this indemnity.
18.2 Worker's Compensation Responsibility. Each PARTY shall indemnify
and hold harmless the other PARTY, and each and every of its officers,
agents, servants, employees, successors and assigns, from any and all
claims of the other PARTY's employees arising from any worker's
compensation laws.
18.3 Procedure. If a claim is asserted or action brought against an
indemnitee (PECO ENERGY or SELLER as applicable), and the indemnitee
believes that it is entitled to indemnification under this ARTICLE XVIII,
the indemnitee shall promptly notify the indemnitor. (the other PARTY), in
writing, of such claim or action. Such notice shall be provided in
sufficient time to enable the indemnitor to assert and prosecute
appropriate defenses to the claim or action. If the indemnitee fails to
give the indemnitor sufficiently prompt notice, the indemnitor shall have
no further obligation to indemnify the indemnitee pursuant to this ARTICLE
XVIII. Upon receipt of such notice, the indemnitor shall make a prompt
determination of
55
<PAGE>
whether it believes it is required to indemnify the indemnitee, and shall
promptly notify the indemnitee1 in writing, of its determination. If the
indemnitor determines that it is required to indemnify, it shall assume the
defense of the indemnitee, including the employment of counsel, and shall
thereafter pay all costs and expenses relative to the defense of the claim
or action. The indemnitee shall cooperate with the indemnitor in all
reasonable respects in this defense. The indemnitee shall also have the
right, at its own expense, to employ separate counsel in any such action
and to participate in the defense thereof. The indemnitor shall not be
liable for any settlement of any claim or action made without its consent.
Conversely, before settling any claim or action, the indemnitor shall
demonstrate to the indemnitee that the indemnitor has sufficient financial
means, or has made adequate arrangements, to make all settlement payments
as and when due.
ARTICLE XIX
TERMINATION
19.1 Termination by PECO ENERGY. PECO ENERGY may terminate the
AGREEMENT:
(a) if SELLER is in default of the AGREEMENT,
(b) if the PUC, or any other governmental agency, issues a binding
order during the term of the AGREEMENT denying, over the objections of PECO
ENERGY and SELLER, PECO ENERGY authority to collect on a full and current
basis from its
56
<PAGE>
customers through the ENERGY COST ADJUSTMENT the costs PECO ENERGY incurs
in purchasing NET ELECTRIC OUTPUT pursuant to the AGREEMENT; provided1
however, that PECO ENERGY shall not have the right to terminate the
AGREEMENT if SELLER agrees within twenty (20) days of the date of issuance
of such a binding order to modify the AGREEMENT to accept payments for NET
ELECTRIC OUTPUT at any lower rate which PECO ENERGY is authorized to
recover on a full and current basis from its customers through the ENERGY
COST ADJUSTMENT, or
(c) if SELLER fails to provide PECO ENERGY with adequate assurance of
performance under Article XVI hereof.
19.2 Termination by SELLER. SELLER may terminate the AGREEMENT:
(a) if PECO ENERGY is in default of the AGREEMENT, or
(b) if, prior to the COMMERCIAL OPERATION DATE, SELLER
permanently terminates FACILITY operations and permanently abandons the
FACILITY. SELLER shall, upon any termination by it, pay to PECO ENERGY any
amounts due and owing under the AGREEMENT, including, if applicable, any
debit balances and accrued interest in the SUSPENSE ACCOUNT pursuant to
Section 5.3 and including an amount determined by PECO ENERGY, in its sole
discretion, to be sufficient to cover PECO ENERGY's CANCELLATION COSTS.
19.3 Effect of Termination. A termination of the
57
<PAGE>
AGREEMENT under Sections 19.1 or 19.2 hereof shall not be deemed to be a
breach or default under Article XX hereof.
ARTICLE XX
BREACH AND DEFAULT
20.1 Breach. A breach of the AGREEMENT shall occur upon the
occurrence of any of the following conditions or events:
(a) The failure of a PARTY to pay any amount due to the other PARTY
under the AGREEMENT, which failure continues for a period of thirty (30)
days after the due date for such payment as determined under the AGREEMENT.
(b) The failure by a PARTY to perform or observe any material term or
condition of the AGREEMENT.
20.2 Cure and Default. In the event that any PARTY breaches the
AGREEMENT. the other PARTY shall provide the breaching PARTY with a written
notice of the breach. Thereafter, if the breach is not rectified or cured
within forty-five (45) days after receipt of such notice the breaching
PARTY shall be deemed to be in default of the AGREEMENT; provided, however,
that, except where there has been a failure to make a payment within thirty
(30) days after the due date for such payment as determined under the
AGREEMENT, if such breach cannot be reasonably cured within such forty-five
(45) day period, then the breaching PARTY shall have an additional
reasonable period, not to exceed one (1) year, to effect such cure, and
shall not be deemed to be in default of the AGREEMENT
58
<PAGE>
provided that the breaching PARTY commences to effect such cure within
forty-five (45) days of its receipt of notice of the breach, and at all
times thereafter proceeds diligently in effecting such cure.
20.3 Damages. In the event a PARTY is in breach or default of the
AGREEMENT, then the other PARTY, in addition to any other remedy it may
have under the AGREEMENT, shall be entitled to all direct damages caused by
such breach or default, but in no event shall either PARTY be liable to the
other PARTY for any indirect, special or consequential damages resulting
from such breach or default, and in no event shall PECO ENERGY be liable
for damages in excess of twenty-five million dollars ($25,000,000). In
addition, upon termination of the AGREEMENT SELLER shall pay PECO ENERGY,
pursuant to Section 5.3, an amount equal to the debit balance and accrued
interest in the SUSPENSE ACCOUNT as of the date of termination.
20.4 Mitigation. Each PARTY shall mitigate damages in the event of a
breach or default by the other PARTY to the AGREEMENT.
20.5 Indemnification. Nothing in this Article XX shall in any way
affect the obligations of the PARTIES to indemnify each other as provided
in Articles XVII and XVIII hereof.
59
<PAGE>
ARTICLE XXI
FORCE MAJEURE
21.1 Force Majeure. Subject td the provisions of Section 21.2 hereof,
either PARTY hereto shall be excused from performance hereunder, other than
the obligation to make payments of amounts already due and the payment of
the Projection Payment or Termination Payment under Sections 5.2 and .3
hereof 1 and shall not be liable in damages or otherwise if 1 and to the
extent that. it shall be unable to perform fully or is prevented from
performing fully by any act, event, cause or condition that is beyond its
reasonable control, that is not caused by its fault or negligence. and that
by the exercise of reasonable diligence it is unable to overcome or
prevent, including but not limited to the following:
(a) An act of God, flood, earthquake, storm, fire, explosion,
lightning, landslide, epidemic or damage by the elements.
(b) The failure of any subcontractor or supplier to perform for
reasons other than nonpayment of undisputed claims.
(c) The entry of a valid and enforceable injunctive or restraining
order or judgment, order or decree of any federal or state court or
administrative agency or governmental officer or body having or purporting
to have jurisdiction thereof, or any change in or adoption of any
constitution, charter, act, statute, law, ordinance, code, rule, regulation
or order, or
60
<PAGE>
other legislative or administrative action of the United States or the
Commonwealth of Pennsylvania. or any agency, department, authority,
political subdivision or other instrumentality of either thereof; provided1
however, that the contesting in good faith of any order, judgment or action
shall not constitute or be construed as the lack of reasonable diligence or
efforts, or failure to act, of the non-performing PARTY; and provided
further that Force Majeure shall not include any actions or orders of any
governmental body insofar as such actions or orders (i) result in any loss
of QUALIFYING FACILITY status, (ii) require specific changes or
modifications to the AGREEMENT, or (iii) pertain to the extent of PECO
ENERGY'S recovery from its customers of payments to SELLER hereunder.
(d) The inability to obtain and maintain rights of way, permits,
licenses, and other required authorizations from any local, state or
federal agency, instrumentality or person for the PROJECT or activities
necessary to provide services hereunder.
(e) The discovery at the PROJECT SITE of an archaeological find of
significance.
(f) Strikes, walkouts1 slowdowns, lockouts or other labor disputes or
industrial disturbances.
(g) Acts of the public enemy, wars, blockages, boycotts,
insurrections or riots.
61
<PAGE>
(h) Loss, diminution or impairment of PECO ENERGY's electrical
supply.
(i) A break or fault in the PECO ENERGY T&D SYSTEM.
(j) Any other cause beyond the reasonable control of and without the
fault or negligence of the PARTY that is unable to perform and which. by
the exercise of reasonable diligence, that PARTY is unable to overcome or
prevent.
21.2 Excuse from Performance. The PARTY claiming Force Majeure shall
be excused from performance only if:
(a) It promptly gives the other PARTY oral notification of the
existence of any Force Majeure upon becoming aware thereof, and it provides
in writing particulars of such Force Majeure within five (5) days of such
oral notification,
(b) The suspension of performance on account of the Force Majeure is
of no greater scope and of no longer duration than is required by the Force
Majeure,
(c) It uses reasonable efforts under the circumstances to remedy the
inability to perform, but neither PARTY shall be required to settle any
strike, walkout, lockout or other labor dispute on terms which, in its sole
judgment, is contrary to its best interests, and
(d) It gives the other PARTY prompt oral notification of the
cessation of the Force Majeure, and thereafter provides confirmation in
writing within. five (5) days of said oral notification.
62
<PAGE>
ARTICLE XXII
INSURANCE
22.1 Insurance. SELLER shall, at a minimum, carry general liability
insurance with a combined single limit for bodily injury and property
damage (including broad form contractual liability) of at least ten million
dollars ($10,000,000). SELLER shall forward a certificate evidencing such
insurance to PECO ENERGY, at the address listed in Section 25.1, prior to
PECO ENERGY's inspection of the FACILITY and the SELLER INTERCONNECTION
EQUIPMENT pursuant to Section 8.5 hereof. SELLER shall provide annually
thereafter a certificate evidencing such ongoing insurance coverage.
ARTICLE XXIII
GOVERNMENT REGULATIONS
23.1 State and Federal. The AGREEMENT and all rights and obligations
of the PARTIES hereunder are subject to all applicable state and federal
laws and all duly promulgated orders and regulations and duly authorized
actions taken by the executive, legislative, or judicial branches of
government or any of their respective agencies, departments, authorities or
other instrumentalities. In the event that any such statute, ordinance,
order, rule, regulation or other action shall increase PECO ENERGY's cost
of performance under the AGREEMENT, SELLER shall pay or reimburse PECO
ENERGY for such costs.
63
<PAGE>
ARTICLE XXIV
GOVERNING LAW
24.1 Interpretation. The interpretation and performance of the
AGREEMENT shall be in accordance with and controlled by the laws and
regulations of the Commonwealth of Pennsylvania and the United States of
America.
ARTICLE XXV
MISCELLANEOUS
25.1 Notices. Except as otherwise specifically provided herein, any
notice, request, demand, statement and/or payment provided herein shall be
in writing and s~1 be sent to the PARTIES at the following addresses:
PECO ENERGY:
PECO Energy Company
Attn: Interconnection Arrangements
2301 Market Street
Philadelphia, PA 19101
Telecopy: (215) 841-4234
SELLER:
O'Brien (Schuylkill) Cogeneration, Inc.
225 South Eighth Street
Philadelphia, PA 19106
Telecopy: (215) 922-5227
PUPCO (after an assignment pursuant to Article XV):
Philadelphia United Power Corporation
2600 Christian Street
Philadelphia, Pa 19146
Telecopy: (215) 875-6910
64
<PAGE>
Such notices shall be deemed to have been given and received when (a)
personally delivered, (b) ninety-six (96) hours after deposit in the U.S.
Mail, postage prepaid, properly addressed to the appropriate PARTY, or (c)
twenty-four (24) hours after a telecopy is properly sent and received.
Oral notification under Section 21.2 shall be made by telephone to the
following numbers:
PECO ENERGY: (215) 841-4236
SELLER: (215) 627-5500
PUPCO: (215) 875-6900
Either PARTY may change the address, telecopy number, or telephone number
to which notice is to be given by written notice to the other PARTY.
Nothing in this Section 25.1 shall be deemed to require PECO ENERGY to
provide prior notice of any kind in the event of an OPERATIONAL EMERGENCY.
25.2 Indulgences. Neither the failure nor the delay on the part of
either PARTY to exercise any right, remedy, power or privilege under the
AGREEMENT shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same, nor shall any waiver of any right,
remedy1 power or privilege with respect to any other occurrence be
construed as a waiver of such right9 remedy, power or privilege with
respect to any other occurrence.
65
<PAGE>
25.3 Captions and Headings. Captions and headings in the AGREEMENT
are for convenience only, do not constitute a part of the AGREEMENT, and
shall not affect its interpretation.
25.4 Validity. Except as otherwise specifically provided in the
AGREEMENT, if any portion of the AGREEMENT is invalid or illegal, it shall
not affect the validity or enforceability of any other portion of the
AGREEMENT.
25.5 Agreement Definition. The AGREEMENT with Appendices A and B
hereto constitutes the entire AGREEMENT between the PARTIES relating to the
subject matter hereof, and all previous and contemporaneous agreements,
understandings, discussions, inducements, conditions, communications and
correspondence, whether oral or written, express or implied, with respect
to the subject matter hereof are superseded by the execution of the
AGREEMENT.
25.6 Modifications. The AGREEMENT may not be modified or amended
except in writing signed by or on behalf of both PARTIES by their duly
authorized officers with the same formality that as followed in the
execution of the AGREEMENT.
25.7 Execution in Counterparts. The AGREEMENT may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against the PARTY whose signature appears thereon, and all of which shall
together constitute one and the same instrument. The AGREEMENT shall become
binding when one or more counterparts hereof, individually or taken
66
<PAGE>
together, shall bear the signatures of the PARTIU reflected hereon as the
signatories.
25.8 Gender and Number. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context indicates is appropriate.
25.9 Number of Days. In computing the number of days for purposes of
the AGREEMENT, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls
on a Saturday, Sunday or holiday on which federal banks are or may elect to
be closed, then the final day shall be deemed to be the next day which is
not a Saturday, Sunday or such holiday.
67
<PAGE>
IN WITNESS WKEREOFD the PARTIES have caused the AGREEMENT to be
executed as of the day and year first above written.
PECO ENERGY COMPANY, formerly
known as PHILADELPHIA ELECTRIC
COMPANY
Attest:/s/ By:/s/ William H. Smith III
Secretary William H. Smith, III
Vice President
GRAYS FERRY COGENERATION
PARTNERSHIP
Attest:/s/ By:/s/Robert A. Shinn
Robert A. Shinn
Vice President
O'Brien (Schuylkill)
Cogeneration, Inc.
JOINDER
The undersigned hereby acknowledges and agrees to be bound by the
terms of this Agreement in accordance with the terms of Section 15.1 (b)
hereof.
CORPORATION PHILADELPHIA UNITED POWER
By:/s/ S. G. Smith
Attest:/s/ Robert A. Shinn
68
<PAGE>
APPENDIX A
ESTIMATED METERING TELEKETERING AND ADMINISTRATION CHARGES
Estimated Monthly Metering Charge* $150
Estimated Monthly Telemetering Charge** $500
Monthly Administration Charge*** $750
* Includes carrying and maintenance charges.
** Includes only maintenance and operating charges.
*** To be updated periodically in accordance with Section 14.2 of
this AGREEMENT.
<PAGE>
APPENDIX B
PRICING VALUES
If the COMMERCIAL OPERATION The One LEVELIZED RATE (Cents
DATE occurs per Kilowatt-hour) is, until
the FINAL PROJECTION DATE
Dec. 26, 1991 - Dec. 25, 1992 3.49
Dec. 26, 1991 - Dec. 25, 1993 3.65
Dec. 26, 1991 - Dec. 25, 1994 3.82
Dec. 26, 1991 - Dec. 25, 1995 4.02
Dec. 26, 1991 - Dec. 25, 1996 4.23
Dec. 26, 1991 - Dec. 25, 1997 4.43
Dec. 26, 1991 - Dec. 25, 1998 4.64
Dec. 26, 1991 - Dec. 25, 1999 4.81
Dec. 26, 1991 - Dec. 25, 2000 4.95
PROJECTED RATE
Calendar Year (Cents per Kilowatt-hour)
1992 2.58
1993 2.77
1994 2.92
1995 3.18
1996 3.57
1997 3.91
1998 4.33
1999 4.68
2000 4.95
FINAL PROJECTION DATE - December 31, 2000
<PAGE>
Exhibit 10.27.1
AMENDED AND RESTATED PROJECT SERVICES AND DEVELOPMENT AGREEMENT
by and between
GRAYS FERRY COGENERATION PARTNERSHIP
as OWNER,
and
PHILADELPHIA UNITED POWER CORPORATION
as OPERATOR
dated as of September 17, 1993
SCHUYLKILL STATION PROJECT
<PAGE>
AMENDED AND RESTATED PROJECT SERVICES AND DEVELOPMENT AGREEMENT
Index
ARTICLE 1 3
DEFINITIONS 3
ARTICLE 2 9
SCOPE OF OPERATOR'S SERVICES 9
2.1 Phase I Mobilization 9
2.2 Phase II Mobilization 9
2.3 Continuous Operation 10
2.4 Proper Maintenance 10
2.5 Compliance 11
2.6 Site Maintenance 11
2.7 Maximum Efficiency 11
2.8 Safety Procedures 11
2.9 Scope of Services 12
2.10 Revise Manuals 12
2.11 Provisions 12
2.12 Mobilization Period Fees 13
2.13 Project Manager 13
ARTICLE 3 13
OWNER'S RESPONSIBILITIES 13
3.1 Acceptance of Project 13
3.2 Spare Parts Inventory 14
3.3 Provision of Project Facilities 14
3.4 Site Services 14
3.5 Approvals and permits 14
3.6 Access to Project Documents 14
3.7 SCR System 15
3.8 CO Catalyst System 15
ARTICLE 4 15
OPERATION OF THE PROJECT 15
4.1 Party Representatives 15
4.2 Visits and Reviews by Owner 15
4.3 Annual Operating Plan 16
4.4 Management Coordination and Planning 17
4.5 Unscheduled Maintenance 17
4.6 Maintenance During Warranty 17
ARTICLE 5 18
TERM: TERMINATION AND DEFAULT 18
5.1 Initial Term and Renewal 18
5.2 Default by Owner 18
5.3 Default by Operator 18
5.4 Remedy Upon Default by Owner 19
5.5 Remedies for Failure to Achieve Performance Standards 20
5.6 Termination for Uncontrollable Circumstances 21
5.7 Rights and Remedies 21
5.8 Determination of Performance Standards and Liquidated
Damages 21
i
<PAGE>
ARTICLE 6 22
OPERATOR'S ANNUAL FEES 22
6.1 Annual Fee 22
6.2 Adjustment of Annual Fee for Steam Purchased 24
6.3 Time for Payment 26
6.4 Electric Capacity Fee 27
ARTICLE 7 27
INTENTIONALLY OMITTED 27
ARTICLE 8 27
REIMBURSEMENT 27
8.1 Reimbursement Costs 27
8.2 Time for Payment 28
ARTICLE 9 28
EQUITY DISTRIBUTION LIMITATIONS 28
9.1 Equity Distribution Limitations 28
ARTICLE 10 29
BILLING AND PAYMENTS 29
10.1 Invoices 29
10.2 Owner's Dispute 29
10.3 Operator's Dispute 29
10.4 Dispute Resolution 29
ARTICLE 11 30
FORCE MAJEURE; STRIKES 30
11.1 Effect of Force Majeure 30
11.2 Strikes 30
ARTICLE 12 30
INSURANCE 30
12.1 Insurance Coverage 30
12.2 Waiver of Subrogation 31
ARTICLE 13 31
DISPUTE RESOLUTION 31
13.1 Procedure 31
13.2 Binding Arbitration 32
ARTICLE 14 33
PAYMENT OF FINES AND PENALTIES 33
ARTICLE 15 33
DEFECTIVE WORK 33
15.1 Work to be Fit 33
15.2 Consequence of Breach 33
15.3 Vendor Warranties 34
ARTICLE 16 34
OPERATOR'S REPRESENTATIONS 34
16.1 Corporate Standing; Authorization 34
16.2 Enforceability 34
16.3 No Violation of Law 34
16.4 Litigation 34
16.5 Qualifications 34
16.6 Waiver of Liens 35
16.7 Approvals and Permits 35
16.8 General 35
ARTICLE 17 35
OWNER'S REPRESENTATIONS 35
17.1 Good Standing; Authorization 35
ii
<PAGE>
17.2 Enforceability 35
17.3 No Violation of Law 36
17.4 Litigation 36
17.5 Approvals and Permits 36
17.6 Contracts 36
17.7 General 36
ARTICLE 18 36
INDEMNIFICATION 36
18.1 Operator Indemnity 36
18.2 Owner Indemnity 37
18.3 Cooperation Regarding Claims 37
ARTICLE 19 38
OPTION TO PURCHASE 38
19.1 Option to Acquire Interest 38
19.2 Effect on Annual Fee 39
19.3 Option to Acquire Entire Project 39
19.4 Right of First Purchase 40
19.5 Ownership Limitations 40
19.6 Status 41
19.7 Dividend Restriction 41
ARTICLE 20 41
MISCELLANEOUS PROVISIONS 41
20.1 Entire Agreement 41
20.2 Further Assurances 41
20.3 Amendments 42
20.4 Joint Effort 42
20.5 Terminology 42
20.6 Notice 42
20.7 Severability 43
20.8 Assignment 43
20.9 No Waiver 43
20.10. Applicable Law 43
20.11 Successors and Assigns 43
20.12. Appendices 44
20.13 Relationship of Parties 44
20.14 Survival of Agreements 44
20.15 Dollar Amounts 44
20.16 Business Days 44
20.17 Counterparts 44
20.18 Overdue Obligations to Bear Interest 45
20.19 Proprietary Information 45
20.20 No Consequential Damages 45
20.21 Environmental Liability 46
20.22 Owner's Approval 47
APPENDICES
Appendix 1 Scope of Services
Appendix 2 Availability Standards (to be attached)
Appendix 3 Intentionally Deleted
Appendix 4 Penn Event: Adjustment in Minimum Take
Appendix 5 Fair Market Value
iii
<PAGE>
AMENDED AND RESTATED PROJECT SERVICES AND DEVELOPMENT AGREEMENT
THIS AMENDED AND RESTATED PROJECT SERVICES AND DEVELOPMENT AGREEMENT
is dated as of September 17, 1993, by and between GRAYS FERRY COGERNERATION
PARTNERSHIP, a Pennsylvania general partnership having its principal place
of business at 225 South 8th Street, Philadelphia, Pennsylvania,
hereinafter called "Owner," and PHILADELPHIA UNITED POWER CORPORATION, a
formerly known as UNITED THERMAL DEVELOPMENT CORPORATION, a Delaware
corporation having its principal place of business at 535 Madison Avenue,
18th Floor, New York, New York, hereinafter called "Operator" or "PUPCO".
BACKGROUND TO RESTATEMENT
Philadelphia Thermal Energy Corporation ("PTEC"), PUPCO, Adwin
Equipment Company ("Adwin"), O'Brien Environmental Energy Systems, Inc.
("O'Brien") and Owner are parties to some or all of a series of agreements,
each dated November 11, 1991, as follows (collectively, "Original
Agreements"):
(1) Steam Venture Agreement by and among O'Brien, Adwin, PUPCO and
PTEC ("Original Venture Agreement");
(2) Site Lease by and between PTEC and Owner ("Original Lease");
(3) Steam Purchase Agreement by and among PTEC, Adwin, O'Brien and
Owner ("Original Purchase Agreement");
(4) Project Services and Development Agreement by and between Owner
and PUPCO ("Original Development Agreement");
(5) Penn Selection Agreement by and among PTEC, PUPCO, Adwin, O'Brien
and Owner ("Original Penn Agreement"); and
(6) Dock Facilities by and among PTEC, Owner and Philadelphia Thermal
Development Corporation ("Original Dock Agreement").
The Original Agreements set forth the terms and conditions under which
Adwin and O"Brien formed Owner for the purposes of constructing and owning
a Cogeneration Facility (as defined hereafter), which will be located on a
portion of PTEC's Schuylkill Station site. The Cogeneration Facility will
produce steam and electrical power, and will be operated and maintained by
PUPCO. Steam from the Cogeneration Facility will be purchased by PTEC for
use in PTEC's steam distribution system. The parties have subsequently
agreed to terminate the Original Penn Agreement.
<PAGE>
The Original Agreements contemplated that the Cogeneration Facility
would consist of a Frame 7 Gas Turbine, a Heat Recovery Steam Generator, a
steam turbine and a high pressure auxiliary boiler with a minimum 5000,000
lbs/hour of capacity (No. 6 oil rating) which would be capable of burning
both No. 6 oil and natural gas. The Original Agreements further
contemplated that the auxiliary boiler would, under certain circumstances,
be constructed on an accelerated basis prior to the remainder of the
equipment described above.
Adwin and O'Brien have now requested, and PTEC and PUPCO have agreed,
that the installation of the Cogeneration Facility ("Project") be
restructured in certain ways, including the development of the Project in
two discrete phases, consisting of (i) installation in Phase I of a high
pressure auxiliary boiler with a 40 megawatt steam turbine ("Phase I
Project"), and (ii) installation in Phase II of the Frame 7 Gas Turbine and
related equipment ("Phase II Project"). The parties intend that the Phase
I Project be completed on an expedited basis.
The parties have further agreed to amend certain of the Original
Agreements and to restate those Original Agreements, as so amended, in
their entirety, to reflect the changes to the Project described above.
Now, therefore, intending to be legally bound hereby, the parties
hereby amend the Original Development Agreement and restate the Original
Development Agreement in its entirety, as follows:
RECITALS
Owner is a general partnership created by a subsidiary of O'Brien
Energy Systems, Inc., a Delaware corporation, and Adwin, and Pennsylvania
corporation, for purposes of designing, constructing and owning a
cogeneration facility to produce steam and electricity ("Project"). The
steam will be sold to PTEC, an affiliate of Operator, pursuant to an
amended and Restated Steam Purchase Agreement of even date herewith
("Amended Steam Purchase Agreement"), and Owner is leasing space for the
cogeneration facility in PTEC's Schuylkill Station plant at 2600 Christian
Street, Philadelphia, Pennsylvania pursuant to an Amended and Restated
Site Lease between Owner and PTEC of even date herewith. Owner now wishes
to retain Operator to operate and maintain the cogeneration facility.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and agreement
of the Parties herein expressed, and intending to be legally bound, the
Parties hereby agree as follows:
2
<PAGE>
ARTICLE 1
DEFINITIONS
In construing this Agreement and the Appendices hereto, the following
terms shall have the meanings herein assigned to them:
"Acceptance Schedule" means the schedule indicating defects in the
Project and setting out the achieved levels of performance under the
applicable tests contained in the Turnkey Construction Agreement, as
further described in Section 3.1.
"Agreement" shall mean this Amended and Restated Project Services and
Development Agreement (including all Appendices hereto), as it may be
amended, restated or supplemented from time to time in accordance herewith.
"Agreement Date" means the date appearing on the first page of this
Agreement, as of which date this Agreement was executed.
"Agreement Year" means (i) in the case of the first Agreement Year,
the period commencing on the Phase I Project Acceptance Date and ending on
the first anniversary of the Phase I Project Acceptance Date, and (ii) in
the case of each succeeding Agreement Year, the twelve-month period
beginning on an anniversary date of the Phase I Project Acceptance Date and
ending on the next succeeding anniversary date of the Phase I Project
Acceptance Date.
"Annual Operating Plan" means the annual plan for the operation and
maintenance of the Project as described in Section 4.3 hereof.
"Applicable Agreement Year" has the meaning set forth in Section
6.1(e).
"Approvals and Permits" means all approvals, permits, licenses,
certificates, inspections and authorizations required by any Governmental
Authority arising out of, incident to or related to the operation and
maintenance of the Project.
"Auxiliary Boiler" means the high-pressure boiler to be constructed
by Owner as Phase I of the Project pursuant to the Steam Venture Agreement.
"Change in Law" means (a) the adoption, promulgation or modification
after the Agreement Date of (i) any federal statute, regulation, ruling or
executive order not adopted, promulgated or modified or officially
published in The Congressional Record or The Federal Register on or before
the Agreement Date, or (ii) any State, local or administrative statute,
ordinance, regulation or executive order that was not so adopted,
promulgated or modified on or before the Agreement Date, or (b) the
imposition by a Governmental Authority of any material conditions in
connection
3
<PAGE>
with the issuance, renewal, or modification of any official permit, license
or approval after the Agreement Date, which in the case of either (a) or
(b) establishes requirements affecting the operation or maintenance of the
Project materially more burdensome than the most stringent requirements (x)
in effect as of the Agreement Date, (y) agreed to in any applications of
Owner for official permits, licenses or approvals pending as of the
Agreement Date or (z) contained in any official permits, licenses or
approvals with respect to the Project obtained as of the Agreement Date;
provided, however, that a change in any income tax law shall not constitute
a Change in Law hereunder.
"Claims" has the meaning set forth in Section 20.21(d) hereof.
"Consumer Price Index Percentage" means the percentage increase in
index points in the Consumer Price Index, All Urban Consumers (CPI-U),
Philadelphia, All Items (1982-84-100) for the period beginning on the last
month of one Agreement Year and ending on the last month of the next
succeeding Agreement Year.
"Construction Contractor" means the contractor retained by owner to
install the cogeneration facility.
"Credit Agreement" is the agreement between Owner and Lender setting
forth the terms of the construction and permanent financing for the
Project.
"Debt Service" means for any period, the amount of principal, interest
and other fees and expenses payable with respect to the indebtedness of
Owner under the Credit Agreement or with respect of any other indebtedness
incurred by Owner to refinance the loan evidenced by the Credit Agreement.
"Dispute" means any claim, dispute, disagreement or other matter in
question between Operator and Owner that arises with respect to the terms
and conditions of this Agreement or with respect to the performance,
nonperformance or breach by Operator or Owner of their respective
obligations under this Agreement.
"Electricity Purchase Agreement" means the agreement between the
Electricity Purchaser and Owner for the sale of the electric output of the
Project, as such agreement may be amended, restated or supplemented from
time to time.
"Electricity Purchaser" means the Philadelphia Electric Company or
another electric utility.
"Energy Revenues" means, for any Agreement Year or other referenced
period, the sum of (a) gross revenues received during such Agreement Year
or other referenced period from all sales of electricity and steam
generated by the Project, and (b) any amount recovered pursuant to any
judgment against, or settlement with, the Electricity Purchaser or the
Steam Purchaser in such
4
<PAGE>
Agreement Year or other referenced period in respect of any dispute
regarding the amounts due to Owner pursuant to the Electricity Purchase
Agreement or the Steam Purchase Agreement, net of all reasonable costs of
collecting such amounts.
"Equity Purchase Option" has the meaning set forth in Section 19.1.
"Final Acceptance" shall mean the acceptance of each Phase of the
Project by Owner upon the completion of all Work (except for the furnishing
and installation of Punchlist Items) and receipt from the Construction
Contractor of a true and correct Final Acceptance Certificate, and the
release and waiver by Owner of all claims against the Construction
Contractor relating to the performance of the Work except those claims
arising from or consisting of (a) unsettled claims, (b) claims for breach
of any warranty or guarantee set forth in the Turnkey Construction
Contract, (c) liens or other title exceptions respecting the facility or
any components of the Project or (d) any material breach by the
Construction Contractor of any of the terms of the Turnkey Construction
Contract.
"Final Performance Tests" means the final series of acceptance tests
required by the Turnkey Construction Contract to be completed prior to
Final Acceptance.
"Force Majeure" means the following acts, events or occurrences to the
extent such acts, events or occurrences are beyond the reasonable control
of the affected party and prevent, reduce or materially interfere with the
operation or maintenance of the Project: act of God; war, declared or
undeclared; reasonably unforeseeable Change in Law; fire; labor strike,
walkout or similar labor dispute (official or unofficial) (but excluding a
strike by the employees of Operator limited to the Site); sabotage; the act
of, or failure to act in accordance with the terms hereof by, the other
Party to this Agreement; breakings of or accidents to machinery or
equipment caused directly by an act of God or by the act or omission of a
third party (other than Operator's subcontractor(s)) over whom the affected
party has no control, or any other cause reasonably unforeseeable; provided
that any such act, event or occurrence resulting from the negligence (by
commission or omission) of the affected Party or any of its subcontractors
shall not constitute Force Majeure.
"Fuel" means the oil or natural gas necessary for the formal operation
and maintenance of the Project.
"Fuel Operation Date" means the Phase II Project Acceptance Date
unless construction of the Phase II Project has not been initiated (as
described in Section 9 of the Steam Venture Agreement) within one (1) year
after the Phase I Acceptance Date, in which event the Full Operation Date
will be the Phase I Project Acceptance Date.
5
<PAGE>
"Gas Turbine" means the Frame 7 combustion turbine portion of the
Project.
"Governmental Authority" means any Federal, state, local, regulatory,
administrative or other governmental authority including any department,
subdivision, commission, board, bureau, agency or instrumentality thereof.
"Heating Degree Days" means the heating degree days for Philadelphia
International Airport as reported by the National Weather Service.
"Interconnection Facilities" means the portions of the interconnection
equipment and other facilities required to connect the Project to the
Electricity Purchaser's electrical supply system which are maintained and
operated by the Electricity Purchaser and any electrical transformers and
associated equipment even if not maintained by Electricity Purchaser.
"Lender" means the institutional lender holding the most senior debt
of the Project from time to time.
"Manuals" means the manuals to be provided by Owner, as the same may
be updated from time to time by Operator pursuant to Section 2.9 hereof,
and such other manual and similar materials as may be required to be
prepared and maintained by Operator with respect to the Project in order to
comply with Requirements of Law.
"Mobilization Period" means the period of initial staffing for
equipment start up and testing preceding the date reasonably estimated by
Owner to be the Project Acceptance Date.
"Operator" means Philadelphia United Power Corporation.
"Owner" means Grays Ferry Cogeneration Partnership.
"Partners" has the meaning set forth in Section 9.2, provided that if
Owner is at any time hereafter a corporation, the term "Partners" as used
throughout this Agreement shall be deemed to refer to Owner's shareholders.
"Party" or "Parties" means Owner and/or Operator.
"Penn Event" means the termination of steam service to the service
location for the University of Pennsylvania at 3401 Spruce Street (Account
No. 06-1705-3).
"Person" means an individual, corporation, partnership, business
trust, joint venture, company, firm, unincorporated association,
governmental body or any other entity.
6
<PAGE>
"Phase I" or "Phase I Project" refers to that portion of the Project
which consists of the installation and operation of the Auxiliary Boiler.
"Phase II" or "Phase II Project" refers to that portion of the Project
which consists of the installation and operation of the Gas Turbine and
HSRG, with related equipment.
"Phase I Availability" means the percentage of time the Phase I
Project is available to operate at the capacity established by the Phase I
Final Performance Test, as adjusted for temperature, as determined in
accordance with the formula set forth in Appendix 2A.
"Phase II Availability" means the percentage of time the Gas Turbine
and HRSG components of the Phase II Project are available to operate
together at the capacity established by the Final Performance Test, as
adjusted for temperature, as determined in accordance with the formula set
forth in Appendix 2B.
"Phase I Minimum Take Requirement" means 3.0 million Mlbs., as defined
in, and adjusted pursuant to, the Steam Purchase Agreement.
"Phase II Minimum Take Requirement" means 3.3 million Mlbs., as
defined in, and adjusted pursuant to, the Steam Purchase Agreement.
"Phase I Project Acceptance Date" shall have the meaning assigned to
such term in Section 3.1.
"Phase II Project Acceptance Date" shall have the meaning assigned to
such term in Section 3.1.
"Prime Rate" refers to the rate publicly announced from time to time
by Lender as its prime rate or as that rate offered to its most favored
commercial customers.
"Project" has the meaning given it in the Recitals and includes the
buildings and other structures, fixtures, machinery, equipment, materials
and things of all kinds used in connection with the cogeneration facility
at the Site, and all substitutes, additions, replacements and modifications
thereto. As used herein, the term "Project" refers initially to the Phase
I Project, and, if the Phase II Project is completed, thereafter to the
Phase I Project and the Phase II Project respectively.
"Project Agreements" means the Amended and Restated Steam Purchase
Agreement, the Amended and Restated Steam Venture Agreement, this Agreement
and the Amended and Restated Site Lease.
"PTEC" means Philadelphia Thermal Energy Corporation, the Steam
Purchaser.
7
<PAGE>
"Punchlist Items" shall mean those finishing items which must be
completed by the Construction Contractor after the Final Acceptance Date,
without which the Project is nonetheless commercially operable.
"Reimbursable Costs" means the costs to be reimbursed by Owner to
Operator pursuant to Section 8.1 hereof.
"Requirements of Law" shall mean any statute, rule, regulation, code,
standard, ordinance or other law of any Governmental Authority and any
order, including an injunction, judgment, writ, award, determination or
decree of any arbitrator, court or other Governmental Authority, in each
case applicable to or binding upon the Project (including the use,
maintenance and operation thereof) or any Party or to which the Project
(including the use, maintenance and operation thereof) or any Party is
subject, including those relating to building, environmental (including
those relating emissions, discharges, disposals and hazardous wastes or
materials), health and safety matters, the giving of notices and access to
the Project.
"Site" means the real property in Philadelphia, Pennsylvania on which
the Project is to be constructed, operated and maintained, as more fully
described in the Site Lease.
"Site Lease" means the Amended and Restated Site Lease, dated the same
date as this Agreement, between Owner and PTEC, as such agreement may be
amended, restated or supplemented from time to time.
"Steam Purchase Agreement" means the Amended and Restated Steam
Purchase Agreement dated the same date as this Agreement between the Steam
Purchaser and Owner for the sale of the steam output of the Project, as
such agreement may be amended, restated or supplemented from time to time.
"Steam Purchaser" means Philadelphia Thermal Energy Corporation.
"Steam Venture Agreement" means the Amended and Restated Steam Venture
Agreement dated the same date as this Agreement among Owner, Operator, and
PTEC, as such agreement may be amended, restated or supplemented from time
to time.
"Substantially Completed" means the stage in the progress of the
construction of the Project when such construction is sufficiently complete
in accordance with the Turnkey Construction Contract to permit normal
commercial operation of the Project for the generation of steam and
electricity.
"Subordinated Annual Fee" has the meaning set forth in Section 6.2.
8
<PAGE>
"Term" means the term of this Agreement as provided in Section 5.1
hereof and any extensions or renewals thereof.
"Turnkey Construction Contract" means the construction contract
pursuant to which Owner has retained Construction Contractor to install the
Project at the Site.
"Work" shall mean all obligations, duties and responsibilities
assigned to or undertaken by the Construction Contractor pursuant to the
Turnkey Construction Contract.
ARTICLE 2
SCOPE OF OPERATOR'S SERVICES
2.1 Phase I Mobilization. The Phase I Mobilization Period shall
begin on a date specified by Owner to Operator at least six (6) months
prior to the projected Phase I Project Acceptance date, and shall continue
until the Phase I Project Acceptance Date. During the Phase I Mobilization
Period, Operator shall, subject to Owner's review and in conjunction with
the Construction Contractor consistent with the terms of the Phase I
Turnkey Construction Contract, take all actions reasonably necessary or
desirable to prepare the Phase I Project for commercial operation on the
Phase I Project Acceptance Date, including, without limitation:
2.1.1 Hiring the temporary staff and recruiting, hiring
and training the permanent staff and specialists required for the normal
operation and maintenance of the Phase I Project in accordance with this
agreement;
2.1.2 Establishing a system for maintaining the
inventory of spare parts and a system for the provision of all consumables
(other than those to be provided by Owner pursuant to Section 3.4 hereof),
equipment and supplies;
2.1.3 Performing start-up of the Phase I Project during
the start-up phase under the direction of the start-up supervisor and start-
up technicians provided by Construction Contractor under the Phase I
Turnkey Construction Agreement or by Owner, as the case may be; and
2.1.4 Preparing monthly progress reports of such
preparation in a format mutually acceptable Operator and Owner.
2.2 Phase II Mobilization. The Phase II Mobilization period shall
begin on a date specified by Owner to Operator at least six (6) months
prior to the projected Phase II Project Acceptance Date, and shall continue
until the Phase II Project Acceptance Date. During the Phase II
Mobilization Period, Operator shall, subject to Owner's review and in
conjunction with
9
<PAGE>
the Construction Contractor consistent with the terms of the Phase II
Turnkey Construction Contract, take all actions reasonably necessary or
desirable to prepare the Phase II Project for commercial operation on the
Phase II Project Acceptance Date, including, without limitation:
2.2.1 Hiring the temporary staff and recruiting, hiring
and training the permanent staff and specialists required for the normal
operation and maintenance of the Phase I Project in accordance with this
agreement;
2.2.2 Establishing a system for maintaining the
inventory of spare parts and a system for the provision of all consumables
(other than those to be provided by Owner pursuant to Section 3.4 hereof),
equipment and supplies;
2.2.3 Performing start-up of the Phase II Project during
the start-up phase under the direction of the start-up supervisor and start-
up technicians provided by Construction Contractor under the Phase I
Turnkey Construction Agreement or by Owner, as the case may be; and
2.2.4 Preparing monthly progress reports of such
preparation in a format mutually acceptable to Operator and Owner.
2.3 Continuous Operation. Beginning on each Project Acceptance Date
and throughout the Term of this Agreement, Operator shall operate and
maintain the Project, according to the terms of this Agreement and each
Annual Operating Plan, in such a manner as to maximize operating hours and
net Energy Revenues giving due consideration to (a) avoiding excessive fuel
consumption and other excessive variable costs of electricity and steam
production, (b) generally accepted and sound operating practices, (c) the
design parameters of the Project and (d) the Manuals. Operator shall
arrange schedule maintenance during such periods as will both reasonably
minimize the loss of Energy Revenues and comply with the equipment
manufacturer's recommendations and service bulletins together with the
requirements of the Project Agreements.
2.4 Proper Maintenance. Operator shall maintain the entire Project
at all times properly and in good, clean, orderly condition, and shall
perform all necessary maintenance and clean-up implement necessary repairs
and replacements and purchase and install necessary replacement equipment
or parts of the Project, subject to reimbursement pursuant to Article 8.
Operator shall maintain inventories of replacements, spare parts and
consumables as specified in the Annual Operating Plan. Operator shall
perform normal and customary overhauls of the Project including (after the
Phase II Project Acceptance Date) major overhauls of the Gas Turbine as
prescribed by the equipment manufacturer or as otherwise may be required.
Operator shall contract out the major overhauls of the Gas Turbine through
a competitive bid process to
10
<PAGE>
a contractor acceptable to owner, Operator and Lender's independent
engineer (if any). Operator shall not make any additions, alterations or
other changes to the Project which would cause a material deviation from
the Annual Operating Plan, or increase operating costs above those set
forth in the Annual Operating Plan, without the written approval of Owner.
Operator covenants that it shall not through its acts or omissions,
knowingly operate or maintain the Project in any manner that impairs
Owner'' ability to obtain recourse against Construction Contractor pursuant
to either Turnkey Construction Agreement, provided that the foregoing
covenant shall not be deemed to expand any rights of recourse which Owner
may have against Construction Contractor pursuant to either Turnkey
Construction Agreement.
2.5 Compliance.
2.5.1 Operator shall operate and maintain the Project in
compliance with all applicable Requirements of Law and all Approvals and
Permits upon each Project Acceptance. Operator furthermore covenants to
perform its obligations hereunder so that Owner is able to comply with its
obligations under the Site Lease and the other Project Agreements.
2.5.2 Owner shall be responsible for ensuring that each Phase
of the Project is capable of complying with all environmental emission
Requirements of Law and all Approvals and Permits prior to Project
Acceptance for each Phase (as hereinafter defined). If the Owner elects to
accept or occupy either Phase of the Project from Construction Contractor
in less than Substantially Completed condition, Owner shall bear the
responsibility, and all costs associated therewith, for bringing that Phase
of the Project into compliance with such Requirements of Law and Approvals
and Permits.
2.6 Site Maintenance. Operator shall maintain the Site in a good,
safe, clean and orderly condition in accordance with the requirements and
restrictions of the Site Lease, to the extent within Operator's control
under the terms of the Site Lease.
2.7 Maximum Efficiency. Consistent with the Manuals, sound operating
and engineering practice and Owner's objective of maximizing the economic
efficiency of Project operations, Operator shall operate and maintain the
project so as to maximize the useful life of the equipment and minimize
downtime for repairs.
2.8 Safety Procedures. Operator shall comply with all safety
procedures whether contained in the Manuals, required by insurance
companies or required by applicable Requirements of Law or the terms of any
Approvals and Permits, reasonably necessary or appropriate to minimize the
likelihood of accidents or injuries to Persons or damage to property on or
about the Site.
11
<PAGE>
2.9 Scope of Services. Operator shall provide, subject to
reimbursement pursuant to Article 8, full-time office services, including
bookkeeping and secretarial services, together with office equipment,
facilities and supplies as well as other services, according to the
requirements described in Appendix 1 hereto which shall be prepared within
sixty (60) days after execution of the Electricity Purchase Agreement.
2.10 Revise Manuals. Operator shall, as often as necessary in
Operator's reasonable judgment but not less often than annually, revise and
update the Manuals.
2.11 Provisions. In order to satisfy Operator's obligations, Operator
shall provide, or cause to be provided by subcontractors:
2.11.1 All permanent staff, temporary staff and specialists
for the operation and maintenance of the Project. Operator shall be solely
responsible for the screening, hiring, assignment and supervision of all
such personnel.
2.11.2 All spare parts (other than spare parts supplied by
Owner under Section 3.2) required for the operation and maintenance of the
Project, subject to reimbursement pursuant to Article 8. Spare parts shall
be held in inventory for immediate replacement of parts required to
maintain the operation of the Project. The inventory of spare parts shall
be specified in the Annual Operating Plan which is approved by Owner.
Owner may inspect inventory upon 24 hours prior notice to evaluate the
quality of goods and stock levels.
2.11.3 All consumables (other than consumables supplied by
Owner under Section 3.4) required for the operation and maintenance of the
Project, subject to reimbursement pursuant to Article 8. The inventory of
consumables shall be specified in the Annual Operating Plan which is
approved by Owner.
2.11.4 Policies of insurance in accordance with Article 12
hereof, subject to reimbursement pursuant to Article 8.
2.11.5 The repair and/or replacement of any broken or damaged
parts or components of the Project, including the installation and
replacement of spare parts.
2.11.6 The preparation, generation, maintenance and storage at
the Site of all operating and maintenance logs, performance data, records,
cost data and scheduled reports on behalf of owner, such information to be
prepared, generated and maintained in accordance with the applicable
requirements of the Project Agreements.
2.11.7 Performance of the obligations of the Project Operator
as described in Section 2(c) of the Dock Facility
12
<PAGE>
Service Agreement of even date herewith among Owner, PTEC and Philadelphia
Thermal Development Corporation.
2.12 Mobilization Period Fees.
2.12.1 During the each of the Phase I Mobilization Period and
the Phase II Mobilization Period, Owner shall be responsible for
reimbursing Operator for all costs of staffing and start-up in accordance
with a phased staffing plan to be agreed between the Parties and for a fee
equal to Twenty-five Thousand Dollars ($25,000) per month to a maximum
aggregate total fee for each Mobilization Period of One Hundred Fifty
Thousand $(150,000) Dollars.
2.12.2 Notwithstanding the foregoing, Operator shall only be
entitled to both Mobilization Fees set forth above if the Phase II
Mobilization Period does not begin within six (6) months after the
conclusion of the Phase I Mobilization Period.
2.13 Project Manager. Operator shall have the right to hire a project
manager for the Project (the "Project Manager") beginning on a date up to
nine (9) months prior to the projected Phase I Project Acceptance Date.
Owner shall be responsible for all costs associated with the hiring and
employing, including, but not limited to, recruitment costs, salary,
benefits and any applicable relocation expenses or bonuses, of the Project
Manager by Operator that are incurred by the Operator prior to the Phase I
Project Acceptance Date. Owner shall have the right to approve the Project
Manager, such approval not to be unreasonably withheld or withheld for
reasons other than the qualifications of the individual.
ARTICLE 3
OWNER'S RESPONSIBILITIES
3.1 Acceptance of Project. The responsibility for the continuous
operation of the Project, as provided in Section 2.2, shall belong to
Operator, and Operator shall accept and shall be deemed to have accepted
such responsibility for each Phase of the Project, (i) on the date ("Phase
I Project Acceptance Date") which is the date of Phase I final Acceptance
Date") which is the date of Phase I Final Acceptance, or in the event Phase
I Final Acceptance under the Phase I Turnkey Construction Agreement does
not occur, the date Owner takes over the operation of the Phase I Project
and commences to utilize the Phase I Project for its intended use after the
termination of the Phase I Turnkey Construction Agreement by Owner ("Phase
I Project Acceptance"), and (ii) on the date ("Phase II Project Acceptance
Date") which is the date of Phase II Final Acceptance, or in the event
Phase II Final Acceptance under the Phase II Turnkey Construction Agreement
does not occur, the date Owner takes over the operation of the Phase II
Project and commences to utilize the Phase II Project for its intended use
after the termination of the Phase II Turnkey Construction Agreement by
Owner ("Phase II
13
<PAGE>
Project Acceptance"). Any defects in either Phase of the Project and the
performance levels achieved in each set of Final Performance Tests of the
Project shall be noted on a schedule (the "Acceptance Schedule") to be
executed by Owner and Operator as of the date of Final Acceptance of each
Phase. If Owner elects to accept or occupy either Phase of the Project
from Construction Contractor in a less than Substantially Completed
condition, appropriate adjustments may be made in the Annual Operating
Plans to reflect increased costs reasonably expected to be incurred by
Operator in operating the Project in a less than Substantially Completed
condition and such adjustments shall be included on the Acceptance
Schedule. Execution of the Acceptance Schedule shall not constitute a
waiver or release of any claim, right or remedy which Owner may have
against Construction Contractor pursuant to either Turnkey Construction
Agreement nor shall it otherwise affect the obligations of the Parties
pursuant hereto.
3.2 Spare Parts Inventory. Owner will establish and provide an
inventory of spare parts containing such items and quantities thereof as
are reasonably recommended by the equipment vendor consistent with the
objectives of the Annual Operating Plan and are reasonably acceptable to
Operator.
3.3 Provision of Project Facilities. Owner shall provide Operator
with the facilities described in the Site Lease and with customary office
and related facilities. The facilities shall be furnished and equipped by
Owner to recognized standards to enable Operator to fulfill its obligations
under this Agreement.
3.4 Site Services. Owner shall provide the following site services
as necessary for the operation and maintenance of the Project in accordance
with Section 2.6, at no cost to Operator: ingress and egress to the Site;
fuel; demineralized water; waste water disposal; standby power;
electricity; and other Site services and materials of a similar nature
reasonably required for the operation and maintenance of the Project and
not required to be provided by Operator under Article 2 hereof. Operator
shall provide one, some or all of the Site services described in this
Section as requested in writing by Owner, provided that Owner shall
reimburse Operator for the actual cost incurred by Operator in providing
such Site services.
3.5 Approvals and permits. Owner shall be responsible for obtaining
and maintaining all Approvals and permits necessary for the Project to be
legally authorized to operate. Operator shall provide full and reasonable
continuing cooperation in obtaining and maintaining all Approvals and
Permits necessary to permit it to operate the Project. Operator shall
review Owner's applications for accuracy if requested.
3.6 Access to Project Documents. Owner will grant Operator access to
all Project related documents required for the perfor-
14
<PAGE>
mance of Operator's responsibilities hereunder. These shall be maintained
in confidence by Operator.
3.7 SCR System. If an SCR System is required for the Project for Nox
control, Owner shall pay for all spare parts and replacement components of
the SCR System and all off-site refurbishment repairs to the SCR System
pursuant to separate agreement with the vendor of the SCR System, such
agreement to be reasonably acceptable to Operator. At Owner's option,
Operator shall accept an assignment of the agreement(s) with the vendor of
the SCR System and shall perform the obligations of Owner thereunder from
and after the effective date of such assignment, provided that (i) Owner
shall reimburse Operator for the actual costs incurred by Operator in
performing such obligations and (ii) Owner shall be entitled to require
Operator to reassign the SCR System Agreement(s) to Owner at any time upon
reasonable notice to Operator.
3.8 CO Catalyst System. If a CO Catalyst System is required for the
Project for CO control, Owner shall pay for all spare parts and replacement
components of the CO Catalyst System and all off-site refurbishment repairs
to the CO Catalyst System pursuant to separate agreement with the vendor of
the CO Catalyst system, such agreement to be reasonably acceptable to
Operator. At Owner'' option, Operator shall accept an assignment of the
agreement(s) with the vendor of the CO Catalyst System and shall perform
the obligations of owner thereunder from and after the effective date of
such assignment, provided that (i) Owner shall reimburse Operator for the
actual costs incurred by Operator in performing such obligations and
(ii) Owner shall be entitled to require Operator to reassign the CO
Catalyst System Agreement(s) to Owner at any time upon reasonable notice to
Operator.
ARTICLE 4
OPERATION OF THE PROJECT
4.1 Party Representatives. Within five (5) days after the beginning
of each Mobilization Period, each Party shall notify the other in writing
of its designation of an individual to act as its representative with
respect to matters which may arise with respect to the operation of the
Project. At any time after the initial designation by any Party of its
representative, such Party may designate a successor representative by
similar written notice to the other Party.
4.2 Visits and Reviews by Owner. With reasonable prior notice, Owner
shall have the right to regularly inspect the Site and the right to inspect
the Gas Turbine during periods of extended maintenance. Owner shall also
have the right, at least once annually, or, more frequently with reasonable
prior notice during hours which any designated representative of Operator
is on the Site, to inspect the Site and any part or component of the
15
<PAGE>
Project, and all other things pertaining to the operation of the Project,
and to receive a complete tour and briefing on the Project and Project
operations by Operator. Owner and its representative shall also have the
right to take visitors, after reasonable notice to Operator, on the Site
and into the Project to observe the various services which Operator
performs, provided that such visits shall be pre-approved by the Operator
and conducted in a manner so as to minimize interference with Operator's
obligations hereunder. Operator will provide daily production reports
which will include steam and electrical production and fuel and water
consumption.
4.3 Annual Operating Plan. Not later than forty-five (45) days prior
to the first day of each Agreement year, Operator shall submit to Owner for
approval a proposed Annual Operating Plan for the upcoming Agreement Year.
For the purpose of developing the first Annual Operating Plan, within
thirty (30) days of receipt of the Electricity Purchase Agreement and
equipment warranties from Owner, Operator shall use its best efforts to
develop and submit to Owner the first Annual Operating Plan for Owner's
approval. Owner shall provide Operator necessary additional information on
a timely basis. Operator and Owner shall use their best efforts to reach
agreement on the first Annual Operating Plan within ninety (90) days after
Operator's submittal of the first Annual Operating Plan to Owner. If no
agreement can be reached within such ninety (90) day period, then the first
Annual Operating Plan shall be subject to arbitration in accordance with
Section 13.2. The Annual Operating Plan shall describe in detail projected
maintenance and overhaul schedules, capital expenditure requirements,
equipment acquisitions and spare parts and consumables inventories
(including a breakdown of capital items and expense items), hours of
operation, purchase electricity, projected Fuel usage and other variable
costs, projected electricity and steam generated for sale, projected Energy
Revenues, staffing plans, data regarding expected environmental performance
and such other matters as Owner may reasonably require. The proposed
Annual Operating Plan shall also include a budget for operation and
maintenance of the Project, including the estimated prices based on time
and materials for all anticipated operating and maintenance costs for the
upcoming Agreement year. Owner shall indicate in writing its approval or
disapproval of the Annual Operating Plan within fifteen (15) days of such
submission, and in the event of disapproval, the parties shall meet and
resolve in good faith any areas of disagreement. If a new Agreement Year
begins without an Annual Operating Plan having been accepted by both Owner
and Operator, the Annual Operating Plan for the prior Agreement year shall
continue in effect, with all costs set forth therein increased monthly by
the Consumer Price Index Percentage for the most recent month for which the
Consumer Price Index is available. Any actions proposed under the Annual
Operating Plan shall be consistent with the Manuals and Operator's
obligations as described in Section 2.2. Operator shall notify Owner as
soon as reasonably possible of any significant deviations or
16
<PAGE>
discrepancies from the projections contained in the Annual Operating Plan.
Any material adjustment to total labor costs proposed by Operator shall be
subject to Owner's prior written approval.
4.4 management Coordination and Planning. Operator shall meet with
Owner at least quarterly for the first two (2) years following the Project
Acceptance Date, and thereafter at least semiannually to review and discuss
Project performance, maintenance and costs. Prior to each scheduled
meeting, Operator shall provide owner, in a form reasonably acceptable to
Owner, a summary of all operating and maintenance activities performed by
Operator during the previous quarter, together with all costs (by category)
which make up the Reimbursable Costs associated therewith, and a comparison
of the current total of such costs for the Agreement year with the budget
prepared pursuant to the Annual Operating Plan.
4.5 Unscheduled Maintenance. Operator shall perform all maintenance,
repair and replacement requirements of the Project (excluding only the
Interconnection Facilities) notwithstanding that the same were not
anticipated or included in the approved Annual Operating Plan. Owner shall
reimburse Operator for such work, subject to the provisions of Article 8.
Operator will not commence any work under this section without the approval
of Owner except (i) in the event that such work shall be required in an
emergency, Operator shall undertake such work and notify Owner as soon as
such notice is reasonably practicable, and (ii) Operator shall be
authorized to perform all maintenance, repair and replacement necessary to
back-up or redundant systems in order to maintain maximum Phase I
Availability and Phase II Availability. The selection of subcontractors to
perform unscheduled maintenance beyond the capability of Operator shall be
at the reasonable discretion of Operator, subject to Owner's approval.
4.6 Maintenance During Warranty. Operator shall maintain the Project
in accordance with the requirements of all manufacturer's warranties, and
shall be assigned to Operator at Operator's request for purposes of
enforcement (provided that the warranties shall be reassigned to Owner if
Operator does not enforce the warranties promptly). Owner shall require
each major component manufacturer (including, without limitation, the
manufacturer of the Gas Turbine, the HRSG, the Auxiliary Boiler and all
rotating equipment such as pumps) as part of its contract, to perform a
warranty inspection with Owner, Operator and Contractor at no additional
cost prior to the expiration of the component's warranty. Operator shall
be responsible for the cost of any repairs that would have been covered by
such warranties but for which the manufacturer disclaims coverage due to
Operator's failure to comply with reasonable warranty requirements.
17
<PAGE>
ARTICLE 5
TERM: TERMINATION AND DEFAULT
5.1 Initial Term and Renewal. The Term of this Agreement shall
commence on the Full Operation Date, and shall conclude on the last day of
the twenty fifty (25th) anniversary of the Full Operation Date, provided,
Owner shall have the option to extend the Term of this Agreement under the
terms and conditions set forth in Section 5 of the Amended Steam Venture
Agreement, subject to extension of all of the Amended Project Agreements
pursuant to Section 5 thereof. Notwithstanding the foregoing, the
provisions of Article 2 regarding the Mobilization Periods shall be
effective as of the dates set forth therein.
5.2 Default by Owner. Each of the following shall constitute a
Default by Owner:
(a) The failure or refusal by Owner to fulfill its
obligations under this Agreement, unless excused by Force Majeure;
provided, however, that such failure or refusal shall not constitute a
Default unless and until:
(i) Operator has given written notice to Owner
specifying Owner's default or defaults; and
(ii) Owner either has not corrected such default, or
has not initiated reasonable steps to correct the
same, within thirty (30) days of its receipt of
such notice, and thereafter does not continue to
take all reasonable steps necessary to
expeditiously correct such default.
(b) The failure or refusal by Owner to make any payment due
Operator under the terms of this Agreement as and when the same becomes
due.
5.3 Default by Operator. Each of the following shall independently
constitute a Default by Operator:
(a) The failure or refusal by Operator, unless excused, in
any case, by Force Majeure (i) to operate, repair and maintain the Project
in accordance with this Agreement; (ii) to achieve at least the Performance
Standards pursuant to Section 5.8 for any Agreement Year, except that
during the first Agreement Year and during any Agreement Year in which a
major overhaul occurs, the Performance Standards will be adjusted pursuant
to Section 5.8; (iii) to comply with applicable
18
<PAGE>
Requirements of Law or Approvals and permits; or 9iv) to fulfill any of its
other obligations, whether designated as agreements, covenants or
otherwise, under this Agreement; provided, however, that a failure or
refusal under (i), (iii) or (iv) shall not constitute a Default unless and
until:
(A) Owner has given notice to Operator specifying
Operator's default or defaults; and
(B) Operator either had not corrected such default, or
has not initiated reasonable steps to correct the
same within 30 days of its receipt of such notice
and thereafter does not continue to take all
reasonable steps necessary to expeditiously
correct such default.
(b) The commencement by Operator of a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or the consent by Operator to the entry of an order for relief
in an involuntary case under any such law, or the consent by Operator to
the appointment of, or taking possession by, a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or similar official) of
Operator or of any substantial part of its properties, or the making by
Operator of any general assignment for the benefit of creditors, or the
failure by Operator generally to pay its debts as they become due or any
corporate action in furtherance of any of the foregoing.
(c) The issuance by a court having jurisdiction over
Operator of a decree or order for relief in respect of Operator of a decree
or order for relief in respect of Operator in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or the appointment by any such court of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of
Operator or any substantial part of its property, or the ordering by any
such court of the winding up or liquidation of the affairs of Operator if
such decree or order shall remain unstayed and in effect for a period of
sixty (60) consecutive days.
5.4 Remedy Upon Default by Owner. Upon the occurrence of a Default
by Owner, if such Default by owner continues for thirty (30) days' after
notice to Owner and Lender, Operator shall have the right to terminate this
Agreement, and (a) if the Default by Owner arises from Owner's failure to
pay the portion of the Annual Fee due under Section 6.1(e) or (h), as the
case may be, plus interest, within one year after the due date thereof (an
"Owner Major Default"), Operator shall have the right to acquire the
Project for $1.00 (which right shall be freely assignable by Operator
subject to any consent required by Lender), subject only to then-existing
debt, within thirty (30) days following expiration of such 30-day grace
period, or (b) if the Default by
19
<PAGE>
Owner involves a failure to pay any other sum due and owing hereunder,
Operator shall have the right to initiate legal action to collect such sum
with interest thereon at the Prime Rate plus two percent (2%).
5.5 Remedies for Failure to Achieve Performance Standards.
(a) The operation and maintenance provisions of this
Agreement and the portions of the Annual Fee described in Section 6.1 (c)
and (d), or (f) and (g) as the case may be, may be terminated by the Owner
if the project fails to achieve the minimum acceptable average annual
Availability (eighty-five percent) established pursuant to Section 5.8 and
specified in Appendix 2A and 2B (for Phase I and Phase II, respectively)
(the average annual Availability for Phase I and for Phase II are
hereinafter collectively referred to as "performance Standards").
Termination, however, shall not affect any payments under this Agreement
that have become due and payable (such as the portion of the Annual Fee
described in Section 6.1 (c) and (D), or (f) and (g) as the case may be,
for services rendered during the year immediately preceding the termination
of the operation and maintenance provisions of this Agreement), and in no
case shall such termination affect the portions of Annual Fee described in
Section 6.1(e) and (h), as the case may be. If the Owner does terminate
the operation and maintenance provisions of this Agreement pursuant to this
Section 5.5(a), PUPCO shall have the right to approve Owner's selection of
any new operator for the Project with such approval not to be unreasonably
withheld.
(b) In the event that Operator shall fail to achieve the
Performance Standards in any Agreement year, then Operator shall pay to
Owner liquidated damages ("Liquidated Damages") as provided in Section 5.8.
the maximum amount of Liquidated Damages which could potentially be
assessed against Operator based upon Operator's inability to meet the
Performance Standards shall be equal to the portion of the Annual Fee
described in Section 6.1(d) or (g), as the case may be. The actual amount
of Liquidated Damages owed ("Liquidated Damages Owed") shall be a function
of the actual performance of the Project as measured against the
Performance Standards as set forth in Appendix 2. Liquidated Damages and
Debt Service coverage shall, except for Owner's right to terminate this
Agreement pursuant to Section 5.5(a), be the sole remedy of Owner and the
sole liability of Operator for Operator's failure to meet the Performance
Standards.
(c) Not later than twenty (20) days after the end of each
Agreement year, Operator shall render a statement to Owner, with all
necessary and appropriate supporting documentation, calculating the amount
of Liquidated Damages due to Owner, in accordance with Section 5.5(b), for
the period from the beginning of the Agreement Year through the end of such
Agreement Year. Any amounts due to Owner on account of Liquidated Damages
shall be paid by Operator simultaneously with the delivery of a
20
<PAGE>
statement therefor, but Owner's acceptance of such amounts shall not
preclude it from disputing under Section 10.2 the accuracy of the amount of
Liquidated Damages owed as set forth on this statement.
5.6 Termination for Uncontrollable Circumstances. In the event of
material damage to or destruction of the Project not caused by the
negligence of Owner, which materially impairs the operation of the Project
for at least one hundred eighty (180) consecutive days, or if any part of
the Project or the Site is taken by eminent domain and such taking
materially impairs the operation of the Project, or in the event a Change
of Law which renders operation of the Project as intended illegal,
uneconomical or otherwise undesirable, Owner and Operator shall each have
the option in any of such circumstances to terminate this Agreement, and
the obligations of the Parties shall cease except for obligations that have
accrued prior to the effective date of such termination.
5.7 Rights and Remedies. Except as otherwise provided herein, all
rights and remedies of the Parties under any provision of this Agreement
shall be cumulative, and may, to the extent permitted by law, be exercised
concurrently or separately, and the exercise of any one right or remedy
shall not operate to preclude or waive the exercise of any other right or
remedy. With respect to equitable remedies, the Parties acknowledge that
any condition which incapacitates the operation of the Project or any part
thereof, constitutes immediate, imminent, substantial and irreparable harm
to owner and the Parties hereto consent to the entry of temporary immediate
injunctive relief to restrain such harm, where appropriate.
5.8 Determination of Performance Standards and Liquidated Damages.
The Performance Standards and Liquidated Damages for each Phase (the
"Standards") shall be jointly established by Owner and Operator based on
(i) the specific components selected by Owner, (ii) the manufacturers'
performance warranties for each component, (iii) the Electricity Purchase
Agreement between Owner and Electricity Purchaser, (iv) the Lender's
requirements, and (v) industry standards for the specific equipment
selected. Such Standards shall be reviewed and approved by Lender's
independent engineer. The Standards shall be prepared jointly by the
parties within sixty (60) days after execution of the Electricity Purchase
Agreement and receipt of the performance warranties, but in any event no
later than thirty (30) days after receipt of the commitment letter for
Project financing; if the Standards are not agreed by that time, the
provisions of Section 13.2 shall apply. The Standards shall include
adjustments for Force Majeure and for an Agreement Year in which a major
overhaul occurs. The Standards shall be affixed to this Agreement as
Appendix 2.
21
<PAGE>
ARTICLE 6
OPERATOR'S ANNUAL FEES
6.1 Annual Fee.
(a) Subject to the terms and conditions hereof (and in
particular the provisions of Article 19), Owner shall pay to Operator an
annual fee for the Agreement Year beginning on the Phase I Project
Acceptance Date, and each Agreement Year thereafter during the Term hereof,
as follows ("Phase I Annual Fee"):
Agreement Year Annual Fee
1-3 $ 900,000
4-15 $1,500,000
16-25 $1,900,000
(b) Subject to the terms and conditions hereof, in lieu of
the Phase I Annual Fee, Owner shall pay to Operator an annual fee for the
Agreement Year in which the Phase II Project Acceptance Date occurs, and
for each Agreement Year thereafter during the Term hereof as follows
("Phase II Annual Fee"):
Agreement Year Annual Fee
1-3 $2,100,000
4-15 $3,600,000
16-25 $4,600,000
In illustration and not limitation of the foregoing, if the Phase II
Project Acceptance Date occurs during the third Agreement Year, the Phase
II Annual Fee for that Agreement Year will be $2,100,000, and the Phase II
Annual Fee for the next succeeding Agreement Year will be $3,600,000.
(c) The first One Hundred Thousand Dollars ($1,000,000) of
each Phase I Annual Fee shall be payable prior to payment of any Debt
Service for that Agreement Year.
(d) The next Two Hundred Thousand Dollars ($2,000,000) of
each Phase I Annual Fee shall be increased annually by a percentage equal
to the Consumer Price Index Percentage and shall be payable prior to
payment of any Debt Service for that Agreement Year.
(e) Payment of the remainder of each Phase I Annual Fee
shall be subordinate to payment of Debt Service (with any amounts unpaid to
be cumulative without interest), and the amount thereof shall be adjusted
as set forth below:
(i) During Agreement Years 1 through 3, the
remaining Six Hundred Thousand Dollars ($600,000)
of the Annual
22
<PAGE>
Fee shall be increased by five percent (5%)
for each Agreement Year; and
(ii) During Agreement Years 4 through 25, Four
Hundred Thousand Dollars ($400,000) of the Annual
Fee shall be increased annually by the Consumer
Price Index Percentage.
In no event shall the portion of the Phase I Annual Fee described in
subsections (i) and (ii) above payable in any Applicable Agreement Year (as
defined below) be less than thirty percent (30%) of the equity distribution
made by Owner to its Partners for such Applicable Agreement Year. If any
equity distribution would exceed such portion of the Annual Fee, Owner
shall pay an amount equal to the excess to Operator at the time the
distribution is made to the Partners. For purposes of this Agreement, the
term "Applicable Agreement Year" shall mean any Agreement Year during the
period beginning on the Phase I Project Acceptance Date and ending on the
Full Operation Date.
(f) The first Two Hundred Thousand Dollars ($200,000) of
each Phase II Annual Fee shall be payable prior to payment of any Debt
Service for that Agreement Year.
(g) The next Four Hundred Thousand Dollars ($400,000) of
each Phase II Annual Fee shall be increased annually by a percentage equal
to the Consumer Price Index Percentage and shall be payable prior to
payment of any Debt Service for that Agreement Year.
(h) Payment of the remainder of each Phase II Annual Fee
shall be subordinate to payment of Debt Service (with any amounts unpaid to
be cumulative without interest), and the amount thereof shall be adjusted
as set forth below:
(i) During Agreement Years 1 through 3, the
remaining One Million Five Hundred Thousand
Dollars ($1,500,000) of the Annual Fee shall be
increased by five percent (5%) for each Agreement
Year; and
(ii) During Agreement Years 4 through end of Term,
One Million Dollars ($1,000,000) of the Annual Fee
shall be increased annually by the Consumer Price
Index Percentage.
All portions of the Phase II Annual Fee that escalate over time shall
use as their base year for calculating such escalations the Phase I Project
Acceptance Date.
23
<PAGE>
6.2 Adjustment of Annual Fee for Steam Purchased.
(a) The portions of the Phase I Annual Fee payable pursuant
to Section 6.1(h) hereof (collectively, "Subordinated Annual Fee") shall be
adjusted according to the following schedule which reflects the amount of
steam purchased by PTEC pursuant to the Amended Steam Purchase Agreement:
Percentage of
Subordinated Annual
Amount of Steam Purchased by PTEC Fee Payable
(in million Mlbs.)
4.6 or greater 100.00
4.5 - 4.599 96.15
4.4 - 4.499 92.30
4.3 - 4.399 88.45
4.2 - 4.299 84.60
4.1 - 4.199 80.75
4.0 - 4.099 76.90
3.9 - 3.999 73.05
3.8 - 3.899 69.20
3.7 - 3.799 65.35
3.6 - 3.699 61.50
3.5 - 3.599 57.65
3.4 - 3.499 53.80
3.3 - 3.399 50.00
(b) If any reduction of the Phase II Annual Fee is required
pursuant to Section 6.2(a), the reduction shall be applied first to those
portions of the Annual Fee described in Section 6.1(h)(i) or (ii). Any
adjustment in the Phase I Minimum Take Requirement or the Phase II Minimum
Take Requirement pursuant to a Penn Event shall also adjust the foregoing
table in accordance with sixty (60) days after execution of the Electricity
Purchase Agreement. Such adjustment ("Penn Event Adjustment") shall
include the effect, if any, of the loss to Operator of either or both the
34th and Civic Center Boulevard Account (Account No. 17-0255-0) that may
occur in conjunction with a Penn Event.
(c) (i) In the event that, in any Agreement Year, the
actual Heating Degree Days are less than the target Heating Degree Days of
4,866, the amount of steam which PTEC must purchase pursuant to Section
6.2(a) for PUPCO to obtain 100% of the Subordinate Annual Fee shall be
adjusted in accordance with the following formula:
24
<PAGE>
Adjusted Target Mlbs =
(Actual HDDs x 50% of Target Mlbs) + 50% Target Mlbs Target HDDs
Where:
Target Mlbs = 4.6 million Mlbs
Target HDDs = 4,866 Heating Degree Days ("HDDs") (the 20
year average HDDs for the Philadelphia
International Airport, 1969-1988 as reported by
the U.S. Weather Service)
Actual HDDs = Actual total year HDDs as reported by the
U.S. Weather Service for Philadelphia
International Airport
50% = Approximately one-half of PTEC's Target Mlb is
base load and not weather related
(ii) The adjusted target Mlbs will be substituted
in the table above for 4.6 million Mlb 100%
minimum payable range. The reduced payment
minimums will decrease from the adjusted target by
the same 100 thousand Mlbs increments identified
above.
(iii) The target 4.6 million Mlbs or the
adjusted target Mlbs shall also be adjusted
downward each Agreement Year to account for
reductions in steam output from the Project as a
result of Force Majeure, including system failures
at the Site not attributable to PTEC's or
Operator's negligence.
(iv) The minimum take levels shall also be
adjusted each Agreement Year to account for
reductions in steam output from the Project as a
result of Force Majeure, including system failures
at the site not attributable to PTEC's or
Operator's negligence.
(v) If PTEC purchases or pays for less than 3.3
million Mlbs in any Agreement Year, Operator will
not receive an Annual Fee for that year
25
<PAGE>
subject to a Penn Event Adjustment or an
adjustment for Force Majeure or other failures not
attributable to PTEC's or Operator's negligence.
(d) If during any Agreement Year prior to the Phase II
Acceptance Date the total steam purchased by PTEC exceeds 3,200,000 Mlbs.,
Operator shall also receive an amount realized by Owner for the sale of
such excess steam, as determined by Owner's accountants, based on line
items of Project expenditures and Debt Service as identified in the pro
forma utilized for Project financing. Such amount shall be payable within
ninety (90) days following the end of each Agreement Year.
(e) If during any Agreement Year prior to the Phase II
Acceptance Date the total steam purchased by PTEC exceeds 4,800,000 Mlbs.,
Operator shall also receive an amount equal to one-third (1/3) of the
incremental pre-tax profit realized by Owner for the sale of such excess
steam, as determined by Owner's accountants, based on line items of Project
expenditures and Debt Service as identified in the pro forma utilized for
Project financing. Such amount shall be payable within ninety (90) days
following the end of each Agreement Year.
6.3 Time for Payment.
(a) The portion of the Annual Fee due under Section 6.1(e)
or (h), as the case may be, shall be due and payable quarterly beginning at
the end of the first quarter (i.e., the first 3-month calendar period)
following the Project Acceptance Date and each quarter (i.e., each three-
month period) thereafter for the Term of this Agreement. The portion of
the Annual Fee due under Section 6.1(c) and (d), or (f) and (g) as the case
may be, shall be due and payable in equal monthly installments on or before
the tenth day of each month.
(b) Annual Fees or portions thereof which remain unpaid
will bear interest from the due date at the Prime Rate plus two percent
(2%).
(c) Failure to make payments described in Sections 6.1(c),
(d), (f) or (g), plus interest, within sixty (60) days of due date, after
thirty (30) days' written notice from Operator and opportunity to cure by
Owner and Lender, shall be a Default by owner pursuant to Sections 5.2 and
5.4.
(d) Failure to make payments described in Section 6.1(e) or
(h), as the case may be, plus interest, within one year of due date, after
thirty days' written notice from Operator and opportunity to cure by Owner
and Lender, shall entitle Operator to exercise Operator's right to purchase
the Project pursuant to Section 5.4(a).
26
<PAGE>
(e) Thirty (30) days prior to the end of each Agreement
Year, Owner shall forecast Project cash flow for the succeeding Agreement
Year using all assumptions as established and relied upon by Lender at the
time of Project financial closure but as adjusted to reflect actual Fuel,
fixed, variable, and debt costs for each of the previous twelve months. If
the pre-tax cash flows after all Debt Service for the Agreement Year are
projected to be less than two (2) times the portions of the Annual Fee
described in Section 6.1(e) or (h), as the case may be, due at the end of
the Agreement Year, the Owner shall pay one twelfth (1/12) of the portion
of the Annual Fee described in Section 6.1(d) to Operator at the end of
each month in the Agreement Year.
6.4 Electric Capacity Fee. In addition to the Phase I Annual Fees
set forth above, if Owner sells to PECO or another utility the additional
electric capacity to be created by the Phase I Project, Owner shall pay
PUPCO thirty percent (30%) of all payments received by Owner for such
capacity, payable within five (5) days after Owner receives each such
payment.
ARTICLE 7
INTENTIONALLY OMITTED
ARTICLE 8
REIMBURSEMENT
8.1 Reimbursement Costs. In addition to the Phase I and Phase II
Annual Fee, Owner shall pay the following Reimbursable Costs:
8.1.1 The actual cost of recruitment and employment of
permanent and temporary staff and specialists from and after the beginning
of the Phase I Mobilization Period, such costs to include employment-
related benefits applicable to such staff and specialists, provided that
such employment and employment-related benefits costs shall not exceed
those in effect for PTEC during the term of this Agreement, except that in
special cases where particular expertise is required, employment and
employment-related benefits costs in excess of those then in effect at PTEC
shall be included as Reimbursable Costs so long as such costs are in
conformity with then current market conditions for employment of people
with such expertise;
8.1.2 The actual cost of consumables, spare parts and repairs
and/or replacement components supplied by Operator in accordance with the
provisions of Sections 2.10.2, 2.10.3 and 4.5 hereof;
8.1.3 Any other direct costs incurred by Operator, such as
any Federal, state or other sales, use, value-added,
27
<PAGE>
gross receipts or similar tax with respect to the operation and maintenance
of the Project (such as a sales tax on direct cost of replacement parts
used by Operator), any insurance premium paid by Operator, subject to the
terms of Article 12, interest carrying costs (at a per annum rate not to
exceed the Prime Rate plus 2%) on any overdue payments due Operator by
Owner and the cost of water or chemicals shall be reimbursed to Operator
upon demand, if Operator is required to pay same, or paid directly by
Owner; provided, Operator shall pay the income and franchise taxes arising
out of any payments made hereunder to Operator.
8.1.4 Owner's obligation to pay Reimbursable Costs shall be
conditional only upon the total Reimbursable Costs for an Agreement Year
not exceeding the aggregate Reimbursable Costs shown on the Annual
Operating Plan for that Agreement Year. Any excess Reimbursable Costs in
any category over those shown on the annual Operating Plan may be offset by
Operator against savings in other categories.
8.2 Time for Payment. Reimbursable Costs shall be payable in
accordance with Article 10.
ARTICLE 9
EQUITY DISTRIBUTION LIMITATIONS
9.1 Equity Distribution Limitations.
(a) In the event that Owner intends to make distributions
to its general partners ("Partners"), Owner must do so on a quarterly basis
and must pay one-quarter of the portion of the Annual Fee described in
Section 6.1(e) or (h), as the case may be, to Operator for that Agreement
Year at the time of such distributions. Estimated quarterly payments of
the Annual Fee will be based on the prior year steam purchases by PTEC.
Overpayments and underpayments will be reconciled within sixty days
following the end of the Agreement Year.
(b) Owner agrees to limit distributions to Partners during
the first Agreement Year after the Full Operation Date to two-thirds
(66.66%) of Owner's profits (after payment of any taxes payable directly by
Owner). If Owner makes distributions to Partners in excess of two-thirds
of such profits, Owner will first post a letter of credit, naming the
Project as beneficiary, in the face amount of one-third (33.34%) of Owner's
profits. That letter of credit will become payable upon the exercise of
the Equity Purchase Option. The term of the letter of credit shall expire
upon the expiration of the Equity Purchase Option.
(c) All first Agreement Year equity earnings may be
distributed to the Partners and the Operator in proportion to their
respective ownership interests once Operator exercises its Equity Purchase
Option pursuant to Section 19.1.
28
<PAGE>
(d) Notwithstanding anything to the contrary set forth
herein, if Operator acquires the Acquired Interest in the Phase I Project,
and (i) the amount payable to Operator as an Annual Fee for the Phase I
Project in any Applicable Agreement Year, plus the capacity fee payable
under Section 6.4 (if applicable) (collectively, "Phase I Payment"),
exceeds (ii) the equity distribution received by Operator following such
acquisition, Operator shall be entitled to receive the excess of the full
amount of the Phase I Payment over the equity distribution.
ARTICLE 10
BILLING AND PAYMENTS
10.1 Invoices. Operator shall render invoices to Owner monthly for
Reimbursable Costs. All invoices shall be accompanied by all relevant
documentation including payroll data and benefits computations for the
relevant staff and specialists and all relevant invoices for consumables,
spare parts and replacement components. Each invoice shall be paid by
Owner, subject to Section 10.2, within thirty days following receipt of
each invoice, and unpaid invoices shall bear interest pursuant to Section
20.18 if unpaid after such 30 day period. Each invoice shall be paid by
Operator, subject to Section 10.3, not later than thirty (30) days after
receipt thereof by Operator. Fuel invoices shall be paid directly by
Owner.
10.2 Owner's Dispute. Owner may, within fifteen (15) days after
receiving any invoice or statement rendered pursuant to Sections 5.5(c),
10.1 or 8.1, by written notice to Operator, dispute any amount set forth in
such invoice or statement; provided that Owner shall pay undisputed amounts
notwithstanding the existence of any dispute with respect to the balance of
such payment.
10.3 Operator's Dispute. Operator may, within fifteen (15) days after
receiving an invoice from Owner, by written notice to Owner, dispute any
amount set forth in such invoice; provided that Operator shall pay
undisputed amounts notwithstanding the existence of any dispute with
respect to the balance of such payment.
10.4 Dispute Resolution. Operator and Owner shall, as soon as
practicable after either Party's receipt of any notice of a dispute
pursuant to Section 10.2 or 10.3 above, attempt in good faith to resolve
all disputed items described therein. If all such disputed items are not
so resolved within thirty (30) days after receipt by either Party of such
notice, either Party may, after sixty (60) days but within ninety (90) days
thereafter, commence dispute resolution procedures pursuant to Article 13,
in accordance therewith. In the event that such dispute resolution
procedures result in an award in favor of either Party, the other
29
<PAGE>
Party shall pay any balance owed with interest as provided in Section
20.18.
ARTICLE 11
FORCE MAJEURE; STRIKES
11.1 Effect of Force Majeure. In the event that either Operator or
Owner shall be prevented by Force Majeure from performing or fully
performing its obligations under this Agreement (other than obligations to
make payments required herein, which may not be excused by Force Majeure),
the Party unable to perform or fully perform shall promptly notify the
other Party and shall keep the other Party informed of the situation for
the duration of such event. Upon the giving of such notice, the
obligations of the Party giving the notice shall be reduced during, but no
longer than, the continuance of the Force Majeure, provided such
obligations shall be reduced only to the extent the affected party's
performance is adversely affected solely by the Force Majeure, and only to
the extent such adverse effects cannot be mitigated by the Affected Party's
best efforts. The affected Party shall use its best efforts to resume
performance as quickly as possible and shall suspend or operate at less
than full performance only for such period of time as is necessary as a
result of the Force Majeure.
11.2 Strikes. In the event of a whole or partial non-operation of the
Project due to a strike or other form of labor action by Operator's
personnel, Owner shall have the right to continue operating the Project and
to retain such other personnel or agents as Owner in its sole discretion
deems necessary or advisable for such purposes. If any strike or labor
stoppage continues for a period beyond thirty (30) days, Owner shall be
entitled to terminate this Agreement.
ARTICLE 12
INSURANCE
12.1 Insurance Coverage.
(a) During the Term of this Agreement, Operator shall
provide and maintain such policies of insurance as may be requested by
Owner in compliance with the Credit Agreement. The terms of all such
policies shall comply with the provisions of the Credit Agreement. The
cost of all such insurance shall be Reimbursable Costs as described in
Article 8.
(b) Certificates of Insurance evidencing the coverages
provided by Operator and copies of such policies shall be delivered to
Owner prior to the beginning of the Phase I Mobilization Period. Owner,
the Lender, Steam Purchaser, and any
30
<PAGE>
Person who owns an interest (as mortgagee, secured party, or otherwise) in
the Site or who has the right (present or contingent) to own the Project,
and any of their respective successors and assigns, shall be named as
additional insureds under specified policies. These certificates as well
as all insurance policies required by this Article shall contain a
provision that the policy will not be canceled or allowed to expire or
amended in any material manner (including as to scope, type or limits of
coverage), until at least ten (10) days prior written notice or such
additional advance notice as may be required under the Credit Agreement has
been given to Owner and all others Persons named as additional insiders.
Should Operator fail to provide or maintain insurance coverage pursuant to
this Section, Owner shall have the right but not the obligation to provide
or maintain such coverage.
(c) All insurance provided by Operator shall be with
reputable and solvent insurance carriers which are reasonably satisfactory
to Owner and Lender and licensed to do business in the Commonwealth of
Pennsylvania.
12.2 Waiver of Subrogation. Operator and Owner hereby waive any and
every claim for recovery from the other for any and all loss or damage
resulting from the performance of this Agreement, to the extent such loss
or damage is recovered under the insurance policies described herein.
ARTICLE 13
DISPUTE RESOLUTION
13.1 Procedure. Except as expressly set forth in Section 13.2 below,
in the event a dispute arises between Owner and Operator regarding the
application or interruption of any provision of this Agreement, the
aggrieved Party shall promptly notify the other Party to this Agreement of
the dispute within ten (10) business days after such dispute arises. If
the parties shall have failed to resolve the dispute within ten (10)
business days after delivery of such notice, each Party shall, within five
(5) business days thereafter, nominate a senior officer of its management
to meet at the Site, or at any other mutually agreed location, to resolve
the dispute. Should the Parties be unable to resolve the dispute to their
mutual satisfaction within ten (10) business days after such nomination,
each Party shall have the right to pursue any and all remedies available at
law or in equity. Without limiting the validity of the foregoing
covenants, the failure or inability of either Party to give the required
notice or make the required nomination shall never be construed to stop or
deny such Party's right to pursue any and all remedies otherwise available
to such Party at law or in equity.
31
<PAGE>
13.2 Binding Arbitration
(a) In the event that any claim, controversy or dispute
arises between the Owner and the Operator concerning Subsections 2.1.2,
3.2, 4.3, 4.5, 5.5, 5.8, 6.1(d), 6.1(g), 6.2(a), 8.1.1 or 8.1.2
(collectively, "Arbitration Subsections") or any approvals, agreements or
concurrence required under any of the Arbitration Subsections shall not
have been timely given then the Owner and the Operator shall undertake in
good faith to resolve the dispute amicably as described in Section 13.1.
(b) Irrespective of any other provision of this Agreement,
if the Owner and the Operator cannot agree within a two (2) week period of
time after written notice respecting the formulation or performance of any
obligation relating to the proposed Annual Operating Plan, the Performance
Standards, or the Reimbursable Costs pursuant to any of the Arbitration
Subsections, such failure to agree shall be deemed a dispute and, exclusive
of any other remedy (subject however to State law), the Owner or the
Operator may, following the two (2) week period, by written notice to the
other party hereto, bring the dispute to an arbitration panel selected
pursuant to Subsection (c) below. The arbitration panel shall assume
exclusive jurisdiction over the dispute and shall be required to make a
final determination, including specific findings of fact required to reach
such determination, within twenty (2) days from the selection of the panel
as to each specific dispute contemplated above, and, if appropriate,
findings of what remedies are due to the Owner and the Operator, if any,
pursuant to the terms of this Agreement. The Owner and the Operator shall
prepare in writing a statement of their positions with supporting facts and
data for the arbitration panel within ten (10) days after receipt of
written notice of the dispute being brought to arbitration, and shall
submit statement to the arbitration panel when it is selected.
(c) The arbitration panel shall consist of representatives
of three independent engineering firms, one of which shall be selected by
the Owner, one of which shall be selected by the Operator, each within ten
(10) days of the notice of arbitration, the third shall be selected by the
first two within ten (10) days of their selection. In the event that any
arbitrator shall resign or otherwise fail to perform his duties, his
successor shall immediately be selected by the party who selected such
arbitrator in the first instance.
(d) The decision of the arbitration panel shall be binding
and enforceable on both parties. The decision of the panel shall be based
solely of findings of fact and shall be based on the following standards:
(1) Consistently with competitive Operation and Maintenance
Contracts in the marketplace;
32
<PAGE>
(2) Consistency with standard practice as may reasonably be
required to obtain Project financing; and
(3) Where available, consistency with the specific
components selected by the Owner, the Manufacturer's
Performance Warranties, and the Project Acceptance Tests.
(e) The costs of arbitration shall be borne equally by the
parties for the first three (3) arbitrations in any calendar year, and
thereafter by the party initiating the arbitration.
(f) Persons other than the Owner and the Operator may be
joined in such proceedings to the extent that they consent to the
jurisdiction of the arbitration panel.
(g) The Owner and the Operator shall continue to perform
their respective obligations under this Agreement during any arbitration or
court proceeding.
(h) Any proceedings held by the arbitration panel shall be
held in Philadelphia, Pennsylvania.
ARTICLE 14
PAYMENT OF FINES AND PENALTIES
14.1 Payment of Fines and Penalties. Payment at any time of any fine
or penalties payable to any state or the United States as a result of the
Operator's gross negligence in failing to operate and maintain the Project
in accordance with Requirements of Law or Approvals and Permits applicable
to the operation and maintenance of the Project shall be the sole
responsibility of Operator and such fines or penalties shall not result in
any increase of the costs to be borne by Owner.
ARTICLE 15
DEFECTIVE WORK
15.1 Work to be Fit. Operator warrants that the operation and
maintenance services described in Article 2 will be performed properly, in
a competent, cost-conscious manner and by qualified personnel, in
accordance with sound and generally accepted operating and engineering
practices, and that such services will be generally fit for their
prescribed purpose.
15.2 Consequence of Breach. In the event Operator fails to perform
its work as required by this Agreement, Operator shall re-perform any
defective service, replace any unfit or unquali-
33
<PAGE>
fied personnel and repair or replace any components of the Project damaged
as a consequence of such failure (but only the components damaged by
Operator, excluding consequential damage for lost revenues).
15.3 Vendor Warranties. Operator shall obtain, when available on
commercially reasonable terms, one-year vendor warranties for all spare
parts and replacement parts, other than parts having a useful life of less
than one year and parts supplied by Owner pursuant to Section 3.2 or 3.4.
Any warranties received from outside vendors or subcontractors shall be
passed through to Owner, but Operator shall maintain, administer and assist
Owner in the enforcement of such warranties.
ARTICLE 16
OPERATOR'S REPRESENTATIONS
Operator represents and warrants that:
16.1 Corporate Standing; Authorization. Operator is a corporation
duly organized, validly existing and in good standing under the laws of
Pennsylvania. The execution, delivery and performance of this Agreement
are within Operator's corporate powers. The execution, delivery and
performance of this Agreement (i) has been duly authorized by all requisite
corporate action; and (ii) does not violate any existing Requirement of Law
or any agreement, certificate, undertaking, commitment, instrument or other
document to which it is a party or by which it or any of its assets may be
bound or affected.
16.2 Enforceability. This Agreement constitute Operator's legal,
valid and binding obligation enforceable against it in accordance with its
terms, except as such enforcement may be limited by bankruptcy, moratorium,
insolvency and similar debtor rights laws, and has been executed and
delivered by its duly authorized officers.
16.3 No Violation of Law. Operator is not in violation of any
Requirement of Law which could materially affect Operator's performance of
any obligations under this Agreement.
16.4 Litigation. Operator is not a party to any legal,
administrative, arbitration, investigatorial or other proceeding or
controversy pending, or, to the best of its knowledge, threatened, which
could materially adversely affect its ability to perform its obligations
under this Agreement.
16.5 Qualifications. Operator (i) has examined each of the Project
Agreements thoroughly and is very familiar with their terms; (ii) is fully
qualified to operate and maintain the Project in accordance with the terms
hereof; and (iii) has thoroughly familiarized itself with the conditions
under which
34
<PAGE>
the obligations entered into hereunder are to be performed and correlated
its observations with the requirements hereof.
16.6 Waiver of Liens. Operator will cause such subcontractor retained
by Operator to waive and release, to the extent it may do so, any and all
liens and/or encumbrances which it or they have or may have against Owner
or the Project on account of work to be performed by Operator pursuant to
this Agreement. Before any subcontractor retained by Operator performs any
work pursuant to this Agreement, Operator shall (i) obtain the consent of
each such subcontractor to such a waiver of liens and encumbrances; and
(ii) file a copy of such a waiver of liens and encumbrances with
Governmental Authorities required by Owner.
16.7 Approvals and Permits. Operator is, or will be prior to the
Phase I Project Acceptance Date, the holder of all material Approvals and
Permits generally required to conduct its business in the Commonwealth of
Pennsylvania. Except for Approvals and Permits required to be maintained
by owner pursuant to Section 3.5, or to be provided by the Construction
Contractor pursuant to either Turnkey Construction Agreement, no consent
(except consents, if any, obtained prior to the date hereof) of any Person,
an no Approval and Permit of, exemption by, notice or report to, or
registration, filing or declaration with, any Person, is or will be
required, in connection with its execution, delivery and performance of
this Agreement.
16.8 General. No representation or warranty by Operator contained
herein contains any untrue statement of any material fact or any omission
of any material fact necessary to make such representation or warranty not
misleading in light of the circumstances under which it was made.
ARTICLE 17
OWNER'S REPRESENTATIONS
Owner represents and warrants as follows:
17.1 Good Standing; Authorization. Owner is a general partnership
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. The execution, delivery and performance of
this Agreement are within Owner's partnership powers. The execution,
delivery and performance of this Agreement (i) has been duly authorized by
all requisite corporate action; and (ii) does not and will not violate any
Requirement of Law or any agreement, certificate, undertaking, commitment,
instrument or other document to which it is a party or by which it or any
of its assets may be bound or affected.
17.2 Enforceability. This Agreement constitutes Owner's legal, valid
and binding obligation, enforceable against it in
35
<PAGE>
accordance with its terms, except as such enforcement may be limited by
bankruptcy, moratorium, insolvency and similar debtor rights laws, and has
been executed and delivered by its duly authorized officers.
17.3 No Violation of Law. Owner is not in violation of any
Requirement of Law which could materially affect Owner's performance of any
obligations under this Agreement.
17.4 Litigation. Owner is not a party to any legal, administrative,
arbitration, investigatorial or other proceeding or controversy pending,
or, to the best of its knowledge, threatened, which could materially
adversely affect its ability to perform its obligations under this
Agreement.
17.5 Approvals and Permits. Owner is, or will be prior to the Phase I
Project Acceptance Date, the holder of all material Approvals and Permits
generally required to conduct its business will acquire all Approvals and
Permits necessary to operate the Project. Except for the Approvals and
Permits to be maintained by Owner pursuant to Section 3.5 hereof or to be
provided by the Construction Contractor pursuant to either Turnkey
Construction Agreement, no consent (except consents, if any, obtained prior
to the date hereof) of any person, and no Approval and Permit of, exemption
by, notice or report to, or registration, filing or declaration with, any
Person, is or will be required, in connection with its execution, delivery
and performance of this Agreement.
17.6 Contracts. Owner has obtained, or will obtain prior to the Phase
I Project Acceptance Date, all necessary contracts for Fuel and electricity
to operate the Project.
17.7 General. No representation or warranty by Owner contained herein
contains any untrue statement of any material fact or any omission of any
material fact or any omission of any material fact necessary to make such
representation or warranty not misleading in light of the circumstances
under which it was made.
ARTICLE 18
INDEMNIFICATION
18.1 Operator Indemnity. Operator shall indemnify, defend and
harmless Owner and its officials, officers, employees and agents (all of
the aforementioned being hereinafter referred to as the "Owner Indemnified
Parties") from and against any Claims arising out of, incident to or
related to the Operator's operation of the Project, made by any Person
(other than the Owner Indemnified Parties), whether based on contract
(including any breach of any agreement respecting any subcontractor but
specifically excluding any breach of the Project Agreements), strict
liability or otherwise (except to the extent any such
36
<PAGE>
Claims arise out of, are incident to or related to the negligence of or the
breach of this Agreement by any of the Owner Indemnified Parties, in which
event the Claims shall be borne by the Parties in proportion to the
respective fault of each Party) including (i) any claims by or otherwise
involving any employee of Operator, any subcontractor, any person directly
or indirectly employed by any of them and any other person for whose acts
they may be liable or otherwise responsible, and (ii) any claims respecting
or made by any Governmental Authority, infringement of proprietary rights,
non-payments of amounts due subcontractors, bodily injury, sickness, death,
injury, and injury or destruction of tangible property of any Person. The
indemnification obligations under this Article 18.1 shall not be limited by
an limitation on the amount or type of damages, compensation or other
employee benefit acts or insurance policies. The indemnity provisions
contained in this Article 18.1 shall in no manner amend or otherwise modify
or limit any other of Operator's obligations expressed elsewhere in this
Agreement except as expressly provided.
18.2 Owner Indemnity. Owner shall indemnify, defend and hold harmless
Operator and its officials, officers, employees and agents (the "Operator
Indemnified Parties") from and against any Claims arising out of, incident
to or related to Owner's ownership of the Project, made by any Person
(other than Operator and the Operator Indemnified Parties) whether based on
contract, tort (including negligence, by commission or omission), strict
liability or otherwise (except to the extent any such Claims arise out of,
are incident to or related to the negligence of or the breach of this
Agreement by any of the Operator Indemnified Parties, in which event the
Claims shall be borne by the Parties in proportion to the respective fault
of each Party) including (i) any claims by or otherwise involving any
employee of Owner, any subcontractor, any person directly or indirectly
employed by any of them and any other person for whose acts they may be
liable or otherwise responsible, and (ii) any claims respecting or made by
any Governmental Authority, infringement or proprietary rights, non-
payments of amounts due subcontractors, bodily injury, sickness, death,
injury, and injury or destruction of tangible property of any Person. The
indemnification obligation under this Article 18.2 shall in no manner amend
or otherwise modify or limit any other of Owner's obligations expressed
elsewhere in this Agreement.
18.3 Cooperation Regarding Claims. If any Party hereto (each an
"Indemnified Party") shall receive notice or have knowledge of any Claim
that may result in a claim under this Article 18, such Indemnified Party
shall, as promptly as possible, give the indemnifying Party notice of such
Claim,
37
<PAGE>
including a reasonably detailed description of the facts and circumstances
relating to such Claim, and a complete copy of all notices, pleadings and
other papers related thereto, and the basis for its potential claim for
indemnification with respect thereto, and the basis for its potential claim
for indemnification with respect thereto in reasonable detail; provided
that failure promptly to give such notice or to provide such information
and documents shall not relieve the indemnifying Party or any obligation of
indemnification it may have under this Article 18 unless such failure
materially diminishes the ability of such indemnifying Party to respond to
or to defend the Indemnified Party failing to give such notice against such
Claim. The Indemnified Parties shall consult with each other regarding,
and cooperate in respect of, the response to and the defense of any such
Claim, and the Party against whom indemnification is claimed shall, upon
its acknowledgment in writing of its obligation to indemnify the
Indemnified Party seeking indemnification, be entitled to assume the
defense or to represent the interests of the Indemnified Party seeking
indemnification in respect of such Claim, which shall include the right to
select and direct legal counsel and other consultants, appear in
proceedings on behalf of such Indemnified Party, and to propose, accept or
reject offers of settlement, all at its sole cost.
ARTICLE 19
OPTION TO PURCHASE
19.1 Option to Acquire Interest.
(a) Operator shall have the option ("Equity Purchase
Option"), in Operator's sole discretion, to acquire a one-third (1/3)
interest ("Acquired Interests") in either the Phase I Project alone, if the
Phase II Project is terminated, or in the entire Project, Phase I and Phase
II ("Entire Project"), if the Phase II Project is completed.
(b) Operator may elect to acquire the Acquired Interest in
the Phase I Project by giving notice to Owner ("Phase I Option Notice") at
any time during the sixty (60) day period ("Phase I Option Period")
beginning on the later to occur of (i) the first anniversary of the Phase I
Acceptance Date (provided that construction of Phase II has not then been
commenced), or (ii) termination of Phase II, as described in Section 9 of
the Amended Steam Venture Agreement. If Operator gives the Phase I Option
Notice during the Phase I Option Period, the purchase price for the
Acquired Interest shall be Five Hundred Thousand Dollars ($500,000.00),
payable by certified check or wire transfer no later than one hundred
eighty (180) days after delivery of the Phase I Option Notice. At least
sixty (60) days prior to the beginning of Phase I Option Period, Owner
shall provide Operator with financial projections and pro forma
calculations for the Phase I Project, subject to Operator's prior execution
of a reasonable confidentiality agreement. Failure by
38
<PAGE>
Owner to provide such information by the time specified herein shall
automatically extend the commencement of the Phase I Option Period until
sixty (60) days after such information is provided.
(c) Operator may further elect to acquire the Acquired
Interest in the Entire Project by giving notice to Owner ("Entire Project
Option Notice") at any time during the sixty (60) day period ("Entire
Project Option Period") beginning on the first (1st) anniversary of the
Phase II Acceptance Date. If Operator gives the Entire Project Option
Notice during the Entire Project Option Period, the purchase price for the
Acquired Interest in the Entire Project shall be Two Million Dollars
(2,000,000.00), payable by certified check or wire transfer no later than
one hundred eighty (180) days after delivery of the Entire Project Option
Notice. At least sixty (60) days prior to the beginning of the Entire
Project Option Period, Owner shall provide Operator with financial Project,
subject to Operator's prior execution of a reasonable confidentiality
agreement. Failure by Owner to provide such information by the time
specified herein shall automatically extend the commencement of the Entire
Project Option Period until sixty (60) days after such information is
provided.
(d) If first Agreement Year pre-tax cash flow after the
Phase II Project Acceptance Date is less than $4.5 million after Debt
Service has been paid, then in the event that Operator exercises its Phase
II Equity Purchase Option under Section 19.1(b), (i) the portion of the
first Agreement Year Annual Fee described in Section 6.1(h)(i) shall be
adjusted to equal one third of the first Agreement Year pre-tax cash flow
and (ii) the cost to Operator to exercise its Phase II Equity Purchase
Option pursuant to Section 19.1(b) shall be $500,000 plus the amount of the
first Agreement Year Annual Fee under Section 6.1(h)(i) as adjusted.
19.2 Effect on Annual Fee. Upon Operator's acquisition of the
Acquired Interest pursuant to Section 19.1, the portion of the Annual Fee
described in Section 6.1(e) or (h) (as the case may be) shall no longer be
due or payable. Notwithstanding anything to the contrary contained herein,
Operator shall have no claim to any portion of the purchase price paid for
the Acquired Interest.
19.3 Option to Acquire Entire Project. Operator shall have the
option, in Operator's sole discretion, to acquire the Entire Project
Project (or any portion thereof not then owned by Operator) by giving
notice to Owner at any time during the thirty (30) day period beginning on
the twenty-fifth (25th) anniversary of the Full Operation Date. The
purchase price for the Project shall equal ninety percent (90%) of the Fair
market Value of the outstanding equity in the Project still held by Owner
at that time, as determined pursuant to Appendix 5 of this Agreement.
39
<PAGE>
19.4 Right of First Purchase.
(a) In the event that Owner or its Partners elect to offer
any interest in the Project or Owner for sale to any party, Owner and/or
its Partners shall first offer such interest to Operator for a period of
thirty (30) days, and shall offer such interest to a third party only if
Operator fails during such thirty (30) day period to notify Owner of
Operator's intent to purchase the interest.
(b) If Owner or its Partners thereafter reach an agreement
to sell an interest in the Project or the Owner to a third party, Owner
and/or its Partners shall offer Operator the option to purchase the
interest on the same terms and conditions by notice to Owner within five
(5) business days following receipt of such agreement.
(c) In the event Owner or its Partners receive a written
offer to acquire all or any portion of the Project, or any interest therein
or its Owner, Owner or its Partners shall immediately provide Operator with
a copy of such offer. Operator shall have thirty days following receipt of
such offer to give Owner or the Partners, as the case may be, notice of
Operator's intention to acquire the interest under the same terms and
conditions as contained in the offer. Failure by Operator to give such
notice to Owner or the Partners within such thirty (30) day period shall
constitute a waiver of this right. If Operator does not elect to acquire
the interest under the terms of the offer, Owner or the Partners, as the
case may be, may complete the sale of the interest to the purchaser in
strict accordance with the terms and conditions of the offer. In the event
that any change is made in the offer, or that the purchaser under the offer
fails to complete closing in accordance with the terms of the offer, this
right of first refusal shall once again become fully operative.
19.5 Ownership Limitations.
(a) Operator's right to acquire an interest in the Project
or the Owner pursuant to this Article 19 shall be limited to those levels
of investment which will not cause the Project to become subject to
regulation under the Federal Public Utilities Holding Company Act
("PUHCA"), or to lose its qualifying facilities ("QF") status under the
Federal Power Act ("FPA"), as each such Act may be amended from time to
time. If, in order for Operator to exercise the Equity Purchase Option set
forth in Sections 19.1 and 19.2, a reduction in equity ownership is
required to avoid Federal regulation under PUHCA or loss of QF status under
the FPA, Operator and Owner shall share proportionately the obligation to
reduce their respective equity positions in the Project to 25% each.
Subsequent to the expiration of the Phase I Option Period or the Entire
Project Option Period (as defined in Section 19.1), if any party takes
action that subjects the Project to Federal regulation under PUHCA or to
losing QF
40
<PAGE>
status under the FPA, such party shall immediately reduce its interest in
the Project as required to avoid such consequences.
(b) In the event any reduction of equity ownership is
required pursuant to the foregoing paragraph, the Party not causing such
failure shall have the first right to negotiate the purchase of such equity
on a pro rata basis within thirty (30) days of the tender of such offer.
If an agreement cannot be reached within the thirty (30) day period, the
Party who is required to reduce its ownership shall be free to negotiate
the sale of the equity to a non-affiliated third party. In the event that
any equity owner of the Project at any time sells all or any portion of its
interest in the Project to an electric utility, so that PUHCA or QF status
is violated, that owner shall immediately, and on an ongoing annual basis,
compensate the other owners for the losses incurred as a result of
regulation under PUHCA or loss of QF status.
19.6 Status. Owner agrees to identify Operator as a co-developer of
the Project in all publications, news releases, and other communications
with the public, until the Phase I Option Period or the Entire Project
Option Period has expired without Operator exercising its Equity Purchase
Option under Section 19.1. The identification of Operator as co-developer
of the Project will not give Operator any rights not otherwise provided
herein or in the Project Agreements.
19.7 Dividend Restriction. Owner shall make no dividend distributions
to any of its Partners, incur any debts to any of its Partners or make any
payments of any kind to any of its Partners unless such distributions,
debts or payments are either (i) expressly authorized by the Credit
Agreement, (ii) budgeted in the final financial pro forma, or (iii) agreed
to in writing in advance by Operator. Pursuant to Section 9.1, one-third
(33.34%) of all profits of the Project shall be held in escrow by owner
until the expiration of the Equity Purchase Option (if Operator does not
exercise the Equity Purchase Option) or the day after Operator acquires the
Acquired Interest (if Operator exercises the Equity Purchase Option).
ARTICLE 20
MISCELLANEOUS PROVISIONS
20.1 Entire Agreement. This Agreement and the other Project
Agreements together contain the entire understanding of the Parties with
respect to the subject matter hereof and supersede any and all prior
agreements and commitments with respect thereto.
20.2 Further Assurances. Each Party agrees that upon request of any
other Party, it shall, from time to time, do any and all other acts and
things as may reasonably be required to
41
<PAGE>
carry out its obligations hereunder and to consummate the transactions
contemplated hereby, including the execution and delivery of documents.
20.3 Amendments. No change, amendment of modification of this
Agreement shall be valid or binding upon the Parties unless made in a
writing signed by all Parties.
20.4 Joint Effort. Preparation of this Agreement has been a joint
effort of the Parties and this Agreement shall not be construed more
severely against one of the Parties.
20.5 Terminology. All personal pronouns used in this Agreement,
whether used in masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and vice versa.
Titles of Articles and Sections are for convenience only, and neither limit
nor amplify the provisions of this Agreement. This "Agreement" shall
always be deemed to mean this Agreement and the Appendices hereto. All
references herein to Articles, Sections or subsections shall refer to the
corresponding Articles, Sections or subsections of this Agreement unless
specific reference is made to Articles, Sections or subsections of another
document. Use of the words "hereby", "herein", "hereof" and similar words
shall be deemed to refer to this Agreement in its entirety and not merely
to the Article, Sections or subsections thereof wherein any such word may
appear.
20.6 Notice. Any notice, demand, offer, consent, report, approval or
other written instrument required or permitted to be given pursuant to this
Agreement shall be in writing signed by the Party giving such notice and
shall be hand delivered or sent by overnight delivery service or by
certified mail to the other Party at the following address:
(a) if delivered to Owner:
Grays Ferry Cogeneration Partnership
225 S. 8th Street
Philadelphia, PA 1906
Attention:
(b) if delivered to Operator:
President
Philadelphia United Power Corporation
2600 Christian Street
Philadelphia, PA 19146
Each Party shall have the right to change the place to which notice shall
be sent or delivered by similar notice sent or like manner to the other
Parties. The effective date of notice issued
42
<PAGE>
pursuant to this Agreement shall be as of the addressee's receipt of such
notice.
20.7 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance(s) shall be invalid or
unenforceable to any extent, (a) the remainder of this Agreement and the
application of such provisions to other Person(s), entity(ies) or
circumstance(s) shall not be affected thereby and (b) each such provisions
shall enforced to the greatest extent permitted by law.
20.8 Assignment. Except for an assignment or subcontract to PTEC,
which Operator may elect in its sole discretion, Operator shall neither
assign nor otherwise transfer this Agreement (or written consent of Owner
and Lender (if Lender requires that its consent to be obtained) and any
such assignment, subletting or other transfer without such consent shall be
void. Owner shall have the right to assign this Agreement (i) as security
for or as required by any lender of funds to Owner or (ii) in connection
with a sale or transfer of the Project and/or the Site Lease.
20.9 No Waiver. No consent, or waiver, express or implied, by a Party
to or of any breach or default by the Party in the performance by it of any
of its obligations hereunder shall be deemed or construed to be a consent
or waiver to or of any other breach or default in the performance by such
Party of the same or any other obligation of such Party hereunder. Except
as otherwise provided herein, failure on the part of a Party to complain of
any act or failure to act of the other Party or to declare such other Party
in default, irrespective of how long such failure continues, such not
constitute a waiver by a Party of its rights hereunder.
20.10. Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania, exclusive of conflicts of laws provisions. For the purposes
of any suit, action or proceeding arising out of the Project, this
Agreement, or any of the Project Agreements, Owner and Operator hereby
consent and submit to the exclusive jurisdiction and venue of any of the
courts of the Commonwealth of Pennsylvania, and irrevocably agree that
service of process by certified mail, return receipt requested addressed as
provided in Section 20.6 shall be deemed in every respect effective and
valid personal service of process. Owner and Operator irrevocably waive
any objection which they may nor or hereafter have to the laying of venue
in such courts and any claim that such suit, action or proceeding has been
brought in an inconvenient forum.
20.11 Successors and Assigns. Subject to the restrictions on
transfers set forth herein, this Agreement shall inure to the
43
<PAGE>
benefit of, be binding upon and be enforceable by and against the Parties
and their respective successors and assigns.
20.12. Appendices. All Appendices referred to in this Agreement
shall be fully incorporated into this Agreement by such reference and shall
be deemed to be an integral part of this Agreement.
20.13 Relationship of Parties.
(a) Nothing contained in this Agreement shall be construed
as constituting a joint venture or partnership between Operator and Owner.
Operator shall be deemed to be an independent contractor. Operator's
creditors shall not be third party beneficiaries under this Agreement.
(b) Operator hereby declares that it is engaged in an
independent business and agrees to perform the services as an independent
contractor not as the agent, employee or servant of Owner. Operator has
and hereby retains the right to exercise full control and supervision of
its services and full control over the employment, direction, compensation
and discharge of all persons assisting it in the performance of this
Agreement. Operator agrees to be solely responsible for all matters
relating to the payment of its employees, including compliance with social
security, withholding and all other regulations governing such matters.
Operator agrees to be responsible for its own actions and those of its
subordinates, employees and subcontractors during the life of this
Agreement. Without Owner'' approval, Operator shall have no authority to
make any statements representations or commitment or take any actions which
shall be binding upon Owner.
20.14 Survival of Agreements. All of the representations,
warranties, covenants and agreements of each of the Parties shall survive
the execution and delivery and performance of this Agreement and the
consummation of the transaction contemplated hereby except as provided
herein.
20.15 Dollar Amounts. All amounts of money in this Agreement are
denominated in United States Dollars.
20.16 Business Days. In the event that an obligation to be
performed under this Agreement falls due on a Saturday, Sunday or legal
holiday in the Commonwealth of Pennsylvania, the obligation shall be deemed
due on the next business day thereafter.
20.17 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one agreement. If shall not be
necessary that any counterpart be signed by all Parties so long as each
Party have executed two counterparts.
44
<PAGE>
20.18 Overdue Obligations to Bear Interest. Except as set forth
in Section 6.3(b), all amounts due hereunder, whether as damages, credits,
revenue or reimbursements, that are not paid when due shall bear interest
at 1% over the Prime Rate on the amount outstanding from time to time, on
the basis of a 365-day year, counting the actual number of days elapsed,
and all such interest accrued at any time shall, but only to the maximum
extent permitted by applicable law, be deemed added to the amount due, as
accrued.
20.19 Proprietary Information.
(a) If either Party transmits to the other any information
(including, without limitation, drawings, technology, reports and designs)
which the disclosing Party designated in writing as "proprietary
information", the receiving Party shall receive and hold such proprietary
information in confidence, shall use it exclusively in connection with the
Project (including necessary disclosures on a proprietary basis to others
directly engaged in the operation or financing of the Project such as
consultants, trustees and lenders engaged for that purpose provided that
such third Party shall consent in writing to be bound by the provision of
this Section 20.19, but in any event avoiding disclosure to other Project
suppliers) and shall not publish or otherwise disclose it to others.
(b) Notwithstanding the foregoing restrictions, either
Party will have the right to disclose proprietary information furnished
hereunder to a Governmental Authority to the extent required by such
Governmental Authority; provided, however, that if such Party undertakes to
so use such proprietary information, it agrees to give the other Party
advance written notice of such undertaking, to make reasonable efforts to
secure confidential treatment of such proprietary information by the
Governmental Authority in question and to permit such other Party to
participate in discussions with such Governmental Authority with regard to
such confidential treatment are unsuccessful, the owner of the proprietary
information shall have the right, if legally permissible, to revise such
proprietary information to make it nonproprietary or to minimize the loss
of its proprietary value.
20.20 No Consequential Damages. In no event shall either Party be
liable (whether based on contract, indemnity, warranty, tort, strict
liability or otherwise) for any special, incidental, exemplary, indirect or
consequential damages, including but not limited to, loss of profits or
revenues arising from the performance or non-performance of such Party's
obligations under this Agreement.
45
<PAGE>
20.21 Environmental Liability.
(a) In no vent shall Owner be responsible for present or
future "Claims" (hereinafter defined) directly or indirectly related to or
arising out of the actual or alleged existence, generation, use,
collection, treatment, storage, transportation, recovery, removal,
discharge or disposal of "Hazardous Material" (hereinafter defined) at the
Site and/or adjacent areas, arising out of the period prior to the
commencement of start-up of the Project pursuant to the Turnkey
Construction Contract. If a Claim arises from an act or omission of
Operator of PTEC subsequent to PTEC's acquisition of the Site, Operator
shall defend, indemnify and hold Owner harmless against such Claim; if a
Claim arises from an act or omission that occurred prior to PTEC's
acquisition of the Site or any act or omission of PECO or any third party,
neither Owner nor Operator shall have any liability to each other for such
Claim and both parties shall fully cooperate in any action against PECO or
the third party.
(b) In no event shall Operator be responsible for present
or future Claims directly or indirectly related to or arising out of the
actual or alleged existence, generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of
Hazardous Material at the Site and/or adjacent areas arising out of the
negligent acts, omissions or other conduct of Owner or any of its
officials, agents or employees, contractors or subcontractors of any tier
and Owner shall defend, indemnify and hold Operator harmless against, and
shall reimburse Operator for such Claims; provided, however, that nothing
contained herein shall be construed as requiring Owner to take any
corrective action with respect to any Hazardous Material in existence prior
to the start-up of the Project unless directed to do so by a Governmental
Authority, in which case the corrective actions so undertaken shall be
deemed a Claim within the contemplation of paragraph (a) of this Section
20.21.
(c) In no event shall Owner be responsible for present or
future Claims directly or indirectly related to or arising out of the
actual or alleged existence, generation, use, collection, treatment,
storage, transportation, recovery, removal, discharge or disposal of
Hazardous Material at the Site and/or adjacent areas arising out of the
negligence acts, omissions or other conduct of Operator or any of its
officials, agents or employees, contractors or subcontractors of any tier
and Operator shall defend, indemnify and hold Operator harmless against,
and shall reimburse Operator for such Claims; provided, however, that
nothing contained herein shall be construed as requiring Operator to take
any corrective action with respect to any Hazardous Material in existence
prior to the start-up of the Project unless directed to do so by a
Governmental Authority, in which case the corrective actions so undertaken
shall be deemed a Claim within the contemplation of paragraph (a) of this
Section 20.21.
46
<PAGE>
(d) As used in this Agreement, "Claims" shall mean any and
all claims, demands, causes of action, suits, proceedings, administrative
proceedings, lawsuits, judgments, decrees, debts, damages, liabilities,
court costs and reasonable attorneys' fees including, but not limited to,
the cost of civil fines or penalties or other expenses incurred, assessed
or sustained by or against the affected Party whether asserted under a
theory of strict liability or otherwise.
(e) As used in this Section 20.21, "Hazardous Materials"
shall mean materials defined as "hazardous substances," "hazardous wastes"
or "solid wastes" in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, 42 U.S.C. SS 9601-9657, and any amendments
thereto, or in the Resource Conservation and Recovery Act, 42 U.S.C. SS
6901-6987, and any amendments thereto; and any other substance, the
existence of which on the Site imposes any liability or responsibility on
any Person under any present or future applicable federal, state, local or
common law relating to the protection of the environment or public health
and safety, whether similar or dissimilar to the foregoing.
20.22 Owner's Approval. Wherever in this Agreement Owner's
approval is set forth as a condition, such approval shall not be
unreasonably withheld.
IN WITNESS WHEREOF, the Parties have hereto set their hands and seals
as of the date first above written.
GRAYS FERRY COGENERATION
PARTNERSHIP
By: O'Brien Environmental Energy, Inc.
By:/s/ Robert A. Shinn
By: Adwin Equipment Company
By:/s/ Daniel A. Neely
PHILADELPHIA UNITED POWER
CORPORATION
By:/s/ S. G. Smith
Title: President
47
<PAGE>
APPENDIX 1 to PROJECT SERVICES AND DEVELOPMENT AGREEMENT
[SCOPE OF SERVICES]
TO BE ADDED AFTER EXECUTION
<PAGE>
APPENDIX 2 to PROJECT SERVICES AND DEVLEOPMENT AGREEMENT
[AVAILABILITY STANDARDS AND LIQUDATED DAMAGES]
TO BE ADDED AFTER EXECUTION
<PAGE>
APPENDIX 3 to PROJECT SERVICES AND DEVELOPMENT AGREEMENT
INTENTIONALLY DELETED
<PAGE>
APPENDIX 4 to PROJECT SERVICES AND DEVELOPMENT AGREEMENT
PENN EVENT: ADJUSTMENT IN MINIMUM TAKE REQUIREMENT
<PAGE>
APPENDIX 4
The occurrence of a Penn Event will reduce each maximum and minimum number
of Mlbs of Steam appearing in the "Amount of Steam Purchased by PTEC"
column of the table appearing in Section 6.2(a).
The reduction will be calculated as follows:
R = [ (UP - B) X HDD Target HDD Actual ] + B
where:
R = Mlbs deducted from all maximum and minimum number
of Mlbs appearing in the table. (A maximum and
minimum appears in each range listed.)
UP = Mlbs consumed by the University of Penn during the
twelve (12) months prior to the month in which the
Penn Event occurs.
B = Mlbs consumed by the University of Penn during the
months of June through September prior to the
month in which the Penn Event occurs.
HDD 4,866 Heating Degree Days ("HDD's"), the 20 year
average HDD's for the Philadelphia International
Airport, 1969 - 1988 as reported by the U.S.
Weather Service.
HDD The total Heating Degree Days for the Philadelphia
International Airport during the twelve (12)
months prior to the month in which the Penn Event
occurs.
<PAGE>
APPENDIX 5 to PROJECT SERVICES AND DEVELOPMENT AGREEMENT
"Fair Market Value" means the value which would be obtained for the Project
in an arm's length transaction between an informed and willing buyer, under
no compulsion to buy, and an informed and willing seller, under no
compulsion to sell, acting within a reasonable time, based upon the market
value of the Project utilizing generally recognized professional criteria
for the appraisal of industrial equipment and machinery. If the parties
cannot agree on a Fair Market Value of the Project within fifteen (15) days
after any event requiring determination of Fair Market Value, then the Fair
Market value shall be mutually determined in an appraisal prepared and
delivered by two disinterested, certified and licensed industrial equipment
and machinery appraisers, each holding the highest then-recognized
professional certification for such appraisers. One of the appraisers
shall be appointed by Owner and the other shall be appointed by Operator,
each of which appointments shall be made within twenty-five (25) days after
the event requiring determination of Fair Market Value of the Project. If
the appraisers thus appointed cannot mutually agree upon the Fair Market
Value of the Project within sixty (60) days after the appointment of the
second appraiser, the two appraisers shall appoint, within five (5) days
thereafter, a third disinterested certified and licensed equipment and
machinery appraiser who shall, within sixty (60) days after the
appointment, determine the Fair Market Value of the Project in accordance
with generally recognized criteria for the appraisal of industrial
equipment and machinery.
If a second appraiser shall not have been appointed within the time
period set forth above, the first appraiser shall determine the Fair Market
Value of the Project.
If the two appraisers fail to agree upon the appointment of a third
appraiser within the time period set forth above, the parties shall jointly
appoint a third appraiser who shall individually determine the Fair Market
Value in accordance with the provisions of this section.
The appraiser of appraisers, as the case may be, shall give written
notice to the parties stating the determination of Fair Market Value and
shall furnish to each party a signed copy of such determination. In the
event of the failure, refusal, or inability of any appraiser or appraisers
to act, a new appraiser or appraisers shall be appointed, which
appointment(s) shall be made in the same manner as provided for the
appointment of the appraiser or appraisers who failed, refused or were
unable to act. The expense of any appraisal conducted in accordance with
the provisions of this section shall be born equally by the parties.
<PAGE>
Exhibit 10.29
LEASE
BETWEEN
NEWARK GROUP INDUSTRIES, INC.
O'BRIEN (NEWARK) COGENERATION, INC.
Dated: July 18, 1988
<PAGE>
TABLE OF CONTENTS
Section Page
1. Term of Lease 1
2. Use 2
3. Acceptance of Demised Premises;
Tenant's Work 2
4. Base Rent 2
S. Additional Rent and Late Charges 3
6. Change In Scope or Amount of Taxation 5
7. Insurance 6
S. Utilities 9
9. Operation, Maintenance and Repair
of Demised Premises 9
10. Requirements of Public Authorities 10
11. Landlord's Right to Cure 10
12. Net Rent 11
13. Destruction 11
14. Indemnification 12
15. No Liability of Landlord 12
16. Removal of Snow, etc. 13
17. Improvements and Alterations 13
18. Signs
14
19. Assignment and Subletting 14
20. Mortgaging 15
21. Air and Water Pollution 18
22. Security 18
23.Condemnation 18
24.Surrender by Tenant at End of Term 21
25.Default by Tenant 22
26.Quiet Enjoyment 25
27.Certificates by Tenant 25
28.Notices 25
29.Captions 26
30.Covenants and Conditions 26
31.waiver of Trial by Jury 26
32.Definition of Term "Landlord" 27
33. Brokerage Representation 27
34. Covenants of Further Assurances 27
35. Entire Agreement 28
36. Applicable Law 28
37. Bind and Inure Clause 28
38. Tenant's Recourse 28
39. Options to Purchase 28
40. Environmental Obligations 30
41. Guaranty 34
42. Relationship to the Agreement 35
43. Continuation of Lease 35
44. Recording 35
Schedule A
Schedule B
Schedule C
Appendix A
Appendix B
<PAGE>
THIS LEASE, made the 18th day of July, 1988,
BETWEEN NEWARK GROUP INDUSTRIES, INC., (formerly known as Paperboard
Manufacturers of Newark, Inc.) a New Jersey corporation having an office at
57 Freeman Street, Newark, New Jersey 07105 ("Landlord");
AND O'BRIEN (NEWARK) COGENERATION, INC. , a Delaware corporation,
having an address of 225 South Eighth Street, Philadelphia,
Pennsylvania 19106 ("Tenant");
W I T N E S S E T H
Landlord, for and in consideration of the rents, covenants and
agreements hereinafter mentioned, reserved and contained to be paid, kept
and performed by Tenant, and in consideration of and pursuant to the
covenants and agreements contained in the Steam Purchase Agreement between
Landlord and Tenant dated October 3, 1986, as amended by Amendments dated
March 8, 1988 and July 18, 1988 (as so amended and as it may be amended
from time to time in accordance with the provisions thereof, the
"Agreement"), which Agreement is incorporated herein in its entirety by
reference, has demised and leased and does hereby demise and lease unto
Tenant, and Tenant does hereby lease and hire from Landlord, subject to
easements, encumbrances and restrictions of record (if any) and such state
of facts as an accurate survey and a physical inspection would reveal, a
portion of the lands owned by Landlord known as 60 Lockwood Street, Newark,
New Jersey and as Lots 75 and 58 in Block 2412 on the Newark, New Jersey
municipal tax map ("Entire Property"), which portion leased hereunder to
Tenant is more particularly described on Schedule A annexed hereto and made
a part hereof ("Demised Premises"), together with the parking easements,
interconnection facility easements, temporary construction easements,
access easements and other easements described on Schedule B annexed hereto
and made a part hereof ("Easements"). Landlord and Tenant acknowledge that
(a) Landlord's sole reason for agreeing to enter into this lease is because
of the services to be provided by Tenant pursuant to the Agreement and that
(b) this lease and the Agreement shall be interpreted in pari materia.
1. TERM OF LEASE
Landlord leases unto Tenant and Tenant hires from Landlord the
Demised Premises for a term ("Lease Term" or
<PAGE>
"Term") to commence on July 18, 988 ("Commencement Date") and to end,
except as otherwise provided in Section 5.1(B) of the Agreement, 120 days
after the termination of the Agreement or on such other date as may be
provided in this lease or the Agreement, whether following an extension or
renewal hereof or otherwise ("Termination Date").
2. USE.
Tenant may use and occupy the Demised Premises solely for the
construction, testing, operation, management and maintenance of a facility
for the generation of steam and/or electricity ("Facility"). The use of
the Demised Premises by Tenant, however, is and shall continue to be
expressly subject to all applicable terms and provisions of the Agreement
and to all applicable laws, ordinances and rules and regulations of any
governmental instrumentality, board or bureau having jurisdiction thereof.
3. ACCEPTANCE OF DEMISED PREMISES; TENANT'S WORK.
3.1 Tenant acknowledges that it is familiar with the Demised Promises
and, except as set forth in section 40 of this lease, hereby
agrees to accept the Demised Promises in their present condition,
"as is". Tenant further acknowledges that neither Landlord nor
anyone on Landlord's behalf has made any representations or
warranties with respect to the condition of the Demised Premises.
3.2 Tenant shall design and construct the Facility on the Demised
Premises ("Tenant's Work") and install all equipment and fixtures
necessary for the Facility's operation subject to, in accordance
with and according to the time schedule described in the
Agreement. Until the Landlord exercises its rights under section
17 or 24 of this Lease, such equipment and fixtures shall be the
personal property of Tenant and hereafter neither the Landlord
nor any mortgagee of Landlord shall have any interest therein.
4. BASE RENT.
4.1 Tenant covenants and agrees to pay Landlord a base rent ("Base
Rent") during the Term of ONE DOLLAR ($1.00) per year. Base Rent
shall be payable annually on January 1 of each and every year of
the Term without demand.
4.2 If this lease is in effect at the same time that the Agreement is
not in effect, the annual Base Rent payable under this lease shall
automatically be increased
2
<PAGE>
to the annual fair market rental value of the Demised Premises. The annual
fair market rental value shall be determined as of the time immediately
before the cessation of the Agreement by appraisal of the American
Appraisal Company (or similar appraisal organization). The arbitration
provisions set forth in Article 18 of the Agreement shall be utilized to
settle any dispute as regards "fair market rental value". Such increased
Base Rent shall be payable monthly on the first day of each month.
5. ADDITIONAL RENT AND LATE CHARGES.
5.1 Additional Rent payable by Tenant shall include:
(a) subject to the provisions of section 6 hereunder, all taxes,
assessments, water rents and other similar governmental charges
assessed against or levied upon the Demised Premises or related to the
use or occupancy thereof;
(b) all premiums on insurance policies required to be maintained
on, or in connection with the use of, the Demised Premises pursuant to
this lease;
(c) all other payments required to be made by Tenant under this
lease; and
(d) all other expenses and charges which, during the Term, shall
arise or be levied, assessed or imposed upon or against the Demised
Premises as an incident of the ownership thereof and which are of the
kind customarily paid by owners of land and improvements thereto by
reason of such ownership, it being the intention of the parties that,
during the Term, Tenant shall be chargeable with and shall pay all
sums which an owner of the Demised Premises would Day having regard to
the safeguarding of its investment and the preservation of the
freehold.
5.2 Subject to section 5.3 of this lease, Tenant agrees to pay
each item of Additional Rent on or before the date when each becomes due or
when billed for the same by Landlord, as applicable. Tenant shall furnish
to Landlord, within 30 days after the date upon which any such charge is
payable by Tenant as hereinabove provided, official receipts of the
appropriate taxing or governmental authority, or other proofs satisfactory
to Landlord, evidencing the payment of Additional Rent, except that so long
as Landlord is, pursuant to section 6.5 of this lease, paying and billing
tenant for real estate
3
<PAGE>
taxes and assessments attributable to the Demised Premises, at Tenant's
request Landlord shall provide Tenant with copies of all such real estate
and assessments bills at the time of billing and evidence of Landlord's
payment of the same. If Tenant shall fail to make any payment or to do any
act required of it by any provision of this lease within any applicable
time periods herein provided (not including cure periods after notice of
default), Landlord may make such payment or do such act and the amount of
such payment or the cost of doing such act, together with interest thereon
at the rate of the Bass Rate then in effect for First Fidelity Bank,
National Association, Now Jersey, plus 2% per annum, shall be deemed
Additional Rent payable by Tenant upon demand by Landlord. The making of
any such payment or the doing of any such act by Landlord shall not
constitute a waiver by Landlord of any right or remedy provided by this
lease upon Tenant's default in the making of such payment or the doing of
such act. All taxes, assessments, water rents and other governmental
charges assessed against or levied upon the Demised Premises shall be
apportioned between Landlord and Tenant at the Commencement Date and
Termination Date.
5.3 Tenant shall have the right to contest or review by appropriate
proceedings or in any other manner permitted by law, at Tenant's
sole cost and expense, in Tenant's name and/or in Landlord's name
(whenever necessary), any tax, assessment or charge, and Landlord
shall, without expense or charge to it, cooperate with Tenant and
execute any documents or pleadings required for such purposes.
If required by Landlord, Tenant shall furnish a surety company
bond or other security reasonably satisfactory to Landlord
against any liens by reason of such contest. The contest by
Tenant may include appeals from any judgments, decrees or orders
until a final nonappealable determination shall be made by a
court or governmental department or authority having jurisdiction
in the matter.
5.4 No payment by Tenant or receipt by Landlord of a lesser amount
than the Base Rent and Additional Rent stipulated in this lease
shall be deemed other than on account of the earliest stipulated
rent, nor shall any endorsement or statement an any check or
payment or any writing accompanying any check or payment of such
rent be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's
right to recover the balance of such rent or pursue any other
remedy provided in this lease.
5.5 If Tenant fails to make any payment o f Base Rent or Additional
Rent within 5 days of its due date,
4
<PAGE>
Landlord may set off the amount of any such unpaid payments against any
monies then due and owing by Landlord to Tenant pursuant to the Agreement.
6. CHANGE IN SCOPE OR AMOUNT OF TAXATION.
6.1 If at any time during the Term the method or scope of taxation
prevailing an the date hereof shall be altered, modified or
enlarged so as to cause the method of taxation to be changed in
whole or in part so that in substitution for the real estate
taxes now assessed there may be, in whole or in part, a capital
levy or other imposition based on the value of the Demised
Premises or the rents received therefrom, or some other form of
assessment based in whole or in part on some other valuation of
the Landlord's real property comprising the Demised Premises,
then the substituted tax or imposition shall be payable and
discharged by Tenant in the manner required pursuant to the law
promulgated which shall authorize the change in the scope of
taxation and as required by the terms and conditions of this
lease.
6.2 Nothing contained in this lease shall require Tenant to pay any
franchise, estate, inheritance, succession, capital levy or transfer tax of
Landlord, or federal income or state income tax or excess profits or
revenue tax or other tax based upon Landlord's income, except to the extent
(a) such taxes are imposed in whole or partial substitution for real
property taxes and (b) Landlord's transfer taxes are payable by Tenant
under section 39.
6.3 If any tax which Tenant is required to pay pursuant to sections
6.1 or 6.2 above is a graduated tax, Tenant shall be required to pay only
the portion thereof which would have been payable by Landlord if the
Demised Premises were the only real property owned by Landlord.
6.4 Notwithstanding anything in this lease (except section 6.5) to
the contrary and pursuant to Article 12 of the Agreement, (a) Tenant shall
be solely responsible for any sales, use, property, income or other taxes
relating to the Facility and its components or the operation of the
Facility and, except as otherwise provided by section 12.3 of the
Agreement, the sale of energy produced therein and (b) Landlord shall be
solely responsible for any sales, use, property, income or other taxes
relating to Landlord's Plant (as that term is defined in Article 1 of the
Agreement), its components or appurtenances or the sale of the products
produced therein.
5
<PAGE>
6.5 Notwithstanding section 6.3, so long as single real estate tax
bills or bills for assessments attributable to the Entire Property of which
the Demised Premises are only a part are submitted during the term of this
lease by the municipal or other authorities having jurisdiction, Landlord
shall pay such bills to the appropriate authorities and Tenant shall be
responsible for (a) 9.1% of the land portion of such tax bills, or such
other prorated amount if the tax lot configurations are altered from their
present configuration, such latter amount to be calculated on the new
percentage that the Demised Premises is of the Entire Property following
such alteration, plus (b) 100% of the taxes attributable on such tax bills
to the buildings and improvements now or to be located within the Demised
Promises including, but not limited to, the Facility, plus (c) that portion
of any bills for assessments determined by multiplying the total amount of
any such bill by a fraction the numerator of which is the total amount of
Tenant's taxes computed in accordance with (b) above and the denominator of
which is the total amount of taxes attributable on such tax bills to all
buildings and improvements located within the Entire Property, including
the Demised Premises. Landlord shall be responsible for 100% of the taxes
attributable on such tax bills to the buildings and improvements now or to
be located within that portion of the Entire Property not being leased to
Tenant hereunder. If there is a dispute between the parties regarding the
amount of taxes attributable to. buildings and improvements located within
the Demised Premises, the parties agree that the attribution contained in
the records of the tax assessor of the City of Newark shall control. If
such records do not contain the necessary attribution, such attribution
shall be determined by an independent M.A.I. appraiser selected by
Landlord. Landlord shall bill Tenant for Tenant's share of all real estate
tax bills and bills for assessments and Tenant shall pay such bills as
Additional Rent within 10 days of its receipt of such bills.
6.6 Landlord agrees (a) not to bill Tenant for installments of taxes
or assessments more than 30 days before the respective dates upon which
such installments are due and (b) to elect to pay all assessments which may
be paid in installments in as many installments as shall be permissible
under applicable law, except that Tenant agrees to pay any additional costs
or expenses incurred by Landlord as a result of such election.
7. INSURANCE.
7. 1 Tenant shall keep the improvements on the Demised Premises
insured against loss or damage by fire
6
<PAGE>
and risks embraced within "all risk coverage" in the locality where the
Demised Premises are located in an amount not less than 100% of full
insurable value. The term "full insurable value" means the actual
replacement cost as defined in the standard "replacement cost" endorsement.
Tenant shall also obtain boiler explosion and casualty insurance in an
amount not less than ten million dollars ($10,000,000). All insurance
policies shall be issued by a company or companies and in a form or forms
reasonably satisfactory to Landlord and shall name Landlord and any
mortgagees of both Tenant and Landlord as additional insureds but not loss
payees. Tenant agrees to use any proceeds received from the insurance
policies to repair, restore, replace and/or rebuild any damaged
improvements on the Demised Premises so that the fair market value of the
Demised Premises will not be decreased from that prevailing prior to the
casualty, except as otherwise provided in either section 13 of this lease
or in the Construction and Term Credit Agreement dated as of July 18, 1988
between Tenant and National Westminster Bank PLC, including only such
amendments which may be made from time to time with the consent of Landlord
("Credit Agreement").
7.2 Tenant shall obtain and maintain a Landlord's and Tenant's
comprehensive general Public Liability Insurance Policy for the joint and
several benefit of Landlord and Tenant, in an amount not less than
$5,000,000. Tenant shall also obtain blanket contractual insurance in an
amount deemed adequate by Landlord to cover the indemnity obligations of
Tenant pursuant to all of the terms and provisions of both this lease and
the Agreement. Tenant shall provide and keep in force insurance for such
other insurable hazards and in such amounts as similarly situated premises
are then commonly insured.
7.3 Prior to the earlier of (a) the Commencement Date or (b) the
date when Tenant has access to the Demised Premises for any purpose,
Tenant shall deliver to Landlord certificates evidencing the issuance of
each of the policies required by sections 7.1 and 7.2 and also evidencing
that the policies are then in effect. Tenant shall deliver original
insurance policies to Landlord within 15 days from the date when Tenant is
required to deliver the certificates. All insurance policies shall
provide for 30 days advance notice in writing to Landlord and to the
respective mortgagees of Tenant or Landlord prior to cancellation or
modification.
7.4 The premiums on any insurance policies which Landlord elects to
keep in force beyond the Termination Date shall be apportioned as between
Landlord and Tenant
7
<PAGE>
in such manner that Landlord shall reimburse Tenant for that pro rata
portion of the unearned premiums on any policies which remain in force
beyond the Termination Date as a result of Landlord's election.
7.5 Neither Landlord nor its agents or servants shall be liable and
Tenant waives all claims for damage, regardless of the cause thereof, to
persons or property sustained by Tenant, its agent and servants or any
occupant of the Demised Premises resulting from the Demised Promises or any
part thereof or any part or any equipment or appurtenances becoming out of
repair, or resulting from any accident in on or about the Demised Promises
or resulting directly or indirectly from any act or neglect of the Tenant
or occupant or any other person including Landlord's agents and servants
other than such injury or harm as may be caused solely and conclusively by
the fault or negligence of Landlord, its directors, officers, employees or
representatives. All property belonging to Tenant or any occupant of the
Demised Promises shall be there at the risk of the Tenant or such other
person only and Landlord shall not be responsible or liable for damages
thereto or misappropriation thereof. Except as otherwise provided in
section 15.2(B) of the Agreement, Tenant agrees to look solely to the
proceeds of its own insurance for indemnity against personal injury,
casualty loss and business interruption.
7.6 Except as otherwise provided in section 15.2(A) of the Agreement,
Landlord agrees to look solely to the proceeds of its own insurance for
indemnity against personal injury, casualty loss and business interruption.
7.7 Each party will use its best efforts to cause each insurance
policy carried by it with respect to the Entire Property or the Demised
Premises, as applicable, to be written so as to provide that the insurer
waives all right of recovery by way of subrogation against the other party
in connection with any loss or damage covered by the policy.
7.8 Every 2 years during the Term on the anniversary of the
Commencement Date, Landlord shall have the right to give Tenant notice that
Landlord is requiring Tenant to increase the amount of coverage under each
insurance policy held by Tenant in connection with its operation of the
Facility. The maximum new insurance coverage amount which Landlord can
require for each policy shall be calculated by multiplying the total amount
of insurance coverage in effect as of the Commencement Date by a fraction,
the Numerator of which is the Consumer Price Index for Urban Wage Earners
and Clerical Workers
8
<PAGE>
for New York - Northeastern New Jersey ("CPI") as of the day of the
applicable 2-year anniversary date and the denominator Of I which is the
CPI as of the Commencement Date. (For example, if the CPI is 200 on the
Commencement Date and 220 on the first day of the applicable 2-year
anniversary date, the new amount of insurance required would be determined
as follows: 220 X Insurance Amount as of the Commencement Date.)
220
in no event shall the amount of insurance coverage for any policy decrease
in any 2-year period from that payable for the prior 2-year period.
8. UTILITIES.
Tenant shall, at its own cost and expense, pay all utility meter and
service charges, including but not limited to those for gas, sewer,
electricity, water, standby sprinkler charges and any hookup charges and
deposits required by utility suppliers with respect to the Demised
Promises. Tenant shall be responsible at its sole cost and expense for
arranging installation of separate motors for all utilities servicing the
Demised Promises. Except an provided in the preceding sentence, all costs
relating to the construction. operation and maintenance of conduits, pipes
and drain fixtures for water, waste water, steam or any other utilities
shall be allocated between Landlord and Tenant in accordance with all of
the terms and provisions of the Agreement including but not limited to
Article 4 and 10 thereof.
9. OPERATION, MAINTENANCE AND REPAIR OF DEMISED PREMISES.
Tenant shall keep. operate and maintain the Demised Promises in a good
state of repair and condition, except for ordinary wear and tear. Tenant
shall make all repairs and replacements of every kind and character
necessary to preserve and maintain the Demised Premises, the Facility and
the appurtenances belonging thereto in accordance with reasonable business
practices, and, except as set forth in section 4.2 or otherwise in the
Agreement, will not call upon Landlord during the Term for the making of
any repairs or replacements whatsoever. All repairs and replacements shall
(a) be performed in a good and workmanlike manner, (b) be at least
substantially equal in quality and usefulness to the original work, (c) be
of first-class modern character and (d) not diminish the fair market value
of the Demised Premises. Notwithstanding anything in this lease to -he
contrary and in addition to the provisions of this section 9, Tenant shall
keep, operate, maintain and repair the Demised Premises and the
9
<PAGE>
Facility in accordance with all of the terms and provisions of the
Agreement including, but not limited to, sections 4.1, 7.1, 7.2. 7.3, 7.4
and 10.1 thereof.
10. REQUIREMENTS OF PUBLIC AUTHORITIES.
Tenant shall suffer no waste or injury in or about the Demised
Premises and shall comply at its sole expense with all federal, state,
county and municipal laws, ordinances and regulations applicable to the use
and occupancy of the Demised Premises including without limiting the
generality of the foregoing, (a) compliance with all "Laws" and
"Regulations" as those terms are defined in the Agreement, (b) the
obtaining of all necessary permits or licenses including, but not limited
to, the permits described in section 4.2(B) and Appendix C of the
Agreement, (c) the securing of all necessary land use approvals including,
but not limited to, a subdivision of the Entire Premises if and when Tenant
acquires the Demised Premises, and (d) the making of any structural or
nonstructural repairs or replacements of any improvements to the Facility
or the Demised Premises that may be required in order to comply with said
Laws, ordinances and Regulations. In addition, except as set forth in
section 40 of this lease, Tenant shall effect the correction, prevention
and abatement of nuisances, violations or other grievances in, upon or
connected with the Demised Premises and the Facility and shall also
promptly comply with all rules. orders and regulations of the Board of Fire
Underwriters and any insurance company insuring the Demised Premises or any
improvements thereon. To the extent required by the terms and provisions
of the Agreement, Landlord will cooperate when necessary with Tenant's
efforts to satisfy the requirements of public authorities. Any
environmental permits, licenses or authorizations that have been
transferred by Landlord to Tenant shall be returned or transferred to
Landlord at the end of the Term in accordance with the terms and provisions
of section 4.2 of the Agreement.
11. LANDLORD'S RIGHT TO CURE
Landlord and its agents and workmen shall have the right (a) in an
emergency and (b) in a non-emergency situation upon advance notice, at
reasonable times and only if accompanied by a representative of Tenant, to
enter into and upon the Demised Premises for the purpose of inspection and
examination of the state of repair and condition thereof. Landlord's entry
and inspection shall be conducted subject to Tenant's reasonable safety
procedures. Landlord may, but shall not be obligated to make such repairs
as shall be necessary as a consequence
10
<PAGE>
of any failure of Tenant to meet its obligations under this lease or the
Agreement within applicable time periods herein provided (not including
cure periods after notice of default) . The cost of any such repairs
undertaken by Landlord, together with interest thereon at the rate of the
Base Rate then in effect for First Fidelity Bank, National Association, New
Jersey, plus 2% per annum, shall be deemed to be Additional Rent payable by
Tenant upon demand by Landlord. The making of any such repairs by Landlord
shall not constitute a waiver by Landlord of any right or remedy provided
by this lease or the Agreement upon Tenant's default in the making of
repairs.
12. NET RENT.
It is the purpose and intent of Landlord and Tenant that the rent
shall be absolutely not to Landlord, so that this lease shall yield. not,
to Landlord, the Base Rent and Additional Rent specified in sections 4 and
5 of this lease during the Term without any abatement, deduction, set-off
or counterclaim, and that all costs, expenses and obligations of every kind
and nature whatsoever relating to the Demised Premises which may arise or
become due during or in respect to the Term (except interest, amortization
or any other charge or obligation arising in connection with any mortgage
placed on the Demised Premises by Landlord. unless the charge or obligation
arises solely as a result of an Event of Default by Tenant hereunder) shall
be paid by Tenant, except for such obligations and charges as have
otherwise expressly been assumed by Landlord in accordance with the terms
and conditions of this lease or the Agreement.
13. DESTRUCTION.
13.1 If the Facility or other improvements on the Demised Promises or
any part thereof shall be damaged or destroyed by fire,
explosion, lightning, vandalism or any other casualty or cause,
Tenant shall, except as otherwise provided in the Credit
Agreement, at its own cost and expense, repair, restore, replace
and/or rebuild the improvements or take such other action as may
be necessary so as not to diminish the fair market value of the
Demised Premises from that prevailing prior to the damage or
destruction. Notwithstanding any such damage or destruction by
any casualty or cause, this lease shall continue in full force
and effect and there shall be no abatement of Base Rent and
Additional Rent payable under this lease and Tenant shall not be
discharged or relieved from any of its other obligations under
this lease. Tenant expressly waives any rights now or hereafter
conferred upon it by statute or otherwise to quit or
11
<PAGE>
surrender this lease or the Demised Premises or any part thereof,
or to any suspension, diminution, abatement or reduction of rent,
on account of any such damage or destruction. Tenant's failure
either (a) to commence (which shall include the preparation of
architectural drawings and the good faith adjustment of claims
with insurers) such repairs, restoration, replacing and/or
rebuilding within 60 days following any such damage or
destruction or (b) to pursue diligently the completion of the
same shall be deemed a default by Tenant under this lease and the
Agreement.
13.2 Notwithstanding anything in section 13. 1 to the contrary, if all
or substantially all of the Facility shall be damaged or
destroyed by any casualty or cause during the last 5 years of the
original Term or during any extension of the Term, Tenant shall
have the right to cancel this lease by giving written notice to
Landlord within 60 days after such damage or destruction provided
Tenant removes the Facility from the Demised Promises, levels the
land to grade level and thereafter paves the Demised Premises
with six inches of concrete as a parking lot. In case of such
cancellation, Tenant shall have the right to retain insurance
proceeds except that Landlord shall be entitled to receive from
Tenant that portion of all insurance proceeds equal to (a) the
total of all insurance proceeds received minus (b) the fair
market value of the Facility immediately prior to such damage or
destruction.
14. INDEMNIFICATION.
To the extent set forth in section 15.2(A) of the Agreement, Tenant
shall indemnify and save harmless Landlord, except an provided in section
40 of this lease, from all fines, penalties, costs, suits, proceedings,
liabilities, damages, claims and actions of any kind arising out of the use
and occupation of or in any way connected with the Demised Premises, or by
reason of any breach or nonperformance of any covenant or condition of this
lease by Tenant. Except as otherwise provided in section 15.2(B) of the
Agreement, this indemnification shall extend to all claims by any person or
party for death or injury to persons and damage to any property, and to
legal expenses, including reasonable attorney's fees, incurred by Landlord
in the defense of such claims or in the enforcement of any provision of
this lease.
15. NO LIABILITY OF LANDLORD.
Except as provided for in section 15.2(B) of the Agreement or in
section 40 of this lease, Landlord,
12
<PAGE>
whether as owner of the Demised Premises or in any other capacity, shall
not be liable for any damage or injury which may be sustained by Tenant or
any other person as a consequence of the failure, breakage, leakage or
obstruction of the water, plumbing, steam, gas, sewer, waste or spoil
pipes, roof, drains, leaders, gutters, valleys, downspouts or the like, or
of the electrical, ventilation, air conditioning, gas, power, conveyor,
refrigeration, sprinkler, heating or other systems, elevators or hoisting
equipment, if any, in the Facility and on, over and under the Demised
Premises and the Entire Property; or by reason of the elements; or
resulting from acts, conduct or omissions on the part of Tenant or of
Tenant's agents, employees. guests, licensees, invitees, assiqnees or
successors, or on the part of any other person or party.
16. REMOVAL OF SNOW, ETC.
Tenant agrees (a) to remove or cause to be removed, as the need for
the same arises, all snow and ice from any sidewalks, driveways and parking
areas within the Demised Premises, (b) to keep the sidewalks, driveways and
parking areas clean and free from any and all defects, obstructions and
encumbrances and (c) to keep the Demised Premises in a neat, clean and
orderly condition.
17. IMPROVEMENTS AND ALTERATIONS.
Tenant covenants and agrees that it will construct the Facility and
make any other improvements, changes, installations, renovations, additions
or alterations in and about the Demised Premises in accordance with the
terms and provisions of the Agreement and this lease. Tenant shall provide
Landlord with "as built" plans for any work completed by Tenant pursuant to
this section 17. After Tenant constructs the Facility and if Tenant
installs or makes any other improvements, additions, installations,
renovations, changes or alterations to the Demised Premises, such
improvements shall be the property of Tenant as provided in section 3.2
hereof. The Facility and all other improvements, changes, additions,
installations, renovations or alterations (including all equipment and
movable trade fixtures necessary to maintain the Facility as an ongoing
operating Facility) shall be subject to purchase by Landlord, in accordance
with the terms and provisions of the Agreement, subject to the lien of the
mortgage, if then outstanding, in favor of the leasehold mortgagee as
contemplated by the Credit Agreement, which mortgage shall remain a lien on
the Facility and any such improvements until all obligations of Tenant to
such leasehold mortgagee are satisfied in
13
<PAGE>
full or discharged. If Landlord has not exercised such right to purchase,
upon Landlord's giving 6 months advance notice to Tenant before the
Termination Date or upon Landlord's giving 30 days advance notice before or
after Tenant's removal from or abandonment of the Demised Premises,
whichever is applicable, Tenant shall remove forthwith the Facility and all
other improvements, additions, installations, renovations, changes or
alterations, level the land to grade level and thereafter pave the Demised
Premises with six inches of concrete as a parking lot. if Tenant exercises
any of its options to purchase the Demised Premises described in section 39
hereunder, any improvements, additions, alterations, installations,
renovations or changes not already the property of Tenant shall become the
property of Tenant upon the closing of the purchase of the Demised
Premises.
18. SIGNS.
Tenant may erect and maintain signs advertising its business,
provided, however, that all signs comply with all laws, ordinances and
regulations of any governmental authority having jurisdiction and that
Tenant has received the prior written approval of Landlord which approval
shall not be unreasonably withheld. Upon the termination of this lease,
Tenant shall remove such sign or signs and shall repair any damage to the
Demised Premises caused by the erection or removal thereof.
19. ASSIGNMENT AND SUBLETTING.
19.1 Tenant may not sublet all or any portion of the Demised Promises
or assign this lease without Landlord's prior written consent
except to the extent permitted under this lease and under the
terms and provisions of the Agreement. Tenant may collaterally
sublet all or any portion of the Demised Premises or collaterally
assign this lease without Landlord's consent to any leasehold
mortgagee of Tenant who agrees in writing to assume the
obligations of Tenant under the Agreement and this lease in the
event that such mortgagee (a) forecloses on its mortgage, (b)
takes possession of the Demised Premises or (c) assumes the
management of the Tenant's operations, provided, however, that
any such leasehold mortgagee may neither further assign this
lease nor sublet all or any portion of the Demised Premises
without Landlord's prior written consent, such consent not to be
unreasonably withheld. Landlord shall consent to any further
assignment by any such leasehold mortgagee if such assignee (a)
executes a written assumption of all of Tenant's obligations
under this lease and the Agreement,
14
<PAGE>
(b) possesses substantially the same technical expertise and experience in
the cogeneration field as the Tenant, (c) has substantially the same net
worth as the aggregate net worth of Tenant and O'Brien Energy Systems, Inc.
on the date hereof, (d) cures all of Tenant's defaults, if any, under this
lease and the Agreement (if then in effect) which are capable of being
cured and (e) agrees to pay all reasonable expenses (including, but not
limited to attorney's fees) incurred by Landlord in connection with its
request for assignment or subletting or with its entering into a new lease
pursuant to section 20.3 of this lease.
19.2 If this lease is assigned as set forth in section 19.1, or if the
Demised Premises or any part thereof is occupied by anybody other
than Tenant, Landlord may collect rent from the assignee or
occupant and apply the net amount collected to the rent herein
reserved. Notwithstanding any assignment, Tenant herein shall
remain liable for the payment of Bass Rent and Additional Rent
reserved hereunder and for the performance of all obligations
imposed upon Tenant by this lease.
20. MORTGAGING.
20.1 Notwithstanding anything in this Section 20 or this lease to the
contrary, Landlord and Tenant may each mortgage, hypothecate or
encumber its interest in this lease only (a) in connection and in
accordance with either party's exercise of its rights pursuant to
Articles 17 and 19 of the Agreement and (b) in accordance with
this section 20. Tenant may mortgage, hypothecate or encumber
its interest in this lease only in connection with any financing
relating to its construction. maintenance or operation of the
Facility and such leasehold interest may not be collaterally
mortgaged, hypothecated or encumbered in connection with any
other financing transaction entered into by Tenant.
20.2 If Tenant mortgages or encumber its interest in this lease
pursuant to and in compliance with this section 20, all rights
acquired by such mortgagee shall be subject to all the covenants,
conditions and restrictions set forth in this lease and the
Agreement, and to all rights and interests of Landlord in the
Demised Premises and the Entire Property.
20.3 Tenant's mortgagee under any such mortgage may enforce the
mortgage and acquire title (either in its own name or in a
nominee) to the leasehold estate hereunder in any lawful way, and
by its representative or by a receiver, as the case may be, take
possession of and manage the Demised Premises. Upon foreclosure
of the
15
<PAGE>
mortgage, the leasehold estate may be sold or assigned by such
mortgagee or nominee subject to the mortgagee's satisfaction of
all the provisions of section 19.1 of this lease, and Landlord
will recognize the person, firm or corporation acquiring the
leasehold estate as the Tenant hereunder and will enter into a
new lease with that person, firm or corporation on the same terms
and provisions of this lease. Notwithstanding the preceding
sentence, Landlord shall have no obligation to enter into such
new lease unless and until that person, firm or corporation has
(a) cured all of Tenant's defaults, if any, under this lease
which are capable of being cured and (b) has agreed to pay all
reasonable expenses (including but not limited to attorney's
fees) incurred by Landlord in connection with its entering into
such new lease.
20.4 If, at the time of the occurrence of any Event of Default
described in section 25 of this lease, the Tenant's leasehold
estate created hereby is subject to a first mortgage, provided
that the mortgagee thereunder has filed written notice with
Landlord together with an address for service, the Landlord shall
notify such mortgagee in writing of the existence of the Event of
Default, specifying the nature thereof. Landlord shall also give
written notice of any default by Tenant known to Landlord which,
with the lapse of time or giving of notice, or both, would become
an Event of Default, including but not limited to notice of
Tenant's failure to perform or observe any of its obligations
under Article 3 or section 6.2 of the Agreement, such notice to
be given immediately following such defaults. The mortgagee
shall have a period of 15 days after the date of notice within
which to cure the Event of Default, or if it cannot reasonably be
cured within said 15-day period but is capable of being cured,
within which to diligently begin to cure the same, in which
latter case the mortgagee shall diligently prosecute to
conclusion all acts necessary to cure the Event of Default.
Notwithstanding anything in the preceding sentence to the
contrary, the Mortgagee shall with respect to an Event of Default
pursuant to section 16.2(i) of the Agreement, have no cure period
beyond the time periods set forth in section 16.2(i). in the
event of failure by the mortgagee to cure or diligently begin to
cure, Landlord may terminate this lease as herein provided
without further notice to the mortgagee. The Lease Term may be
preserved if the mortgagee within the cure periods set forth in
this section (a) cures all monetary defaults hereunder and under
the Agreement, (b) cures any default under section 16.2(i) of the
Agreement, (c) diligently commences to cure any nonmonetary
default hereunder an under the Agreement which default is capable
of being cured (except under 16.2(i) of the Agreement) and
16
<PAGE>
diligently prosecutes such cure to conclusion, (d) notifies
Landlord in writing of its or its nominee's intention to continue
to perform and observe all Of Tenant's covenants and obligations
hereunder and under the Agreement upon completion of its
foreclosure proceedings in accordance with section 20.3, and (e)
without delay, commences and diligently prosecutes to conclusion
foreclosure proceedings under its mortgage while keeping all
monetary and other obligations hereunder and under the Agreement
current.
20.5 As used in this lease as a noun (but not as a verb), the word
"mortgage" includes any instrument evidencing a loan or loans to
Tenant made at any time during the Lease Term which is or are
secured in whole or in part by a specific charge against the
leasehold interest of Tenant hereby created or any part of such
leasehold interest and includes all renewals, modifications,
consolidations, replacement and extensions of such instrument or
loan and shall include each and every debenture, mortgage. deed
of trust or other evidence of security given by way of
assignment, sublease or charge upon such leasehold interest and
which matures by its terms before, or is not renewable by the
obligor to a date beyond, the date herein provided for the
termination of this lease. The word mortgagee" means the
mortgagee of a mortgage by Tenant and the successors and assigns
of such mortgagee. The word "foreclosure" shall encompass the
acquisition of the leasehold estate by judicial proceedings or
otherwise, including the exercise of a power of sale contained in
a mortgage.
20.6 Landlord will at the request and cost of Tenant and the
mortgagee:
(a) enter into a direct agreement with the first mortgagee described
in section 20.4 confirming the provisions of this section,
including an agreement not to make any material modification of
this lease without the prior written consent of such mortgagee;
and
(b) execute, date and deliver a certificate as to the status of this
lease, including as to whether it is in full force and effect, is
modified or unmodified, confirming the rent payable and the state
of the accounts between Landlord and Tenant, the existence or
nonexistence of defaults and any other matters pertaining to this
lease.
20.7 Tenant and the mortgagee shall give Landlord notice advising of
the existence of such first
17
<PAGE>
quasi-public use, by any power or authority having the right to take the
same by condemnation, eminent demain or otherwise, the amount awarded for
compensation for the whole of the Demised Premises so taken shall be paid
to Landlord. Tenant hereby expressly grants unto Landlord the entire
amount of the award or compensation, expressly disclaiming all right, title
and interest therein, and agrees that it shall have no claim for any damage
or loss against Landlord by reason of the condemnation or taking except
that any amount awarded as compensation for the improvements to the Demised
Premises, including the Facility (but excluding the value of Tenant's
interest in the unexpired term of this lease), shall be paid to Tenant.
Landlord acknowledges that Tenant's first leasehold mortgagee is entitled
to receive or hold all proceeds which are due and payable to Tenant
hereunder and agrees that Landlord shall hold all such proceeds due Tenant
in trust for such leasehold mortgagee. This lease shall terminate as of
the date title to all of the Demised Premises shall vest in the taking body
or the date Tenant is ousted from possession of the Demised Premises,
whichever is earlier. Landlord and Tenant shall thereupon be released of
and from all obligations and liabilities to each other accruing hereunder
thereafter. Tenant shall pay all Base Rent and Additional Rent accrued up
to the time of the Termination Date, and if any rent has been paid in
advance Landlord shall return the surplus.
23.2 If a part but less than the entire Demised Premises and all of
the improvements thereon is so taken by such power or authority
as aforesaid, then this lease, together with all of the
agreements, covenants, conditions and obligations herein
contained shall continue in full force and effect for the balance
of the Term as if the taking had not occurred. The amount
awarded for compensation for the part of the Demised Premises so
taken shall be paid to Landlord. Tenant hereby grants unto
Landlord the entire amount of the award or compensation,
expressly disclaiming all right, title and interest therein, and
agrees that it shall have no claim for any damages or loss
against Landlord by reason of such condemnation or taking, except
that any amount awarded as compensation for the improvements to
the Demised Premises, including the Facility (but excluding the
value of Tenant's interest in the unexpired term of this lease),
shall be paid to Tenant. In the event of a partial taking such
that Tenant's reasonable use of the Demised Premises shall be
materially impaired, Tenant shall have the right to terminate
this lease as of the date title shall vest in
19
<PAGE>
the taking body or the date Tenant is ousted from Possession of
the portion taken, whichever is earlier, by giving Landlord
written notice. Landlord shall give written notice to Tenant of
such proposed taking specifying the portion of the Demised
Premises to be taken. Tenant shall give its written notice of
termination within 60 days after the giving of Landlord's notice.
Tenant's notice shall state the date of termination (not prior to
the date of Tenant's actual ouster from possession of the portion
of the Demised Premises so taken) and upon that date all Base
Rent and Additional Rent shall be apportioned and paid.
Thereafter neither Landlord nor Tenant shall have any obligations
to or rights against the other party hereunder.
23.3 If the temporary USO Of the whole or any part of the Demised
Premises shall be taken by any lawful power or authority by the
exercise of the right of condemnation, eminent domain or
otherwise, or by agreement between Tenant and those authorized to
exercise such right, Tenant shall give prompt notice thereof to
Landlord. Landlord shall give prompt notice to Tenant of any
notice Landlord receives regarding on temporary taking of the use
of the whole or any part of the Demised Premises. In that event
the Term shall not be reduced or affected in any way and Tenant
shall continue to pay in full the Base Rent, Additional Rent and
other charges herein reserved without reduction or abatement.
Tenant shall be entitled to receive for itself any award or
payment made for such use, provided, however, that if the period
of temporary use shall extend beyond the Termination Date, the
award or payment shall be ratably apportioned between Landlord
and Tenant.
23.4 The terms "condemnation", "taking" or similar terms as herein
used shall mean the acquisition by a public or other authority
having the right to take the same by condemnation or eminent
domain or otherwise, regardless of whether such taking is the
result of actual condemnation or of voluntary conveyance by
Landlord.
23.5 Tenant agrees to execute and deliver any instruments as may be
deemed necessary by Landlord to expedite any condemnation
proceeding or to effectuate a proper transfer of title to such
governmental or other authority seeking to take or acquire the
Demised Premises or any portion thereof. Each party agrees to
give the other and Tenant's first leasehold mortgagee, if any,
notice of any condemnation or similar proceeding.
23.6 Tenant shall have the right to participate in and appear at
any condemnation proceeding involving the
20
<PAGE>
Demised Premises and to file an independent claim only with
respect to the improvements to the Demised Premises, including
the Facility (but excluding any claim with respect to Tenant's
interest in the unexpired term of this lease). If, however,
Tenant shall assert a claim or right to claim, except for a claim
permitted by the provisions of the immediately preceding
sentence, Tenant shall be liable to Landlord for all damages
sustained and all expenses incurred by Landlord, including
counsel fees and costs of legal proceedings, as a result of the
assertion by Tenant of that claim.
24. SURRENDER BY TENANT AT END OF TERM
24.1 Subject to and except as otherwise provided by the provisions of
section 17 of this lease, Tenant will surrender possession of the
Demised Premises and remove all goods and chattels, including
equipment and moveable trade fixtures, and other personal
property in the possession of Tenant at the end of the Term or at
such other time as Landlord may be entitled to re-enter and take
possession of the Demised Premises pursuant to any provision of
this lease. Tenant shall leave the Demised Premises in good
order and condition. Upon surrender of possession of the Demised
Promises, all improvements, additions, installations,
renovations, changes or alterations to the Demised Promises shall
become the property of Landlord , subject to the lien of the
mortgage in favor of the. leasehold mortgagee, if then in effect,
as contemplated by the Credit Agreement, which mortgage shall
remain a lien on the Facility and any such improvements until all
obligations of Tenant to such leasehold mortgages are satisfied
in full or discharged. In default of surrender of possession and
removal of goods and chattels at the time aforesaid, Tenant will
pay to Landlord (a) the Basic Rent and Additional Rent reserved
by the terms of this lease for such period as Tenant either holds
over in possession of the Demised Premises or allows its goods
and chattels or other personal property to remain in the Demised
Premises and (b) statutory penalties and all other damages which
Landlord shall suffer by reason of Tenant holding over in
violation of the terms and provisions of this lease, including
all reasonable claims for damages made by any succeeding tenant
or purchaser of the Demised Premises against Landlord which may
be founded upon delay by Landlord in giving possession of the
Demised Premises to such succeeding tenant or purchaser, so far
as such damages are occasioned by the unlawful holding over of
Tenant.
24.2 Subject to and except as otherwise provided by the provisions of
section 17 of this lease, if Tenant
21
<PAGE>
fails to remove all goods and chattels and other personal
property in possession of Tenant, by whomsoever owned, at the end
of the Term or at such other time as Landlord may be entitled to
re-enter and take possession of the Demised Premises pursuant to
any provision of this lease, Tenant hereby irrevocably makes,
constitutes and appoints Landlord as the agent and attorney-in-
fact of Tenant to remove all goods and chattels and other
personal property from the Demised Premises to a reasonably safe
place of storage, the moving and storage to be at the sale cost
and expense of Tenant. Tenant covenants and agrees to reimburse
and pay to Landlord all expenses which Landlord incurs for the
removal and storage of all such goods and chattels. Without
limiting the foregoing, Tenant shall be deemed to have abandoned
such goods, chattels and other personal property and Landlord may
elect that the same shall become its property.
24.3 No act or thing done by Landlord shall be deemed an acceptance of
the surrender of the Demised Premises unless Landlord shall
execute a written release of Tenant and unless Tenant and any
first leasehold mortgagee of Tenant shall also execute such
written release. Tenant's liability hereunder shall not be
terminated by the execution by Landlord of a new lease of the
Demised Premises.
25. DEFAULT BY TENANT.
25.1 if before or during the Term there shall occur any of the
following events ("Events of Default"):
(a) except as otherwise provided in section 25.2, if Tenant shall
make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts as they become due, or shall file a
petition in bankruptcy, or shall be adjudicated a bankrupt or insolvent, or
shall file a petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present
or future statute, law or regulation, or shall file an answer admitting or
not contesting the material allegations of a petition against it in any
such proceeding, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of Tenant or any
material part of its assets; or
(b) except as otherwise provided in section 25.2, if, within 60 days
after the commencement of any proceeding against Tenant seeking any
reorganization, arrangement, composition, readjustment, liquidation,
22
<PAGE>
dissolution or similar relief under any present or future statute, law or
regulation, the proceeding shall not have been dismissed, or if, within 60
days after the appointment without the consent or acquiescence of Tenant of
any trustee, receiver or liquidator of Tenant or of any material part of
its assets, the appointment shall not have been vacated; or
(c) except as otherwise provided in section 25.2, if the interest of
Tenant in the Demised Premises shall be sold under execution or other legal
process; or
(d) if Tenant shall fail to pay any installment of Base Rent or
Additional Rent when the same is due and the failure shall continue for 10
days after Landlord gives Tenant notice thereof; or
(e) if Tenant shall fail to perform or observe any requirement,
obligation, agreement. covenant or condition of this lease, other than the
payment of any installment of Base Rent or Additional Rent, and any such
failure shall continue for 30 days after Landlord gives Tenant notice
thereof, or if such failure cannot be remedied within 30 days, then for a
reasonable time thereafter, provided Tenant diligently commences to remedy
the failure within the 30-day period and prosecutes the same to completion
with diligence; or
(f) if any representation or warranty contained in this lease shall
prove to be incorrect in any material respect on the date upon which it was
made; or
(g) if an Event of Default occurs pursuant to section 16.2 of the
Agreement; or
(h) if there is an event of default by Tenant under any financial
agreement involving more than $2,000,000 which relates to the construction
or operation of the Facility and which is not cured within any applicable
grace periods; or
(i) if Tenant fails to obtain or maintain any material permit or
license required to construct or operate the Facility;
(j) if there is an assignment for the benefit of creditors of
Guarantor; or
(k) if Guarantor is adjudged a bankrupt or a petition is filed by or
against Guarantor under the provisions of any state insolvency law or under
the provisions of federal bankruptcy laws; or
23
<PAGE>
(l) if the business or principal assets of Guarantor are placed in
the hands of a receiver, assignee or trustee; or
(m) if Guarantor is dissolved;
then at any time following any of such Events of Default, Landlord shall
have all of the rights available to Landlord pursuant to section 16.4 of
the Agreement, including, but not limited to, Landlord's right to terminate
this lease and the Agreement except as otherwise provided in sections 25.2
or 20 hereof.
25.2 The events of default set forth in subsections 25.1(a), (b), (c),
(f) and (h) above shall not constitute an Event of Default or
otherwise affect the validity of this lease so long as Tenant, in
its status as Seller under the Agreement, continues to provide
all of the services described in the Agreement on the part of
Seller to be performed and complies with its other obligations
under this lease and the Agreement, and in such event, this lease
shall continue to remain in full force in accordance with the
terms herein contained.
25.3 The non-prevailinq party agrees to pay all costs of proceedings
brought or defended by the prevailing party for the enforcement
of any terms and conditions of this lease, including reasonable
attorney's fees and expenses, which, if Landlord is the
prevailing party, shall be deemed Additional Rent for the period
with respect to which the Event of Default occurred, payable
immediately upon the final disposition of any suit.
25.4 Except as limited by section 16.4 of the Agreement, no remedy
herein conferred upon or reserved to Landlord is intended to be
exclusive of any other remedy herein or provided by law or the
Agreement, but each shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute. The receipt and
acceptance by Landlord of rent with knowledge of the default by
Tenant in any of Tenant's obligations under this lease shall not
be domed a waiver by Landlord of the default. Nothing contained
in this lease shall limit or prejudice the right of Landlord to
prove for and obtain in proceedings for bankruptcy or insolvency
an amount equal to the maximum allowed by any statute or rule of
law in effect at the time when, and governing the proceedings in
which, the damages are to be proved, whether or not the amount be
greater, equal to or less than the amount of the loss or damages
referred to above.
24
<PAGE>
25.5 No waiver by Landlord of any Event of Default or any default by
Tenant in any covenant, agreement or obligation under this lease
or the Agreement shall operate to waive or affect any subsequent
Event of Default or default in any covenant, agreement or
obligation hereunder or in the Agreement, nor shall any
forbearance by Landlord to enforce a right or remedy upon an -
Event of Default or any such default be a waiver of any of its
rights and remedies with respect to that or any subsequent
default or in any other manner operate to the prejudice of
Landlord.
26. QUIET ENJOYMENT.
Landlord covenants that Tenant, on paying the rental and performing
the covenants and conditions contained in this lease, may peaceably and
quietly have, hold and enjoy the Demised Premises for the term aforesaid.
27. CERTIFICATES.
Each party agrees at any time and from time to time during the Lease
Term, within 10 days after written request from the other party, to
execute, acknowledge and deliver to the other party or to a third party a
statement in writing certifying that this lease is unmodified and in full
force and effect (or if there have been modifications, that the. same is in
full force and effect as modified and stating the modifications), and the
dates to which the Base Rent, Additional Rent and other charges have been
paid in advance, if any, and stating whether or not, to the best knowledge
of the party making such certificate, the other party is in default in the
performance of any covenant, agreement or condition contained in this
lease, and, if so, specifying each such default of which such party may
have knowledge. Such third party shall have the right to rely upon the
contents of any such written statement.
28. NOTICES.
28.1 Whenever it is provided herein that notice, demand, request or
other communication shall or may be given to or served upon
either of the parties, or if either of the parties shall desire
to give or serve upon the other any notice, demand, request or
other communication with respect hereto or the Demised Premises,
the notice shall be in writing, and. any law or statute to the
contrary notwithstanding, shall be given or served as follows:
25
(a) if given or served by Landlord, by hand delivery, by overnight
nationwide courier delivery service or by mailing the same to Tenant by
registered or certified mail, postage prepaid, return receipt requested,
addressed to Tenant at the Demised Premises or at such other address as
Tenant may from time to time designate by notice given to Landlord in the
manner herein provided, with a copy to any first mortgagee of which
Landlord has notice under section 21.6; and
(b) if given or served by Tenant, by hand delivery, by overnight
nationwide courier delivery service or by mailing the same to Landlord by
registered or certified mail, postage prepaid, return receipt requested,
addressed to Landlord at the address first set forth above or at such other
address as Landlord may from time to time designate by notice given to
Tenant in the manner herein provided.
28.2 Every notice, demand, request or other communication hereunder
shall be deemed to have been given or served (a) at the time that the same
shall be hand delivered or delivered by the courier delivery service or (b)
3 days after the same shall be deposited in the United States mails,
postage prepaid, in the manner aforesaid. No notice given by Landlord
shall be effective unless given to any first mortgagee of which Landlord
has notice under section 21.6.
29. CAPTIONS.
The captions to the sections of this lease are inserted only as a
matter of convenience and for reference and in no way define, limit or
describe the scope or intent of this lease or any part thereof nor in any
way affect this lease or any part thereof.
30. COVENANTS AND CONDITIONS.
All of the terms and provisions of this lease shall be deemed and
construed to be "covenants" and "conditions" to be performed by the
respective parties as though words specifically expressing or importing
covenants and conditions were used in each separate term and provision
hereof.
31. WAIVER OF TRIAL BY JURY.
Landlord and Tenant hereby mutually waive their rights to trial by
jury in any action, proceeding or counterclaim brought by either of the
parties hereto
26
<PAGE>
against the other on any matters whatsoever arising out of or in any way
connected with this lease, Tenant's use or occupancy of the Demised
Premises, and any claim of injury or damage.
32. DEFINITION OF TERM "LANDLORD"
When the term "Landlord" is used in this lease it shall be construed
to mean and include only the then owner of the fee title of the Demised
Premises. Upon the transfer by Landlord of the fee title to the Demised
Premises, Landlord shall give Tenant notice in writing of the name and
address of Landlord's transferee. In such event the former Landlord shall
be automatically freed and relieved from and after the date of such
transfer of title of all personal liability with respect to the performance
of any of the covenants and obligations on the part of Landlord herein
contained to be performed so long as the transfer and conveyance by
Landlord is expressly subject to the assumption by the grantee or
transferee of such covenants and obligations of Landlord.
33. BROKERAGE REPRESENTATION.
Tenant hereby represents and warrants to Landlord that it did not see
the Demised Premises with, nor was it introduced to the Demised Premises
by, any real estate broker or agent thereof. Tenant further represents and
warrants that it knows of no person who is entitled to a real estate
brokerage commission or sum in lieu thereof in connection with the
execution of this lease or the creation of the tenancy effected by this
lease.
34. COVENANTS OF FURTHER ASSURANCES.
34.1 If, in connection with Landlord's obtaining financing for the
Demised Premises or the Entire Property, a lender shall request reasonable
modifications in this lease as a condition to such financing, Tenant will,
contingent upon Tenant's obtaining the prior consent of its mortgagee, not
unreasonably withhold, delay or defer its written consent thereto, provided
that such modifications do not in Tenant's reasonable judgment (a)
materially increase the obligations of Tenant hereunder or under the
Agreement or (b) materially adversely affect the leasehold interest hereby
created or Tenant's use and enjoyment of the Demised Premises pursuant
hereto or to the Agreement.
34.2 If in connection with Tenant's obtaining financing for the
Facility or the Demised Premises, a lender shall request reasonable
modifications in this
27
<PAGE>
lease as a condition to such financing, Landlord will , contingent upon
Landlord's obtaining the prior consent of it mortgagee to such
modifications, not unreasonably withhold, delay or defer its written
consent thereto, provided that such modifications do not in Landlord's
reasonable judgment (a) materially decrease the obligations of Tenant
hereunder or under the Agreement (b) materially increase the Landlord's
obligation hereunder or thereunder or (c) materially adversely affect
Landlord's estate and interest hereunder.
35. ENTIRE AGREEMENT
This lease contains the entire agreement between the parties and shall
not be modified in any manner except by an instrument in writing executed
by the parties.
36. APPLICABLE LAW.
This lease and the performance thereof shall be governed by and
construed in accordance with the laws of the state of Now Jersey.
37. BIND AND INURE CLAUSE.
The terms, covenants and conditions of this lease shall be binding
upon and inure to the benefit of each of the parties hereto, and their
respective successors and assigns.
38. TENANT'S RECOURSE.
In any action or proceeding brought by Tenant against Landlord on this
lease, Tenant shall look solely to the Demised Premises for the payment of
any damages or satisfaction of any liabilities or obligations of Landlord,
and no judgment obtained by Tenant shall be enforceable against, or a lien
upon, any property of Landlord other than the Demised Premises. This
section 38 shall have no applicability to Landlord's liability to Tenant
under the Agreement.
39. OPTIONS TO PURCHASE.
39.1 Tenant shall have the right, option and/or obligation to purchase
the Demised Premises only to the extent that those rights,
options and obligations are given to or required of Tenant under
the terms and provisions of the Agreement, including but not
limited to Article 5 and section 11.1 of the Agreement.
28
<PAGE>
39.2 If Tenant elects or is required to purchase the Demised Premises
under section 39.1 of this lease, title thereto (including title
to all easements which (a) were theretofore granted by Landlord
to Tenant pursuant to this lease and (b) are necessary in order
"or Tenant to continue operating the Facility) will be conveyed
to Tenant by a Bargain and Sale Deed with Covenant against
Grantor's Acts and a properly executed Affidavit of Title,
subject to all agreements and restrictions of record (but free of
all mortgages and other liens and encumbrances placed by Landlord
on the Demised Premises which are capable of satisfaction by the
payment of a fixed sum of money), all applicable provisions of
the Agreement and all facts which a survey and physical
inspection of the Demised Promises would reveal. Tenant shall be
obligated at its sole cost and expense to obtain all governmental
approvals necessary to consummate such purchase including, but
not limited to, the obtaining of any subdivision and, subject to
the provisions of section 40 of this lease, environmental
approvals (including the complete cost of any necessary
environmental cleanup). If Landlord is unable in good faith to
convey title as specified herein because of circumstances beyond
Landlord's reasonable control, Landlord shall be released from
the obligation to convey title, and shall not be liable to Tenant
for any damages resulting therefrom.
39.3 If Tenant purchases the Demised Premises, Landlord shall have the
right, option and/or obligation thereafter to repurchase the
Demised. Premises only to the extent that those rights, options
and obligations are given to or required of Landlord under the
terms and provisions of the Agreement. The repurchase rights of
Landlord shall be reflected in any deed from Landlord to Tenant.
39.4 Landlord shall have the right, option and/or obligation to
purchase the Facility only to the extent that those rights,
options and obligations are given to or required of Landlord
under the terms and provisions of Agreement including, but not
limited to, Article 5 and section 16.4 of the Agreement. Any
purchase of the Facility and the improvements shall be subject to
the lion of the mortgage, if then in effect, in favor of the
leasehold mortgagee as contemplated by the Credit Agreement,
which mortgage shall remain a lien on the Facility and the
improvements until all obligations of Tenant to such leasehold
mortgagee are satisfied in full or discharged.
39.5 Neither Landlord nor Tenant may assign their respective options
and obligations to purchase the
29
<PAGE>
Demised Premises or the Facility, as applicable, except to the extent
permitted by their respective mortgages and as otherwise permitted under
the terms and provisions of the, Agreement.
39.6 TENANT AIM LANDLORD AGREE THAT TIME IS OF THE ESSENCE NOT ONLY
IN EXERCISING ALL OF THEIR RESPECTIVE PURCHASE OPTIONS AND/OR
OBLIGATIONS BUT ALSO IN CLOSING THS PURCHASE THEREAFTER. TENANT
AND LANDLORD ALSO AGREE THAT TIME IS OF THE ESSENCE REGARDING THE
NOTICE OF TERMINATION DESCRIBED IN SECTION 5.1(ii) OF THE
AGREEMENT.
40. ENVIRONMENTAL OBLIGATIONS.
40.1 For purposes of this section,
(a) "Hazardous Substances" include any pollutants, dangerous
substances or any "hazardous wastes" or "hazardous substances" as defined
in or pursuant to the Environmental Cleanup Responsibility Act (N.J.S.A.
13: 1K-6 et seq.) ("ECRA"), the Spill Compensation and Control Act
(N.J.S.A. 58:10-23.11 et seq.), the Resource Conservation and Recovery Act
(42 U.S. SS6901 et seq.), the Comprehensive Environmental Response
Compensation and Liability Act (42 U.S.C. SS9601 et seq.) or any other
state or federal environmental law or regulation.
(b) "Enforcement Notice" means a summons, citation, directive, order,
claim, litigation, investigation, judgment, letter or other communication,
written or oral, actual or threatened, from the Now Jersey Department of
Environmental Protection ("NJDEP"), the United states Environmental
Protection Agency "USEPA") or other Federal, State or local agency or
authority, or any other entity or any individual, concerning any
intentional or unintentional action or omission resulting or which might
result in the Releasing of Hazardous Substances into the waters or onto the
lands of the State of New Jersey, or into waters outside the jurisdiction
of the State of New Jersey where damage may have resulted to the lands,
waters, fish, shellfish, wildlife, biota, air or other resources owned,
managed, hold In trust or otherwise controlled by, or within the
jurisdiction of. the State of Now Jersey, or into the 'environment', as
such term is defined in 42 U.S.C. SS9601(8).
(c) "Releasing', means releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, dumping or otherwise placing.
30
<PAGE>
40.2 The Demised Premises shall not be used and/or occupied by the
Tenant to generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer or process Hazardous Substances, except
as disclosed by the Tenant in Appendix A. Notwithstanding the
previous sentence, Tenant shall be permitted to generate,
manufacture, refine, transport, treat, store, handle, dispose,
transfer or process Hazardous Substances in addition to those
listed in Appendix A if and only if (a) Tenant obtains Landlord's
prior written consent, such consent not to be unreasonably
withheld, and (b) the Hazardous Substances are necessary or
appropriate in connection with Tenant's operation of the Facility
and (c) Tenant proves to Landlord's reasonable satisfaction that
all such Hazardous Substances will be used in accordance with all
applicable requirements of all applicable public authorities.
40.3 The Demised Premises shall not be used by as a "Major Facility",
as such term is defined as a "Major Facility" in N.J.S.A. 58:10-
23.llb(l).
40.4 The Tenant shall not suffer or permit any lien to attach to the
Demised Premises as a result of the chief executive of the New
Jersey Spill Compensation Fund ("Spill Fund" or "Fund") expending
monies from the Fund to pay for "Damages", as such term is
defined in N.J.S.A. 58:10-23.11(g) ("Damages") and/or "Cleanup
and Removal Costs", as such term is defined in N.J.S.A.
58:1023.11b(d) ("Cleanup and Removal Costs"), arising after the
Commencement Date from any intentional or unintentional action or
omission of the Tenant, user and/or operator of the Demised
Premises, resulting in the Releasing of Hazardous Substances into
the waters or onto the lands of the State of Now Jersey, or into
waters outside the jurisdiction of the State of New Jersey where
damage may have resulted to the lands, waters, fish,
shellfish, wildlife, biota, air or other resources owned,
managed, held in trust or otherwise controlled by, or within the
jurisdiction of, the State of New Jersey. Under no circumstances
shall Tenant be responsible for Damages or Cleanup and Removal
Costs for the remediation of Hazardous Substances Released at the
Demised Premises prior to the Commencement Date or Released by
Landlord.
40.5 Tenant shall not suffer or permit any Enforcement Notice or any
facts which might result in any Enforcement Notice with respect
to the Demised Premises arising, in either case, after the
Commencement Date from any intentional or unintentional action or
omission of the Tenant, user and/or operator of the Demised
Premises,
31
<PAGE>
resulting in the Release of Hazardous Substances on or after the
Commencement Date.
40.6 If the Tenant obtains knowledge of the assertion of any lien, as
set forth in section 40.4, or an Enforcement Notice, as set forth
in section 40.5, or obtains knowledge of facts which may give
rise to such lien or Enforcement Notice, whether written or oral,
it shall promptly notify the Landlord in writing.
40.7 At the request of Landlord during and after the Term, in the
event of an Enforcement Notice or other circumstances leading
Landlord reasonably to conclude an Enforcement Notice could issue
as a result of events, actions or facts occurring or arising
after the Commencement Date, the Tenant will retain an
environmental consultant, acceptable to the Landlord. to conduct
an appropriate on-site inspection of the Demised Premises,
including if necessary a geohydrological survey of soil and
subsurface conditions as well as other tests, to determine the
presence of such Hazardous Substances and the consultant shall
certify to the Landlord whether, in his professional judgment,
there exists any evidence of the presence of Hazardous Substances
on or in the Demised Premises.
40.8 If there shall be filed a lien against the Demised Premises by
the NJDEP pursuant to and in accordance with the provisions of
N.J.S.A. 58:10-23.11f(f) as a result of the chief executive of
the Spill Fund having expended monies from the Spill Fund to pay
for Damages and/or Cleanup and Removal Costs attributable to the
Releasing of Hazardous Substances after the Commencement Date,
the Tenant shall immediately either (a) pay the claim and remove
the lien from the Demised Premises, or (b) furnish M a bond
satisfactory to the Landlord in the amount of -he claim out of
which the lien arises, (ii) a cash deposit in the amount of the
claim out of which the lien arises, or (iii) other security
reasonably satisfactory to the Landlord in an amount sufficient
to discharge the claim out of which the lien arises.
40.9 The Tenant warrants and represents that the Standard Industrial
Code ("SIC Code") number for the activities to be carried on
within the Demised Premises is 4931, and that no other activities
having any different SIC Code numbers shall be conducted on the
Demised Premises without the Landlord's prior written consent,
which consent may be arbitrarily withheld.
40.10 Compliance with the provisions of ECRA ("ECRA Compliance" or
"ECRA Clearance") shall be accomplished by either (a) obtaining
an "ECRA Nonapplicability
32
<PAGE>
Letter" from the NJDEP (if ECRA is not applicable) or (b)
submitting to the NJDEP a "Negative Declaration", as such term is
defined in N.J.A.C. 7:1-3.3 ("Negative Declaration") or in lieu
thereof submitting and implementing a "cleanup plan", as such
term is defined in N.J.A.C. 7:1-3.3 ("Cleanup Plan"). The
allocation of responsibility between Tenant and Landlord for ECRA
compliance shall be as follows (subject to the allocation of
costs pursuant to section 40.11):
(a) if ECRA Compliance is necessary because Tenant has exercised any of
its rights under the Agreement to purchase either the Demised Premises
or the Entire Property (including the Demised Premises), Tenant shall
be responsible for ECRA Compliance for both such acquisition and any
subsequent resale of said property pursuant to the Agreement; and
(b) if ECRA Compliance is necessary because Tenant ceases its operations
at the Facility, Tenant shall be responsible for ECRA compliance; and
(c) if ECRA Compliance is necessary for any reason other than the reasons
set forth in subsections 40.10(a) or (b), the party whose actions
caused ECRA Compliance to be necessary shall be responsible for such
compliance.
Notwithstanding anything in this section 40.10 to the contrary, Tenant and
Landlord agree to cooperate with each other and to exchange information
relating to ECRA Compliance regardless of which party is responsible for
such Compliance.
40.11 The allocation of responsibility as between Tenant and Landlord
for the payment of any and all costs and fees ("ECRA Costs") associated
with ECRA compliance shall be as follows:
(a) all of that portion of ECRA Costs which relates either
to (i) obtaining an ECRA Nonapplicability Letter or (ii) submitting a
Negative Declaration to the NJDEP, excluding the submission and
implementation of any necessary sampling plan, shall be paid by the party
who is responsible for ECRA compliance pursuant to section 40.io above; and
(b) all of that portion of ECRA Costs which relates to
submitting and implementing a sampling plan or
33
<PAGE>
a cleanup Plan shall be paid by, and the submission and implementation of
the Cleanup Plan shall. to the extent permitted by NJDEP under ECRA, be
controlled by (i) Landlord if the Hazardous Substances requiring
remediation were either Released prior to the Commencement Date or Released
by Landlord and (ii) Tenant if the Hazardous Substances requiring
remediation were Released after the Commencement Date and were not Released
by Landlord.
40.12 Unless Tenant delivers an ECRA Nonapplicability Letter to
Landlord on or before 6 months prior to the end of the Term,
Tenant shall commence its ECRA compliance efforts relating to its
cessation of operations at east 6 months prior to the end of the
Term and diligently pursue such efforts to conclusion. Tenant
shall keep Landlord fully informed of its progress in obtaining
ECRA Clearance by sending a copy of all correspondence and
documents to Landlord and by delivering an ECRA Compliance status
report to Landlord every 30 days during the 6-month clearance
period. it is understood and agreed by Tenant that Landlord shall
have the right to rely an and shall rely on all statements,
representations, warranties and commitments made by Tenant to the
NJDEP pursuant to this section an if such statements,
representations, warranties and commitments had been made
directly to the Landlord, if Tenant fails to obtain ECRA
Clearance on or before the and of the Term, Tenant shall be
liable to Landlord as a holdover tenant, without limiting any
other liability of Tenant to Landlord resulting from its default
under this lease.
40.13 Whenever the terms ECRA, Spill Fund, Major Facility and similar
terms and statutory references are used in this lease, they shall be deemed
to include any similar, future or successor statutory references and/or
terms as may apply to the Demised Premises and its use and occupancy by
Tenant under this lease.
41. GUARANTY.
O'Brien Energy Systems, Inc., of which Tenant is a wholly-owned
subsidiary, will execute as Appendix 3 to this lease an appropriate
guaranty of the due and punctual performance of all of Tenant's obligations
under this lease. This guaranty will continue in full force and
34
<PAGE>
effect for the duration of this lease unless Landlord and Tenant mutually
agree to terminate it, whereupon it will have no further force or effect.
42. RELATIONSHIP TO THE AGREEMENT.
Notwithstanding anything in this lease to the contrary, in case of any
ambiguity or contradiction between the terms and provisions of this lease
and the terms and provisions of the Agreement, the terms and provisions of
the Agreement shall control.
43. CONTINUATION OF LEASE
Notwithstanding any provision of this lease or the Agreement to the
contrary, unless this lease is otherwise continued in connection with the
assumption of the Agreement by a purchaser of the "Plant" pursuant to
section 5.1(B) of the Agreement (in which case this lease will continue as
presently written), so long as there is then no Event of Default by Tenant
under this lease, this lease shall not terminate upon the exercise by the
Landlord of its rights to sell or abandon the "Plant" as provided in
Section 5.1(B) of the Agreement (unless the Tenant purchases the Demised
Premises pursuant to such Section 5.1(B)) but shall continue in effect
until the twenty-fifth anniversary of the Commencement Date, provided that
the parties shall enter into a new lease (or amend this lease) which shall
be on the same terms hereof except that (a) Base Rent shall be renegotiated
to a fair market rental for comparable premises and (b) all references
herein to the Agreement (other than those relating to the production of
steam by Tenant and the purchase thereof by Landlord, which references
shall be delted) shall, to the extent required to effectuate the purposes
of this lease, be replaced by provisions comparable to the provisions of
the Agreement.
44. RECORDING.
The parties agree that a memorandum of lease in the form attached
hereto as Schedule C ("Memorandum of Lease") shall be recorded in the Essex
County Register's Office, immediately following the Commencement Date.
Neither party shall have the right to record either this entire lease or
any writing other than the Memorandum of Lease which describes the terms
and provisions of this lease.
35
<PAGE>
IN WITNESS WHEREOF, the parties have executed or have caused this
lease to be executed by their duly authorized officers and their corporate
seals to be hereunto affixed and attested, all as of the day and year first
above written.
ATTEST
By: /s/ William D. Harper
William D. Harper
V.P. and Secretary
ATTEST
By: /s/ Carlene B. Balickie
Carlene B. Balickie
Assistant Secretary
NEWARK GROUP INDUSTRIES, INC. (Landlord)
By: /s/ Connie B. Smith
Connie B. Smith
V.P.
O'BRIEN (NEWARK) COGENERATION, INC. (Tenant)
By: /s/ Sanders Newman
Sanders Newman
Secretary
<PAGE>
SCHEDULE A
Legal Description of Property
To be Leased to O'Brien (Newark) Cogeneration, Inc.
In the City of Newark, N.J.
By Newark Group Industries, Inc.
Beginning at a point in the North Easterly Section of Lot 75, Block 2412,
said point being distant 28.0' South of the Southerly R.O.W. of the Central
Railroad of N.J. and 60.0' Westerly Property Line of Blanchard and running
thence:
(1) S13-02'12"E a distance of 110.00' to a point; and thence
(2) Sl-30'00"W a distance of 62.54' to a point; and thence
(3) N88-30'00"W a distance of 191.00' to a point; and thence
(4) Nl-30'00"E a distance of 175.00' to a point; and thence
(5) S86-26'00"E a distance of 163.49' to the point or place of Beginning.
<PAGE>
SCHEDULE B-1
[Drawing of lease area]
<PAGE>
Steam Purchase Agreement between Landlord and Tenant dated October 3, 1986
as amended by Amendments dated March 8, 1988 and July 18. 1988 (as so
amended and as it may be amended from time to time in accordance with the
provisions thereof, the "Agreement"), will terminate 120 days after the
termination of the Agreement or on such other date as may be provided in
the Lease or the Agreement, whether following an extension or renewal
hereof or otherwise.
3. The Lease provides the Tenant with (a) the right to extend the
lease term for successive additional terms of five (5) years each but only
in connection with the renewal of the Agreement and upon the terms
contained therein and (b) the right to purchase the Demised Premises and
the Entire Property, such purchase rights of Tenant being exercisable upon
the terms and conditions as more particularly set forth in the Lease and
the Agreement.
4. All of the terms, covenants and conditions of the Lease are fully
and particularly set forth in the Lease executed by the parties, which is
incorporated herein by reference as if herein set forth in full.
IN WITNESS WHEREOF, the parties have set their hands and seals or
caused this Memorandum of Lease to be executed by their proper corporate
officers and their
<PAGE>
corporate seals to be affixed, as of the day and year first above written.
ATTEST:
[Seal]
ATTEST:
[Seal]
NEWARK GROUP INDUSTRIES, INC., Landlord
By:
O'BRIEN (NEWARK) COGENERATION, INC., Tenant
By:
<PAGE>
STATE OF NEW JERSEY:
COUNTY or ESSEX:
BE IT REMEMBERED, that on this day of July, 1988, before me,
the subscriber, an Attorney-at-Law of the State of New Jersey, personally
appeared who, being by me duly sworn and on his oath, deposed and
made proof to my satisfaction that he is the of Newark Group
Industries, Inc., and the person who has signed the within instrument, and
I having first made known to him the contents thereof, he did acknowledge
that he signed, sealed with the proper corporate seal and delivered the
same as such officer an behalf of the corporation as its voluntary act and
deed, made by virtue of authority from its board of directors, for the uses
and purposes therein expressed.
Attorney-at-Law of New Jersey
STATE OF NEW JERSEY:
COUNTY OF ESSEX:
BE IT REMEMBERED, that an this day of 19 , before me, the
subscriber, a Notary Public of the State of , County of
personally appeared who, being by me duly sworn and on this oath,
deposed and made proof to my satisfaction that he is the of ,and
the person who has signed the within instrument; and I having first made
known to him the contents thereof, he did acknowledge that he signed,
sealed with the proper corporate seal and delivered the same as such
officer on behalf of the corporation as its voluntary act and deed, made by
virtue of authority from its board of directors, for the uses and purposes
therein expressed.
Notary Public
(Apply Raised Seal and Stamp indicating expiration date of Commission)
Prepared by:
<PAGE>
APPENDIX A
Tenant's Hazardous Substance List
Type of
Hazardous substance
1. No 2 Fuel
or Kerosene
2. Ammonia
Selective
3. Drew Chemical
Adjunct B or F
(or equivalent)t
Neutral orthophosphate
4. Mekor (R) 70 (or
equivalent):
Volatile organic oxygen
Scavenger/Metal passivator
5. Amercor 8750
Inhibitor (or
Equivalent):
Neutralizing Amines
6. Advantage (R) 202
Deposit Inhibitor
(or equivalent):
Polymeric Antiscalant-
Sequesterant (as a substitute
for Item 3)
7. PerforMax
4021/403
Chlorine
Sulfuric Acid
8. Lubricants
9. Sulfuric Acid
10. Sodium Hydroxide
(Caustic Soda)
11. Sodium Sulfite
12. Solvents
(Degreasers)
<PAGE>
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE made this 18th day of July, 1988,
BETWEEN NEWARK GROUP INDUSTRIES, a New Jersey corporation located at 57
Freeman Street, Newark, New Jersey 07105 ("Landlord"),
AND O'BRIEN (NEWARK) COGENERATION, INC., a Delaware corporation located at
225 South Eighth Street, Philadelphia, Pennsylvania 19106 ("Tenant"),
W I T N E S S T H":
1. The parties do hereby acknowledge and declare that they have
entered into a lease dated as of July 18, 1988, ("Lease") for a portion of
the land in the City of Newark, County of Essex and State of Now Jersey,
located at 60 Lockwood Street and being known and designated as Lots 75 and
58, Block 2412 on the Newark, New Jersey Tax Maps ("Entire Property"), and
more particularly described in Schedule A hereto ("Demised Premises").
2. The Lease commenced an July 18, 1988 and, except as
otherwise Provided in Section 5.1(B) of the Steam Purchase Agreement
between Landlord and Tenant dated October 3, 1986 an amended by Amendments
dated March 8, 1986 and July Is, 1988 (as so amended and as it may be
amended from time to time in accordance with the
Prepared by:
/s/ Margaret F. Black
Margaret F. Black, Esq.
Sills Cummis Zuckerman Radin
Tischman Epstein & Gross
<PAGE>
provisions thereof, the "Agreement"), will terminate 120 days after the
termination of the Agreement or on such other date as may be provided in
the Lease or the Agreement, whether following an extension or renewal
hereof or otherwise.
3. The Lease provides the Tenant with (a) the right to extend
the lease term for Successive additional terms of five (5) years each but
only in connection with the renewal of the Agreement and upon the terms
contained therein and (b) the right to purchase the Demised Premises and
the Entire Property, such purchase rights of Tenant being exercisable upon
the terms and conditions as more particularly set forth in the Lease and
the Agreement.
4. All of the terms, covenants and conditions of the Lease are
fully and particularly sot forth in the Lease executed by the parties,
which in incorporated herein by reference as if herein set forth in full.
2
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals or caused
this Memorandum of Lease to be executed by their proper corporate officers
as of the day and year first above written.
ATTEST
By: /s/ William D. Harper
William D. Harper, V.P. and Secretary
ATTEST
By: /s/ Carlene B. Balickie
Carlene B. Balickie, Assistant Secretary
NEWARK GROUP INDUSTRIES, INC. (Landlord)
By: /s/ Connie B. Smith
Connie B. Smith, V.P.
O'BRIEN (NEWARK) COGENERATION, INC. (Tenant)
By: /s/ Sanders Newman
Sanders D. Newman
Secretary
<PAGE>
STATE OF NEW JERSEY, COUNTY OF ESSEX SS:
I CERTIFY that on July 20, 1988,
SANDERS D. NEWMAN
personally came before me and this person acknowledged under oath,
to my satisfaction that:
(a) this person signed, sealed and delivered the attached document as
Secretary of O'Brien (Newark) Cogeneration, Inc., the corporation named in
this document:
(b) the proper corporate seal was affixed; and
(c) this document was signed and made by the corporation as its
voluntary act and deed by virtue of authority from its Board of Directors.
/s/ Margaret F. Black
Notary Public/Attorney at Law
Of New Jersey
STATE OF NM JERSEY, COUNTY OF ESSEX SS:
I CERTIFY that on July 15, 1988,
CONNIE B. SMITH
personally came before me and this person acknowledged under oath, to my
satisfaction that:
(a) this person signed, sealed and delivered the attached document as
Vice President of Newark Group Industries, Inc., the corporation named in
this document:
(b) the proper corporate seal was affixed; and
(c) this document was signed and made by the corporation as its
voluntary act and deed by virtue of authority from its Board of Directors.
/s/ Margaret F. Black
Margaret F. Black
Attorney at Law of New Jersey
<PAGE>
Exhibit 10.30
GROUND LEASE
BETWEEN
E. I. DU PONT DE NEMOURS AND COMPANY
AND
O'BRIEN ENERGY SYSTEMS, INC.
TABLE OF CONTENTS
Paragraph Page
1. PREMISES LEASED 2
2. CONSTRUCTION OF FACILITIES BY TENANT 4
3. TERM 9
4. RENT 9
5. CONDITION PREECEDENT 9
6. TAXES AND ASSESSMENTS 10
7. USE 12
8. REPAIR AND MAINTENANCE 12
9. UTILITIES 13
10. INDEMNIFICATION 13
11. REQUIREMENTS OF PUBLIC AUTHORITY 13
12. ACCESS TO PREMISES 15
13. ASSIGNMENT AND SUBLETTING 15
14. SIGNS 15
15. INSURANCE 15
16. WAIVER OF SUBROGATION 16
17. CASUALTY 17
18. CONDEMNATION 17
19. FEE MORTGAGES 20
<PAGE>
TABLE OF CONTENTS (cont'd)
Paragraph Page
20. DEFAULT 21
21. BANKRUPTCY AND INSOLVENCY 21
22. WAIVERS 22
23. NOTICES 22
24. SURRENDER 23
25. GOVERNING LAW 23
26. PARTIAL INVALIDITY 23
27. SHORT FORM LEASE 23
28. SUCCESSION 24
<PAGE>
GROUND LEASE
THIS LEASE AGREEMENT, entered into this 2nd day of , 1986, s by and
between E. I.DU PONT DE NEMOURS ND COMPANY, a Delaware corporation, having
its principal office and place of business at 1007 Market Street,
Wilmington, Delaware 19898 ("LANDLORD"), and O'BRIEN ENERGY SYSTEMS. INC.,
a Delaware corporation of Philadelphia, Pennsylvania, ("TENANT").
W I T N E S S E T H :
WHEREAS,
(a) LANDLORD is the owner of a tract of land situate in the Borough
of Sayreville. Middlesex County, State of New Jersey, and as more
particularly described herein: and
(b) It is the intent of the parties hereto that LANDLORD shall lease
said land to TENANT upon and; subject to the conditions and
limitations hereinafter expressed: and
(c) It is the intent of the parties hereto that TENANT will erect a
cogeneration facility on said land from which LANDLORD shall
purchase steam pursuant to a certain steam purchase contract
between the parties hereto ("STEAM CONTRACT").
NOW, THEREFORE, the parties hereto. intending to be legally bound, agree as
follows;
<PAGE>
1. PREMISES LEASED. LANDLORD, for and in consideration of the
rents, covenants and agreements hereinafter reserved, mentioned and
contained an the part of TENANT, its successors and permitted assigns, to
be kept, paid, observed, and performed, has leased, rented, let and demigod
and by these presents does lease, rent and demise unto TENANT, and TENANT
does hereby take and hire, upon and subject to the conditions and
limitations hereinafter expressed, all that piece, parcel or tract of land
with the buildings and improvements thereon now or hereafter erected,
situate in Borough of Sayreville, Middlesex County, New Jersey, as more
particularly described as follows:
BEGINNING at a concrete monument set in the southerly side of
Washing Road, 50' wide, said point being a common corner for the
parcel herein being described and lands now or formerly of New
Jersey Highway Authority; Thence thereby the two (2) following
described courses and distances: (1) SO1--06'-OO"E, 338.19' to a
set concrete monument and (2) S86-47'-09"E, 156.06' to a concrete
monument set at a corner of other lands of E. I. du Pont de Nemours
and Company the six (6) following described courses and distances:
(1) S28'-49'-27"W, 450.74' to an iron pipe set, last described
course also crossing and running along, in part, a 40' wide Jersey
Central Power and Light Co. easement, (2) S33'-30"-27"W, 175.92' to
a nail set in asphalt, last described course also continuing along
westerly side of a Jersey Central Power and Light Co. easement at
varying width, (3) N61'-10'-33"W, 267.36' to an iron pipe set, (4)
N28-49'-27"E, 445.00' to a concrete monument set in
2
<PAGE>
the southerly side of said 40' wide Jersey Central Power and Light
Co. easement, (5) S83-53'-33"E, 110.00' to a concrete monument set
in the said 40' wide Jersey Central Power and Light Co. easement,
Last described course also being along the said 40' wide Jersey
Central Power & Light Co. Easement, in part, and (6) NO1-06'-00"W,
382.02' to a found iron pipe an the said southerly side of
Washington Road, last described course also recrossing said 40'
wide Jersey Central Power and Light Co. easement, Thence along the
said southerly side of Washington Road NSS*-54'-00"E, 70.00' to the
point and place of BEGINNING.
Containing within said described mates and bounds 4.02 acres of
land. be the same, more or less.
The aforementioned property is also shown on a survey entitled
"PROPERTY PLAN FOR PROPERTY OF E. I. DU PONT DE NEMOURS AND
COMPANY, PARLIN WORKS" dated December 1, 1986 prepared by MANN-
TALLEY ENGINEERS & SURVEYORS, PROJECT NO. 1186-12, a copy of which
is attached hereto as EXHIBIT "A".
The aforementioned property is subject to the following:
(1) all matters of record and any state of facts that is
apparent or that an accurate survey or inspection of the
aforementioned property would disclose:
(2) all agreements not of record but in use;
(3) present and future zoning laws, ordinances, resolutions, and
regulations of all boards, bureaus, or commissions and
bodies of any municipal, county, state or federal sovereign
now
3
<PAGE>
or hereafter having or acquiring jurisdiction of the
aforementioned property and the use. and improvements
thereof:
(4) The effect of all present and future laws and ordinances
relating to TENANT'S, or Occupants use of the aforementioned
property:
(5) violations of laws and ordinances that might be disclosed by
an examination and inspection or search of the
aforementioned property as of the date first above written;
(6) the condition and state of repair of the aforementioned
property as the same may be an the date first above written;
(7) all taxes, assessments, water meter and water charges, sewer
rents accrued or unaccrued. fixed or not fixed:
(8) any defects of title or any encumbrances affecting the
aforementioned property or any encroachments existing as of
the date first above written.
The aforementioned property and all improvements, rights, easements
and appurtenances thereunto belonging are hereinafter referred to as
"LEASED PREMISES".
TO HAVE AND TO HOLD the same, subject as aforesaid, unto TENANT and,
subject to the terms, covenants, agreements, provisions, conditions and
limitations hereof, for the term described herein.
2. CONSTRUCTION OF FACILITIES BY TENANT.
(a) Provided the conditions Of STEAM CONTRACT Article 13
"Preconditions to Performance" are satisfied, TENANT covenants
and agrees to construct a cogeneration facility with
4
<PAGE>
related improvements on the LEASED PREMISES, without cost or expense to
LANDLORD, in accordance with the requirements at all laws, ordinances,
codes, orders. rules, and regulations of all governmental authorities
having jurisdiction over the LEASED PREMISES and as such facility is more
particularly described in STEAM CONTRACT . At such time as final
certificates of occupancy or equivalent use certificates shall be issued,
TENANT shall be doomed to be in compliance with this subparagraph (a) as to
any buildings, structures, and improvements constructed on the LEASED
PREMISES.
(b) In the event TENANT, in the course of its construction requires
an electrical service connection from LEASED PREMISES to an
electrical transmission line, upon TENANT's request LANDLORD
agrees to provide an easement for such electrical connection
along a way as designated by LANDLORD across its lands.
(c) TENANT, at its own cost and expense, shall apply for and
prosecute with reasonable diligence, all necessary permits and
licenses required for the construction mentioned in subparagraph
(a) of this Paragraph. LANDLORD, without cost or expense to
itself, shall cooperate with TENANT in securing building and
other permits and authorizations necessary from time to time for
this performance of any construction, alterations or other work
permitted to be done by TENANT under this Lease, but such
cooperation by LANDLORD shall not be construed as consent to the
filing of a mechanic's lien or a notice of intention to file a
mechanic's lien or any claim relating thereto.
(d) Throughout the duration of this Lease, TENANT agrees that all
installations or buildings, structures, and improvements that may
be erected on the LEASED PREMISES by
5
<PAGE>
TENANT or any subtenants. including, but not limited to, all plumbing,
electrical, heating, air-conditioning and Ventilation equipment and
systems, and all other equipment, will be installed, operated, and
maintained in accordance with the law and with the regulations and
requirements of any and all governmental authorities, agencies, or
departments, having jurisdiction thereof, without cost or expense to
LANDLORD.
(e) If, at any time during the term of this Lease, any liens or
claims of mechanics. laborers, or materialmen shall be filed
against the LEASED PREMISES, or any part of parts thereof, for
any work, labor, or materials furnished, alleged to have been
furnished or to be furnished pursuant to the written agreement by
TENANT or any person holding thereunder, TENANT, within 7 days
after:
(i) The date of the filing or recording of any such lien, or the
filing or recording of any notice of intention to file a lien
or claim of lien; and
(ii) The receipt by TENANT from LANDLORD of written notice of such
filing and recording at TENANT's own cost and expense, it of
record, shall cause the same to be discharged by payment,
bond, or otherwise; or at the option of TENANT, TENANT shall
deposit, in trust, with LANDLORD or with a title company
licensed to do business in the State of New Jersey, a sum of
money equal to the amount of such recorded lien, plus ton
(101) percent thereof, to be applied:
(a) To such portion of the amount. if any, an may be
determined to be due and owing to the lienor in a final
judgment of a court of competent jurisdiction. when and if
such
6
<PAGE>
final judgment is no longer subject to appeal, or
(b)To the payment to the Lienor of all or a portion of said
sum when, as any and if written notice shall be sent by
TENANT expressly authorizing such payment.
(f) TENANT is authorized to demolish all existing building(s),
structures, and improvements located on the LEASED PREMISES, and
to remove, raze, and/or destroy such trees, plants, shrubs, and
topsoil as TENANT may deem necessary, provided that it does so in
accordance with all Federal, state and local laws and further
provided that such plans for demolition are first reviewed and
approved by LANDLORD. TENANT acknowledges that asbestos say be
contained within the buildings scheduled to be removed.
(g) In the event that TENANT contents any lion or claim, TENANT shall
prosecute the contest with reasonable diligence, and TENANT shall
at all times effectually stay or prevent any official or judicial
sale of the LEASED PREMISES and TENANT shall pay or otherwise
satisfy any final judgment (unless TENANT shall appeal same, in
which event the last appeal shall be the determining factor)
which may be entered against it and thereafter promptly procure
record satisfaction of the release of the lion. Subject to
TENANT's rights as set forth in this Lease, if TENANT shall
ultimately fail to procure a discharge at any such lion, LANDLORD
after at least fourteen (14) days' written notice to TENANT (or
lesser time if the LEASED PREMISES are threatened with sale or
foreclosure), may procure the discharge of such lion by payment
or otherwise, and all costs and expenses which LANDLORD may
sustain thereby shall be paid by TENANT as additional rent under
the provisions of
7
<PAGE>
this Lease. In the event that any action shall be brought
against LANDLORD to enforce any such lion, and provided TENANT
may exercise all of its rights set forth in this Lease, and
provided further that TENANT shall have received written notice
of such action and an opportunity to defend the same, TENANT
shall pay any judgment that may be entered against LANDLORD, and,
in addition thereto, shall pay all costs and expenses that may be
incurred by LANDLORD in the defense of any such action, provided
such judgment shall be final and no longer subject to appeal.
(h) Prior to commencing construction of any buildings or
improvements. TENANT, without cost to LANDLORD, shall obtain
from the general contractor in charge of construction of any
buildings and improvements a performance bond and a labor and
material payment bond, in the amount at the estimated cost of
same issued by a reputable surety company licensed to do business
in the State of New Jersey guaranteeing the completion of said
buildings and improvements and payment of all costs therefor and
incident thereto, or in some instances, at LANDLORD's option, to
furnish to the LANDLORD a surety bond naming the TENANT as
obligor thereunder. which bond in form, substance, and amount
shall be subject to LANDLORD's approval, which it shall not
unreasonably withhold, which bond shall name LANDLORD, as co-
obligee as its respective interests may appear and a certificate
or true copy thereof shall be delivered to LANDLORD. LANDLORD
however may waive this requirement if in its sale discretion it
is satisfied as to the reputation and credit worthiness of the
contractor selected by TENANT 'or construction of the facility.
TENANT shall notify LANDLORD by prior written notice as to its
selected contractor and LANDLCRD shall have seven (7) days
thereafter to elect approval or non-approval.
8
<PAGE>
(i) If TENANT shall deliver to LANDLORD a financial statement of
TENANT or any person(s) or entities having an interest in TENANT
indicating a net worth of not less than Eighty Million Dollars
which party shall guarantee to LANDLORD the items as would be set
forth in the bonds described above, LANDLORD hereby waives the
requirements of subparagraph (h) hereof.
3. TERM. The term of this Lease shall commence upon the date first
above written and shall expire upon termination of the STEAM CONTRACT.
Should STEAM CONTRACT be cancelled, terminated, or otherwise and for any
reason other than LANDLORD's default, then the term of this Lease shall and
unless TENANT has elected to conduct an affiliated thermal consuming
business in accordance with Article 3(D) of STEAM CONTRACT, and in such
case the term hereunder shall not terminate with STEAM CONTRACT but shall
continue for the term originally specified in Article 5 of STEAM CONTRACT.
4. RENT. TENANT'S covenants and agrees to pay LANDLORD for LEASED
PREMISES, an annual base rental of One Dollar ($1.00) during the term of
this Lease payable at the office of LANDLORD as follows:
E. 1. du Pont de Nemours and Company
Corporate Real Estate
Materials and Logistics Department
1007 Market Street
Wilmington, Delaware 19898
or at such other place or places as LANDLORD shall from time to time give
TENANT written notice at least thirty (30). days in advance.
5. CONDITION PRECEDENT.
As a condition precedent to this agreement, LANDLORD shall have
received a Certificate of non applicability from the State of New Jersey
evidencing that the transaction
9
<PAGE>
contemplated herein is not subject to New Jersey's Environmental Cleanup
Responsibility Act (ECRA).
6. TAXES AND ASSESSMENTS.
(a) Commencing with the date first above written and ending with the
termination, cancellation or expiration of this Lease, TENANT shall
reimburse LANDLORD for all real estate taxes and any and all assessments,
including special assessments, or any tax that may be levied, assessed or
imposed by the State of New Jersey or by any political or taxing
subdivision thereof, upon or measured by the rents hereunder or the income
arising therefrom in lieu of or as a substitute in whole or in part, for
any tax upon LEASED PREMISES or which are or may become a lien upon LEASED
PREMISES, and all other governmental charges levied against LEASED PREMISES
which become due and payable during the term hereof. TENANT'S obligation
to pay taxes. special assessments and other impositions shall be contingent
upon and subject to the following provisions and conditions;
(i) TENANT may take the benefit of the provisions of any statute or
ordinance permitting any special assessment to be, paid over a
period of time, and TENANT shall be obligated to pay only the
installment of such special assessments as shall become due and
payable during the term hereof. Any installment falling due
after the expiration of the term hereof shall be payable by
LANDLORD, even though such unpaid installments shall constitute
a lien or liens until paid.
(ii) TENANT shall pay its prorata share of taxes, special
assessments, other impositions or installments thereof which
become due and payable
10
<PAGE>
during the years in which the obligation to pay rental
hereunder commences and ceases, such prorata share to be
determined on the basis which the number of months of the then
current tax year for which TENANT is to pay rent shall bear to
the entire number of months in said tax year.
(b) Nothing in this Lease shall be construed to require TENANT to pay
any franchise, income, corporation, inheritance, succession, gift, estate,
realty transfer, capital or other tax (except the taxes and assessments
provided for in subparagraph (a) of this Paragraph which may be charged or
assessed against LANDLORD or any income, excess profit or revenue tax or
any other tax which may be assessed against or become a lien upon LEASED
PREMISES or the rent accruing therefrom.
(c) Except if contested as hereinafter provided, TENANT, upon due
notice by LANDLORD or from the taxing authority, shall pay each tax,
assessment, or installment thereof, and other imposition before any fine,
penalty, interest, or costs may be added by nonpayment.
(d) TENANT shall not be required to pay any tax. assessment or other
imposition required by the terms of this Lease to be paid so long as TENANT
at its own expense shall, in good faith and with due diligence, contest the
same or the validity thereof by appropriate legal proceedings. In such a
case, TENANT may institute such proceedings in its own name or in the name
of LANDLORD or in both names as may be necessary, and TENANT shall
indemnify LANDLORD and save it harmless from and against all costs, charges
or liabilities in connection with any such proceeding: provided, however,
that TENANT shall take no action and shall delay no proceeding so as to
11
<PAGE>
jeopardize title of LANDLORD to LEASED PREMISES or its other lands situated
in Middlesex County, New Jersey. TENANT shall give LANDLORD prompt written
notice of the commencement of any such proceedings.
(e) TENANT shall furnish to LANDLORD, within forty-five (45) days
after the date when any tax, special assessment or other imposition is
payable, copies of the official receipts, or other reasonable proof
satisfactory to LANDLORD evidencing payment thereof.
(f) TENANT shall pay any and all taxes on its personal property
located on LEASED PREMISES directly to the taxing authority.
7. USE. LEASED PREMISES shall be used only for the construction and
operation of a cogeneration facility in connection with those services and
products to be supplied to LANDLORD under STEAM CONTRACT or if said use is
voided by the provisions of Article 3(D) of STEAM CONTRACT, then a use
consistent with the operation of an affiliated thermal consuming business
shall be allowable. TENANT shall not use or occupy LEASED PREMISES or
permit the same to be used or occupied contrary to any appropriate
governmental statute, rule, order, ordinance or regulation applicable
thereto or in any manner which would violate any certificate of occupancy
affecting the same, or which would cause structural injury to the
improvements or cause the value or usefulness of LEASED PREMISES or any
part thereof to diminish or which would constitute a public or private
nuisance or waste.
8. REPAIR AND MAINTENANCE. TENANT agrees that, at its sole cost and
expense, it shall keep and maintain LEASED PREMISES, including any altered,
rebuilt or additional buildings, structures and other improvements thereto,
in good
12
<PAGE>
repair. replacement and appearance during the continuance of this Lease and
will with reasonable promptness make all structural and nonstructural,
foreseen and unforeseen, and ordinary and extraordinary changes and repairs
of every kind and nature which may be required to be made upon or in
connection with LEASED PREMISES or any part thereof in order to keep and
maintain LEASED PREMISES in such good repair, replacement and appearance.
LANDLORD shall not be required to maintain, repair. or rebuild. or to make
any alterations, replacements or renewals of any nature or description to
LEASED PREMISES or any part thereof, whether ordinary or extraordinary,
structural or nonstructural, foreseen or unforeseen, or to maintain LEASED
PREMISES or any part thereof in any way, and TENANT hereby expressly waives
any right to make repairs or replacements at the expense of LANDLORD which
may be provided for in any statute or law in effect at the time of the
execution of this Lease or any statute or law which may thereafter be
enacted.
9. UTILITIES. TENANT shall supply and pay for all gas, electricity,
water, sewer. heat and other utilities used on LEASED PREMISES by TENANT.
10. INDEMNIFICATION. TENANT shall indemnify and save LANDLORD
harmless from and against any and all loss, costs, damages, claims, actions
or liability on account of the injury to or death of any person or persons
or the damage to or destruction of any property arising from or growing out
of TENANT'S use and occupancy of LEASED PREMISES unless such loss, costs,
damages, claims. actions or liability is caused solely by the fault,
failure or negligence of LANDLORD.
11. REQUIREMENTS OF PUBLIC AUTHORITY.
(a) During the term of this Lease, TENANT shall. At its own cost
and expense, promptly observe and comply with all
13
<PAGE>
present and future laws, ordinances, requirements, orders, directives.
rules and regulations of the Federal, State, County, Town, Village and City
Governments and of all other governmental authorities affecting LEASED
PREMISES or appurtenances thereto or any part thereof whether the same are
in force at the commencement of the term of this Lease or may in the future
be passed, enacted or directed, and TENANT shall pay all costs, expenses,
liabilities, losses, damages, fines, penalties. claims and demands.
including reasonable counsel fees, that may in any manner arise out of or
be imposed because of the failure of TENANT to comply with the covenants of
this Paragraph.
(b) If TENANT or this Lease is subject to New Jersey's Environmental
Clean-Up Responsibility Act (ECRA), the responsibility for clean-up if any,
or compliance with such Act. shall root with the party which was the source
of the hazardous substance or waste which must be cleaned up. Any wastes
or other hazardous substances which were deposited on the site prior to
occupancy by TENANT and must be cleaned up shall be the responsibility of
LANDLORD. Any toxic or hazardous substances or wastes which are deposited
an the Site by TENANT shall be TENANT's responsibility. TENANT's
responsibility pursuant to ouch service termination of this lease shall
survive expiration or earlier termination of this lease.
(c) TENANT shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, in the name of TENANT, or
LANDLORD (if legally required), or both (if legally required), without cost
or expense to LANDLORD, the validity or application of any law, ordinance,
rule. regulation or requirement of the nature referred to in subparagraph
(a) of this Paragraph and, if by
14
<PAGE>
the terms of any such law, ordinance, order. rule, regulation or
requirement, compliance therewith may legally be delayed pending the
prosecution Of any such proceeding, TENANT may delay such compliance
therewith until the final determination
of such proceeding.
(d) LANDLORD agrees to execute and deliver any appropriate papers or
other instruments which may be necessary or proper to permit TENANT so to
contest the validity or application of any such law, ordinance, order,
rule, regulation or requirement and to fully cooperate with TENANT in such
contest.
12. ACCESS TO PREMISES . LANDLORD or LANDLORD'S agents and designees
shall have the right to enter upon LEASED PREMISES at all reasonable times
to examine same and to maintain any of its utility or other systems located
thereon.
13. ASSIGNMENT AND SUBLETTING. TENANT may not assign this Lease, or
sublet all or any part of LEASED PREMISES except that LANDLORD shall
consent to an assignment of this lease to the financing institution
selected by TENANT in connection with the financing of the cogeneration
facility.
14. SIGNS. No signs. advertisement or notices other than those
required by law, shall be affixed to or placed upon any part of LEASED
PREMISES by TENANT except in such manner and of such size. design and color
as shall be approved in advance in writing by LANDLORD.
15. INSURANCE.
(a) TENANT shall provide at its expense and keep in force during the
term of this Lease, general liability insurance in a good and solvent
insurance company or companies licensed to do business in the State of New
Jersey, covering all of its liabilities hereunder and in accordance with
the
15
<PAGE>
limits set forth in STEAM CONTRACT.
(b) TENANT shall provide at its expense, and keep in force during the
term of this Lease insurance on the buildings and improvements an the
LEASED PREMISES insured by a responsible and reputable insurance company or
companies against loss or damage by fire and such other hazards an are
currently embraced in the standard extended coverage endorsement in the
State of New Jersey, and in an amount equal to the full insurable Value Of
said buildings and improvements.
(c) All insurance policies carried or caused to be carried by TENANT
shall be issued in the name of TENANT and the LANDLORD, as their respective
interests may appear.
(d) In the event that the insurance proceeds received are
insufficient to restore, repair, or rebuild said buildings and
improvements, TENANT covenants and agrees that it will pay the balance of
the amount necessary to restore such buildings or improvements to restore
to their former state or erect other buildings and improvements, provided
the value thereof is at least equal to the value of the buildings and
improvements immediately prior to such damage or destruction. Any excess
of insurance proceeds over the cost of repairing or rebuilding shall belong
to TENANT.
(a) TENANT, in its discretion, may carry such insurance under a
blanket fire and other hazards and causes insurance policy or policies
issued to TENANT covering the LEASED PREMISES and other premises or
property. However, a certificate or true copy thereof evidencing said
insurance shall be delivered to LANDLORD on LANDLORD's written request. 16.
WAIVER OF SUBROGATION. All insurance policies carried by TENANT covering
LEASED PREMISES. including, but not limited to. contents, fire and casualty
insurance, shall
16
<PAGE>
expressly waive any right on the part of the insurer against the LANDLORD.
The TENANT agrees that its policies will include such waiver clause or
endorsement.
17. CASUALTY. In the event that, at any time, during the term of
this Lease, the buildings and improvements on LEASED PREMISES shall be
destroyed or damaged in whole or in part by fire or other cause within the
extended coverage of the fire insurance policies carried by TENANT in
accordance with this Lease, then, TENANT, at its own cost and expense,
shall, cause the same to be repaired, replaced or rebuilt within a period
of time which, under all prevailing circumstances, shall be reasonable. In
the event LANDLORD's facility located adjacent to LEASED PREMISES shall
also have been damaged an or about the same time as TENANT's facility, then
as a condition precedent to TENANT's duty to rebuild hereunder LANDLORD
shall deliver to TENANT a letter indicating that it plans to rebuild its
facility within a two year period and will upon the completion of its
facility have a need for steam in accordance with the STEAM CONTRACT.
18. CONDEMNATION. In the event that the whole or any part of LEASED
PREMISES be taken by virtue of eminent domain or for any public or quasi-
public use, the parties shall be entitled to share in the compensation and
award in accordance with the following provisions:
(a) If the whole of LEASED PREMISES shall be taken, then this
Lease shall cease and determine and LANDLORD shall first receive a sum
equal to the fair market value of the land taken, considered as
vacant, unencumbered and unrestricted land an of the date of taking,
together with interest thereon from the date of taking to the date of
payment at the rate paid on the
17
<PAGE>
award, and if such value shall be officially determined and stated in
the condemnation proceedings, then the amount thereof shall control
for the purposes of this provision, otherwise the same, unless agreed
upon by the parties to this Lease, shall be determined by arbitration
in accordance with the rules then obtaining of the American
Arbitration Association in the County of Middlesex, State of New
Jersey. TENANT in such case shall receive and retain the remainder at
the award, and interest.
(b) If only a part of LEASED PREMISES shall be taken, then
LANDLORD shall first receive a sum equal to the fair market value of
the land taken, considered as unencumbered and unrestricted land, as
of the vacant, unencumbered and unrestricted land, as of the date of
taking plus the resulting or consequential damage, if any, to the
remaining part of the land of LEASED PREMISES, considered as vacant,
unencumbered and unrestricted land as of the date of taking, with any
interest thereon from the date of taking to the date of payment at the
rate paid on the award, and if such value and such resulting or
consequential damage be officially determined and stated in the
condemnation proceedings, then the amount thereof shall control for
the purposes of this provision, otherwise the same, unless agreed upon
by the parties to this Lease, shall be determined by arbitration in
accordance with the rules then obtaining of the American Arbitration
Association in the County of Middlesex, State of New Jersey, and
TENANT in each case shall receive the remainder of the award and
interest;
18
<PAGE>
(i) If the remaining part of LEASED PREMISES not so taken cannot
be adequately restored, repaired or reconstructed so as to constitute
a complete architectural unit of substantially the same usefulness,
design and construction, having regard to the taking, as immediately
before such taking, capable of producing, after the payment of all
operating expense thereof, the minimum annual rant, additional rent
and other charges herein reserved, the debt service charges on any
then existing leasehold mortgages hold by a permitted leasehold
mortgagee, and after the performance of all covenants, terms,
agreements and provisions herein and by law provided to be performed
and paid by TENANT, a fair and reasonable net annual income, as
hereinafter determined, then TENANT shall have the right, to be
exercised by written notice to LANDLORD within sixty (60) days after
the date of taking, to terminate this Lease as to such remaining part
of LEASED PREMISES not so taken on a date to be specified in said
notice not earlier than the date of such taking, in which came TENANT
shall pay and satisfy all rent due and accrued hereunder up to such
date at such termination including all sums of additional rent and all
other charges and shall perform all of the obligations of the TENANT
hereunder to such date and thereupon this Lease and the term hereby
demised shall cease and determine. Should the parties be unable to
agree as to whether the part not taken is susceptible of adequate
restoration, repair or reconstruction as aforesaid, such controversy
shall be determined by arbitration in accordance with the rules
19
<PAGE>
then obtaining of the American Arbitration Association in the County
of Middlesex, State of New Jersey:
(ii) If the Lease is not terminated as hereinabove provided,
then, as to the premises not taken in such condemnation proceeding,
TENANT shall proceed, at its own cost and expense, to make an adequate
restoration, repair or reconstruction of the part of the building not
taken or to rebuild a now building upon the part of the land not
taken. If the part of the award so paid to TENANT shall be
insufficient fully to pay for such restoration, repair or
reconstruction, TENANT shall nevertheless pay the excess cost thereof,
and shall fully pay for all such restoration, repair or
reconstruction, and complete the same to the satisfaction of LANDLORD
and free from mechanic's or materialmen's liens and security interests
of all kinds, and shall at all times save LANDLORD free and harmless
from any and all such liens;
(c) In case of a second or any other additional partial taking
or takings from time to time, the provisions hereinabove contained
shall apply to each partial taking.
(d) The foregoing provisions of this paragraph shall apply only
to a taking of the fee of the whole or of a part of LEASED PREMISES.
In the case of the taking of an easement or of any interest less than
a fee, the parties hereto shall claim and shall be entitled to receive
art award and compensation therefor in accordance with their
respective legal rights.
19. FEE MORTGAGES. TENANT may not, without the written consent of
LANDLORD, mortgage or otherwise create a
20
<PAGE>
security interest upon LANDLORDIS fee interest in LEASED PREMISES.
LANDLORD may arbitrarily withhold such consent or make such consent subject
to any conditions it deems appropriate.
20. DEFAULT. If either party hereto defaults in carrying out any of
such party's covenants and agreements herein contained for a period of
thirty (30) days after written demand for compliance has been made, such
default, at the option of the party not in default, shall give LANDLORD any
and all remedies it may be entitled to in law or in equity.
21. BANKRUPTCY AND INSOLVENCY If, after the commencement of the term
of this Lease: (a) TENANT then having the title to the leasehold estate
created hereunder shall while having such title be adjudicated a bankrupt
or adjudged to be insolvent; (b) a receiver or trustee shall be appointed
for the aforesaid TENANT'S property and affairs; (c) the aforesaid TENANT
shall make an assignment for the benefit of creditors or shall file a
petition in bankruptcy or insolvency or for reorganization or shall make
application for the appointment of a receiver; or (d) any execution or
attachment shall be issued against the aforesaid TENANT or any of the
aforesaid TENANT'S property, whereby LEASED PREMISES or any building or
buildings or any improvements thereon shall be taken or occupied or
attempted to be taken or occupied by someone other than the aforesaid
TENANT, except as may herein be permitted, and such adjudication,
appointment, assignment, petition. execution or attachment shall not be set
aside, vacated. discharged or bonded within one hundred twenty (120) days
after the issuance of the same, then a default hereunder shall be deemed to
have occurred so that the provisions of this Paragraph shall become
effective and LANDLORD shall have the rights and remedies
21
<PAGE>
provided for therein. Notwithstanding anything to the contrary hereinabove
contained, upon the occurrence of a default pursuant to this Paragraph, if
the rent due and payable hereunder shall continue to be paid and the other
covenants, conditions and agreements of this Lease on TENANT'S part to be
kept and performed shall continue to be kept and performed, no event of
default shall have been deemed to have occurred and the provisions of this
Paragraph shall not become effective.
22. WAIVERS. Failure of LANDLORD or TENANT to complain of any act or
omission on the part of the other party no matter how long the same may
continue, shall not be deemed to be a waiver by said party of any of its
rights hereunder. No waiver by LANDLORD or TENANT at any time, express or
implied, of any breach of any provision of this Lease shall be deemed a
waiver of a breach of any other provision of this Lease or a consent to any
subsequent breach of the same or any other provision.
23. NOTICES. Every notice, approval, consent or other communication
authorized or required by this Lease shall not be effective unless same
shall be in writing and sent postage prepaid by United States registered or
certified mail, return receipt requested, directed to the other party as
follows:
To Landlord
E. I. du Pont de Nemours and Company
Corporate Real Estate
Material and Logistics Department
1007 Market Street
Wilmington, Delaware 19898
To Tenant
O'Brien Energy Systems, Inc.
225 South Eighth Street
Philadelphia, PA 19106
Attention Jeffrey D. Barnes,
Executive Vice President
22
<PAGE>
24. SURRENDER. At the expiration or termination at this Lease,
TENANT agrees to deliver up LEASED PREMISES together with all buildings or
other improvements erected thereon, to LANDLORD in good order and condition
and make good all damage to LEASED PREMISES, ordinary wear and tear
excepted, subject however to the acquisition by LANDLORD of all or a
portion of the cogeneration facility in accordance with Article 5(B) of the
STEAM CONTRACT. That portion of the cogeneration facility not purchased by
LANDLORD as provided hereunder shall be removed by TENANT from the LEASED
PREMISES within twelve (L2) months following the expiration or earlier
termination of this lease. If TENANT fails to so remove, LANDLORD shall
have the right to remove the same at TENANT's expense.
25. GOVERNING LAW. This Leas* and the performance thereof shall be
governed, interpreted, construed and regulated by the laws of the State of
New Jersey.
26. PARTIAL INVALIDITY. If any term. covenant, condition or
provision of this Lease or the application thereof to any person or
circumstance shall, at any time or to any extent, be invalid or
unenforceable, the remainder of this Lease, or the application of such term
or provision to persons or circumstances other than those as to which it is
hold invalid or unenforceable, shall not be affected thereby, and each
term, covenant, condition and provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
27. SHORT FORM LEASE. The parties will at any time, at the request
of either one, promptly execute duplicate originals of an instrument, in
recordable form, which will constitute a short form of lease, setting forth
a description of LEASED PREMISES, the term of this Lease and any other
portions thereof as either party may request.
23
<PAGE>
28. SUCCESSION. All of the covenants. agreements. conditions and
undertakings of this Lease shall extend and inure to and be binding upon
the successors and permitted assigns of the respective parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed an the day and year first above written.
ATTEST:
/s/
Assistant Secretary
ATTEST:
/s/ Sanders Newman
E. I. DU PONT DE NEMOURS AND COMPANY
/s/
PROPERTIES MANAGER
O'BRIEN ENERGY SYSTEMS, INC.
By /s/ Jeffrey D. Barnes
24
